RALEIGH – Raleigh’s startup pipeline is getting ready to burst.
That’s one of several takeaways from TechWire’s recent series, “Tomorrow’s Unicorns: A look inside Raleigh’s $1B startup pipeline,” a multimedia series produced in conjunction with Innovate Raleigh.
In the lead up to the group’s 10-year anniversary culminating in its annual summit today, the series aimed to profile some of the region’s most promising startups. These were the companies tipped to hit the $1-billion valuation mark, thus becoming a so-called “unicorn” in the language of investors.
Companies were selected based on annual revenue, recent fundraises, momentum and the “general buzz” on the street. The lineup was meant to represent a snapshot of the different people and emerging technologies at play in Raleigh’s ecosystem.
From TechWire’s reporting, these are some of the biggest takeaways:
1. Raleigh’s $1-billion startup pipeline is strong, and the capital is flowing.
After years of hyping itself as the “Silicon Valley of the East coast,” Raleigh appears to be hitting its stride when it comes to incubating major tech startups.
Veteran entrepreneur Scot Wingo has been active in the ecosystem since the early 1990s. Each year, he puts out his own official “Tweeners List” of startups that have at least $1 million per year in sales or 10 people.
Perhaps he put it best: “If the Triangle startup ecosystem was a typical funnel metaphor,” he said, “then top of our funnel is getting very, very full.”
Add to the mix that many of these startups are being led by serial entrepreneurs who are raising big bucks, and he predicts more unicorns will come in “three to five years.”
2. The pandemic has created prime market conditions for startups in emerging technologies.
COVID-19 has disrupted markets across the board, pushing companies to accelerate their digital transformation. That’s proven fortuitous for many companies in new or emerging technologies.
Take Global Data Consortium, a digital identity verification platform featured as part of the series. Revenue has ballooned from just over $1 million in 2016 to a projected $20 million or more in 2021.
“It’s gone from accelerating to just ludicrous speed,” its co-founder Charles Gaddy said.
JupiterOne, a Morrisville-based cyber asset management startup, is another example. Since launching in mid 2020, it has tripled its annual revenue and more than doubled its team. That’s largely been triggered by the global spike in cyberattacks in the wake of the pandemic.
“It’s the right product at the right time,” he told TechWire.
3. Big tech companies, local universities are breeding grounds for the region’s top startup founders.
There’s a good reason why cities such as Raleigh fight hard to win projects like Google’s new engineering hub in Durham and Apple’s $1 billion campus, both announced this year.
“It’s a whole trickle-down waterfall effect,” explained Pryon’s CEO Igor Jablokov. “Inevitably, these big tech companies spurn intrapreneurs that eventually just start floating out and starting their own companies.”
Such was the case with Kaleido’s co-founders Sonja Lopez and Steve Cerveny. Both are products of the local university system. (Cerveny earned an MBA from Duke University; Lopez earned hers from UNC-Chapel Hill.)
Back in 2015, they worked together at IBM, heading up its blockchain development program. Eventually, they saw a gap in the market and spun out Kaleido, a blockchain platform for enterprises.
In fact, most, if not all, of the startups featured had some tie to a local university or big tech company like IMB or Cisco.
4. Diversity, equity and inclusion (DEI) is all the rage, but still more needs to be done.
In the wake of George Floyd’s death that sparked global calls for reform last year, it’s clear that the Triangle’s business community is taking steps to heed the call.
When Global Data Consortium’s Bill Spruill challenged other local companies to move their earnings to M&F Bank (the second oldest minority bank in the country) in late 2020, fellow CEOs at Adzerk, Pendo and K4Connect all stepped up.
Funds like Resilient Ventures have also emerged. The Durham-based investment firm has invested in eight minority-led companies since launching in December 2018 and raised nearly $3.5 million from dozens of limited partners.
Still, there’s much more hard work that needs to be done. While the pipeline is increasingly filled with a huge diversity of types of companies, from fintech and blockchain to edtech, healthtech and agtech, its diversity of founders still lags woefully behind.
Kaleido’s co-founder Sophia Lopez was the only woman to be featured as part of the series. She graduated with an engineering degree from Harvard University and an MBA from UNC-Chapel Hill. Between working at startups and a handful of merit scholarships, she paid her way through college.
It’s that kind of exposure, and examples of rising stars like Lopez going forward that will hopefully prove to be the turning point.