The small world of technology investing in South Carolina has a new player – a group of fund managers with plans to cut bigger checks for the state’s startups.
Charleston-based Good Growth Capital said Tuesday that it hopes to raise $20 million to invest in Southern tech companies. The first batch of funding, which it says will be worth "several million dollars," is expected to close in the next few months.
The firm will land in a state that has seen interest grow in investing in startups as the Palmetto State’s emerging tech sector has taken shape in recent years. It will also join the handful of relatively small venture capital firms operating in South Carolina.
The group will be led by familiar names in Charleston’s tech community.
Its managing partners include David Mendez, who runs Capital A Partners, one of the state’s most active venture funds; John Osborne, who runs the Harbor Entrepreneur Center startup accelerator and Charleston Angel Partners investment group; and Amy Salzhauer, who previously ran Ignition Ventures in Boston.
Finding investors has long been a challenge for startups headquartered in South Carolina, far from traditional tech hotbeds of Boston and San Francisco. Access to funding has appeared in report after report as a stumbling block for the state’s tech sector.
But the landscape has loosened over the past several years, particularly for small investments.
The state-chartered S.C. Research Authority has cut $200,000 checks for scores of startups over the past decade through its SC Launch program, and the angel group VentureSouth has inked a few dozen six-figure deals, boosted by a tax credit for early-stage investments.
Those kinds of programs have helped grow a crop of early-stage companies with the seed funding they need get off the ground.
But the state has struggled when startups outgrow them - when they need heftier investments to keep growing but haven’t gotten big enough to win the ear of big national firms.
Osborne says Good Growth’s goal is to bridge that gap, sometimes called the "valley of death," which he says tech startups in cities like Atlanta and Raleigh also face.
"They need that ... capital to keep going and prove it on out. We really saw the opportunity to provide that ... funding for the companies at that stage," Osborne said. "The market timing just seems right. It’s very much an evolution of the ecosystem story in my mind."
The fund expects to make investments between $250,000 and $1.5 million in 20 or so companies, Mendez said. The firm expects to have its first round of funding by the start of summer, with "several million dollars" from a group of mostly regional investors, he said.
The state’s economic-development agencies are increasingly eyeing the gap as well. The S.C. Department of Commerce cited it as a challenge in a study of the state’s technology industry released this year, saying lawmakers should consider offering tax credits for bigger investments. And SCRA has said in recent months it plans to boost its efforts to spur larger deals.
"I am excited for what Good Growth Capital will do for our innovation economy with the creation of a firm located in South Carolina paying close attention to our state’s companies," Commerce Secretary Bobby Hitt said in a statement.
The announcement was timed to coincide with the opening of Charleston’s Dig South tech conference, where Good Growth made its first funding deal, if a modest one: The firm invested $25,000 in PT on Demand, a Charleston startup that won a Tuesday pitch competition at the conference.
The firm's first full-fledged deal will follow soon thereafter, though, Mendez said: It's in the process of vetting its first portfolio companies.