Optimistic outlook from area's venture capitalists
Adrian Wilson, managing general partner of the Trelys Fund, and who recently joined the North Carolina-based Aurora Funds team, is more optimistic about South Carolina's economic future than ever before, he said.
His optimism comes from two initiatives in South Carolina that are expected to add tremendous value to the knowledge-based economy in the state, Wilson said. The combination of SC Launch! and the Venture Capital Investment Act has opened new opportunities for investing in early-stage companies.
"We need to deploy more venture capital in the state of South Carolina in order to grow a knowledge economy," Wilson said.
As the global economy has shifted from a goods-producing society to an information-commodity society, the knowledge-based society has become the basis of economic success, according to Sykes Wilford, the chair of finance at The Citadel School of Business Administration.
In this new economy, Wilford said, the competitive advantage is knowledge and information.
Venture capitalism is the fuel for a business engine, turning an idea into a "viable entity." Whereas many business ideas fail, venture capitalism allows a product or business model to reach full potential, Wilford said.
Venture capitalism consists of funds and portfolios. Investors raise capital to create a fund of limited capacity. Then, investors build a portfolio of companies, investing funds into them. Once the funds are expended, investors remain active within their portfolio companies, often offering advice and mentoring, Wilson said.
In the normal course of events, once a fund is fully invested, the group or team forms subsequent funds known as follow-ons, Wilson explained.
The Trelys Fund consists of one portfolio of nine companies. Wilson said there will be no follow-on funds under the Trelys name. Aurora will embark on its fifth follow-on fund and subsequent portfolio.
Venture capitalists can invest at any stage of a company. Angel investors, such as Charleston Angel Partners, often invest in an idea and help a business get off the ground. Early-stage investors, such as Trelys and Aurora, build portfolios of very young, but already-formed, companies. Other groups invest in mature, fully formed companies.
Venture capital groups act as both a source of money and a source of expertise. Sometimes, Wilford said, good ideas fail as companies because the owners lack business know-how. Venture capitalists provide the know-how to run a business.
Wilson explained that SC Launch! resembles an angel or early-stage investment group. In 2005, state legislators passed the South Carolina Innovation and Research Centers Act. The South Carolina Research Authority runs the program, which was renamed SC Launch! earlier this year.
The program helps new businesses fully develop concepts, business plans and management teams. SC Launch! supplies qualified entrepreneurs and researchers with key tools for success, providing South Carolina-based companies with counseling, facilities and/or funding up to $200,000.
In addition to SC Launch!, the S.C. Venture Capital Investment Act offers $50 million and tax credits to venture capitalists in the state. The act created two funds within the state Department of Commerce: the South Carolina Venture Capital Fund and the South Carolina Technology Innovation Fund. The funds provide equity, near-equity and seed capital of up to $5 million for businesses, as outlined at www.scstatehouse.net.
Wilson's investment plan agrees with Wilford's vision of the new global economy with economic success created in knowledge and information services.
Wilson saw opportunities for investment success with South Carolina's healthcare and information technology industries, he said.
Specifically, Wilson cited companies in alternative fuel production and technologies, nanotechnology, new or innovative material manufacturing and personalized medicine. Wilson said universities, such as the Medical University of South Carolina, that are researching DNA to provide personalized-medicine technology, piqued his interest.