When it comes to start-up technology businesses, let’s just say Charlotte is no Silicon Valley. The local start-up scene has made some recent strides, though. Packard Place in Uptown has emerged as a hub for technology entrepreneurs and last year launched RevTech Labs, a program offering space and support for early-stage companies. The first group graduated five months ago, but they’ve struggled to attract local investors—a common complaint of Charlotte start-ups.
Viddlz.com looks like someone gave Yelp a Pinterest makeover and then plastered it with cupcakes. It’s an online store for baked confections from local Charlotte chefs, with the slogan “Let’s Food Together.” The company has eight employees, all in Charlotte, and it’s about to launch a new version of the site. There’s been at least one speed bump, though: Viddlz has no investors.
“Looking back, I was probably thinking that fundraising is a little easier than it actually is. Maybe there’s a little bit of hubris in that,” says Zerrick Bynum, Viddlz founder and Cobbler Connoisseur. “But, there is no easy button.”
Bynum bootstrapped the company—meaning he is the primary funder. He hoped to attract outside investors during RevTech’s showcase for graduating companies, but that did not pan out, so Bynum’s still the bank.
Packard Place director Adam Hill describes a chicken and egg problem that makes funding hard to find in Charlotte.
“Charlotte historically hasn’t been a really tech heavy city,” Hill says.
In New York and Silicon Valley, start-up incubators like RevTech often have big backers, and have birthed some tech giants, such as Dropbox, AirBnB , and SCVNGR. Hill says that kind of success was not the expectation with RevTech.
“Our expectation was the companies would go from the early idea stage to raising cash, closing some customers, finishing your development, some definable milestone that gets them closer to having a real viable business,” says Hill.
By that standard, the companies are succeeding. All report moving forward, into beta testing or their initial launches. But,
none of RevTech’s first group of graduates has wooed a local investor. Only one company from the RevTech class has attracted a Charlotte investor for a small round of funding.
That company is Autopilot—it’s basically a cab service where the cabbie drives your car for you. Before starting the company, Ben Lee founded, grew, and sold a jet ski and boat rental company. Lee says Autopilot has investors, but the most success has come on the West Coast.
“Trying to find the funding here locally has been tough, because we’re doing things that are probably a bit riskier than most investors have the appetite for,” Lee says. He thinks Charlotte investors perceive risk because they do not have a tech background or have not invested in it before.
This problem is not exclusive to Lee. The National Venture Capital Association reports that in 2010 only 11 percent of venture capital funding in North Carolina came from North Carolina, while 35 percent came from New York and Massachusetts. Lee is considering moving nearer to his investors, even though he prefers Charlotte. Other RevTech grads feel pressure to move, too.
“A lot of people you’ll talk to will say ‘why don’t you move to New York, or why don’t you move to Boston, or why don’t you move to San Francisco?’” says Philip Dodds, founder of Dataset IO. Dodds has no investors, and at the moment he does not need them, because his company already turns a profit. So, Dodds says he’s not going anywhere.
“You can be a kind of pioneer down here, whereas obviously you move back to New York, you’re not really a pioneer anymore, you’re just one of a set of start-ups,” Dodds says.
For now, all of the RevTech companies are still based in the Charlotte area, but as long as funding comes from out of town, the most sought-after companies will also be the most tempted to leave to follow the money.
This article was updated on 3/13/13 to reflect that Autopilot has a Charlotte investor.