Last Wednesday, N.C. Treasurer Janet Cowell talked to investment leaders such as Falfurrias Capital Partners’ Hugh McColl and Bull City Venture Partners’ Jason Caplain. The goal of the discussion was to update private equity on the return’s of North Carolina’s first investment fund and to announce the second larger fund. The first fund -Innovation Fund – was and a total of $232 million with a 20% return. The second is called Innovation Fund 2 with a total of $250 million. These funds are not to be confused with the Kauffman Foundation’s Innovation Fund NC which provides grants and loans to early stage companies. That particular fund is administered by Catawba Valley Community College. Innovation Fund is mostly committed to private equity firms and 12 companies. Innovation Fund 2 is an investment vehicle for North Carolina’s pensions. In Innovation Fund 1, the state invested in niche manufacturing companies with global customers, a wireless infrastructure company, big data applications, and pharmaceutical companies for chronic diseases.
Here are the facts about Innovation Fund 2:
North Carolina has the 9th largest pension fund in the United States at around $90 billion.
6.6% of that $90 billion is allocated to alternative assets which in financial portfolio terms mean riskier investments.
1 such investment vehicle is the $250 million Innovation Fund 2 which is managed by GCM Grosvenor Private Markets.
Two-thirds of the sum will be held for co-investments in developed companies.
One-third (about $83 million) will be used in four ways – multi-stage venture capital, growth equity, buyout, and mezzanine.
The fund will have similar investment layout to IF 1 which was 51% buyout, 26% growth, 20% venture capital, and the rest mezzanine.
The fund will be ready to invest with two to three months.
In short, North Carolina venture capital firms will get a little larger and the state will invest in a few growth companies. So how can Charlotte entrepreneurs get money from Innovation Fund 2? Cowell highlighted that past investments were found via referrals, partnerships, and capital partners and met eligibility requirements. She also noted that most investments were into growth companies between the revenue marks of $5 million and $20 million to help reach a milestone. For early stage companies, that still leaves a funding gap. It was mentioned at the event about the lack of an early stage FinTech venture fund in the state and especially Charlotte. McColl mentioned that the region’s investors are less risky which point to a possible reason of so little early stage investment in North Carolina.