A new local venture capital firm has a big appetite for investing in the Charlotte region's high-growth startups.
Charlotte Fund launched early last year to help connect local investors with successful later-stage and seed-stage companies. Mark McDowell, co-founder of LaunchCLT, and Don Rainey, partner and Grotech Ventures, are principals of the fund — sharing a vision to transform Charlotte's typically "conservative" investing approach.
"Charlotte has been more of a conservative banking town, not a risk-taking town with tech startups," McDowell said. "But what's happening is that's starting to change. The surge of young people and young entrepreneurs to town has created a chance for riskier investments to pay off. And so we're trying to be at the cutting edge of that and help a city that's been fairly conservative."
McDowell said while working at LaunchCLT, a local nonprofit designed to support Charlotte's entrepreneurial ecosystem, he noticed founders here were being backed by investors outside of the region. That's what drove him to team up with Rainey and other local investors to launch Charlotte Fund and keep founders from leaving the city.
The firm closed its capital fund in December at just under $7 million. Charlotte Fund has already made about 14 investments locally, with later-stage companies including Debtbook and earlier-stage businesses such as StreetFair under its portfolio. The fund invests 80% of its capital in later-stage companies with valuations greater than $100 million. The remaining 20% will be poured into rising pre-seed and seed-stage companies.
McDowell said that investment strategy helps limit risk and is more attractive to first-time investors.
Any profit produced by the fund will be shifted into the next fund and the VC firm aims to keep that tactic going in the future. That means Charlotte Fund's investment team is working pro bono, with a goal to help the city's startup scene thrive.
"The profits that are produced by the fund, most of those profits get recycled back into the community in the form of a second fund," he said. "And the profit that we make will go into the next fund, and we hope to have an evergreen fund that'll keep Charlotte growing for decades."
Charlotte Fund's rise comes as the venture capital industry is undergoing a pullback from its highs in 2021. Capital is still flowing, as North Carolina moved up to No. 10 in the U.S. for venture capital in 2022. However, McDowell said Charlotte has always been a challenging place to raise capital.
"Startups are really struggling to raise money," he said. "There are some investors in town, but relative to the size of the city, right now we're kind of below our weight class in terms of backing entrepreneurs. So, even if you had come in two or three years ago, before the capital crunch, it was still hard to raise money in town."
Charlotte Fund aims to show local investors that the city is an ideal area to place a bet.
"We want to make Charlotte a city to where people want to come and start their company; where they want to hire people; where they want to relocate to be in Charlotte, and where if you're a successful founder, when you sell your business for $1 billion, you start another business here in Charlotte," he added.
