What started as a seed investor in Cary has become a major player that's writing million-dollar checks.
Tim McLoughlin, managing partner of Cofounders Capital, which serial entrepreneur David Gardner founded in 2015, said a bigger fund means flexibility – and it also means bigger checks for the Triangle companies on its radar.
Cofounders closed its third fund in February at just shy of $50 million. McLoughlin said the firm began investing those dollars right away. To date, the fund has deployed more than $7 million in seven different companies. McLoughlin said the pipeline is such that the number could grow by one or two investments to round out the year.
Cofounders has grown steadily over the years – as have the size of its checks. The average check size of its first fund was about $300,000. The second, McLoughlin estimates, was around the $600,000 range.
“This fund, it will probably be north of a million for our average first check into companies,” he said.
A larger fund means Cofounders can be less reliant on outside capital for its portfolio companies. But McLoughlin said there are other advantages, like the ability to get the right team out of the gate “versus the team that we could afford.”
“If there are rock stars that are more expensive, we can bring the right players in,” McLoughlin said.
As Series A rounds move later and later, a bigger fund gives Cofounders the ability to bridge its companies to the milestones they need to reach in order to find follow-on funding.
“It gives us more optionality rather than our companies having to go out and raise capital from outside investors, which resets the clock and expectations on their exit,” he said.
McLoughlin said it’s been a different kind of year – one of “strange deals.”
“Nothing seems to be right down the middle,” he said. “There just seems to be some funky dynamics in some of the deals we’re looking at.”
But there is also a lot of potential deals. McLoughlin said there are more “investable opportunities” in the region than it has the bandwidth for – meaning plenty of potential portfolio firms to go around. In recent years, multiple new players have emerged in the Triangle's startup investment scene – from the Tweener Fund to Primordial.
Companies in Cofounders Capital's third fund portfolio include Cycle Labs, Reveal Mobile, EcoMap and Sift Media.