December 5, 2013

Venture Capital Fund Launches To Support Growing Tech Sector In Charleston

Liz Segrist  /  Charleston Regional Business Journal

Silicon Harbor Ventures announced Thursday the launch of its venture capital fund with an initial $1 million investment to target early and growth-stage technology companies in the Charleston area. Johns Island-based Gold Ridge Asset Managements committed $1 million to the Charleston-based Silicon Harbor Ventures, said Mike Knox, the managing partner for the venture fund and president of Gold Ridge.

Silicon Harbor Ventures, using the Charleston Digital Corridor's network, will invite roughly 20 investors to join the team. Each member will be required to make at least a $250,000 investment to join the venture capital fund. They will also serve as mentors to the companies in which they invest.The eventual investors funding, coupled with the initial investment from Gold Ridge, will arm Silicon Harbor Ventures with roughly $6 million to start.

The venture fund aims to support the Charleston technology startup sector and bring capital in to a market that traditionally doesn't garner as much as other tech hubs, such as Austin, Boston or Silicon Valley. In the third quarter, the Southeast region received $225 million in venture capital funding for 57 deals, roughly 3% of the nationwide share, while Silicon Valley received $3.56 billion for 312 deals, roughly 46% of the share, according to Pricewaterhouse Cooper's MoneyTree report.

The Silicon Harbor Ventures will focus on Charleston-area companies, although it would consider companies outside of the region as well. Knox said the venture fund is looking to invest in early to mid-stage companies.

"I don't think we're looking for very many 'guy in a garage with a great idea' kind of companies. I don't want to say we would never do that because it really depends on the person and the team. ... But our ideal investment is something that's been kind of proven to be viable in some way –- a company that needs some capital to grow faster or higher another developer, for instance," Knox said.

The fund will treat each investment differently based on the needs of the entrepreneur and the desires of the investment team. The team could lend to a company, take a minimum ownership or a controlling stake in the company, for example. "It really depends on the situation, what the entrepreneur looks for and what stage they're at, but I really think we will consider all of those things," Knox said.

Knox moved to Kiawah in summer of 2012 after a career on Wall Street and building a software company, Xtract Research, a data provider in which finance attorneys review indentures and credit agreements to prepare summary research reports.

Upon arriving, Knox met Ernest Andrade, the executive director of the Charleston Digital Corridor, and they discussed the need for more local venture capital to support the burgeoning tech scene in Charleston, which was recently dubbed Silicon Harbor. Andrade said when the Digital Corridor was developing, he had to decide to focus on either cultivating talent or a funding pool for the local tech sector.

He decided to first focus on workforce development to address the huge needs for tech companies in the area. He launched CodeCamp, which is finishing its second round, and then turned his focus toward venture capital. "The acceleration of Charleston's knowledge economy provides investors with an unprecedented opportunity," said Andrade.

Silicon Harbor Ventures' investors are required to attend meetings and serve as mentors to the companies in which the fund invests. SHV will also enlist non-investor mentors to provide entrepreneurs with experience and knowledge needed to grow a tech company. Mentors need expertise in the technology sector or expertise starting or growing a company.

"We're looking for early stage enough companies that mentors will be very valuable to them," Knox said. In addition to mentorship, companies in the Silicon Harbor Ventures also will have access to the Charleston Digital Corridor's office facilities, talent and business concierge services. Companies in need of funding can submit an application on the fund's website and the investment team will decide whether to move forward and meet the company in-person.

Knox said the fund will prefer companies to have financial resources in place and for the entrepreneur to have a "significant amount of their own net worth invested in the company."

"We want someone who is all in and just needs a bit more help," Knox said.