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VentureSouth groups "help start-ups learn to fly"

Charlie Banks
Charlie Banks
Last updated: January 17, 2024
Venture south fallback

The efforts of VentureSouth’s (fka SCAN) groups continue to gain attention as their impact grows.  The Greenville News did a great job explaining VentureSouth (fka SCAN) for its readers - and we are delighted that both reporters and editorial staff understand the importance of local angel investors for the long-term health of our state.

Read this article from Greenville Online here. 

Editorial: Angel investors help start-ups learn to fly

Upstate South Carolina has long been known as the manufacturing capital of the state, but it’s increasingly apparent that this region is a leader in nurturing and funding the entrepreneurs who are providing much of the growth in today’s economy. Entrepreneurs are the creative thinkers and gutsy risk-takers who try to translate what seems like a good idea into a viable business.

When entrepreneurs are successful, they fuel the economy and provide jobs to area workers. It takes start-up funds to make it possible for an idea to become a reality, and that is where angel investors come in. They are willing to take a calculated risk to help start-up companies turn dreams into profitable businesses.

The Upstate Carolina Angel Network is one of the leading angel investor groups in the entire country. Encouraging news for South Carolina is that the success being experienced by UCAN soon could spread throughout our state and Western North Carolina as more angel investment groups are formed to help fledgling companies survive their first days and learn to fly.

VentureSouth, the statewide network that was launched last year, now includes angel investor groups in Columbia and Asheville. A fourth group is forming in Spartanburg, Greenville News reporter Rudolph Bell reported this week, and a fifth group meets virtually to help Clemson University alumni who are entrepreneurs.

The formation of VentureSouth bodes well for South Carolina that has put itself in a good position to become a friendly environment for the start-up companies that could end up providing jobs and enhancing the state’s economy. The South Carolina Legislature did something noteworthy in 2013 when it approved legislation that created a significant tax incentive for start-up companies that have high growth potential.

In an op-ed in The Greenville News months before the law passed in 2013, state Rep. Dwight Loftis and Wayne Roper of the South Carolina Biotechnology Industry Organization predicted the law could triple the number of angel investors in South Carolina and pump $57 million in private capital into these potentially high-growth businesses. The law was needed for many reasons including to encourage more start-ups in South Carolina and to make the state competitive as other states were taking similar action.

Loftis, Roper and the bill’s supporters were correct. In about nine months 26 companies had attracted about $20 million in investment and accounted for more than 100 jobs, according to news reports in 2014. Those numbers may seem small compared to the news when a big manufacturer locates or expands in an area, but the investment dollars and additional jobs represent the potential for more growth for both those start-ups and new ones in a more attractive environment.

Upstate Carolina Angel Investors is setting the pace in South Carolina. Formed in 2008, the Greenville-based network of more than 50 investors has invested nearly $12 million in 36 portfolio companies. Angel investors provide the capital to entrepreneurs looking to start a business, but equally important is the knowledge they can share.

New York Butcher Shoppe provides an example of how the process works. Jim Tindal and a business partner bought the New York Butcher Shoppe brand five years ago from a Mount Pleasant investor and they moved the company’s base of operations to Greenville, Bell reported earlier this week. Tindal and his partner turned to UCAN as they were wanting to expand the business, and they went through a rigorous vetting process that resulted in an undisclosed amount of money being invested in the business. Three UCAN members also joined the Butcher Shoppe board and have provided what Tindal described as valuable guidance over the years.

In a nutshell that’s how an angel investor group works. A person has to be affluent to become an angel investor; in this state’s network that means a net worth of $1 million excluding a primary residence or an annual income of $200,000 for at least three years. After all, the angel investor is risking his or her own money on a start-up company that could become an amazing success story or could fall flat in a year or two.

The tax credit approved two years ago in South Carolina was important for providing some buffer for those investors. The law allowed angel investors to claim a 35 percent tax credit on their investments, but a give-back provision also required them to return their tax credits if the company made a profit. Other states with a rich entrepreneurial community had similar laws.

UCAN has an excellent reputation. It was ranked No. 8 last year by CB Insights, a New York firm that tracks investments in private companies, out of the 370 angel groups that were evaluated based on the firm’s Investor Mosaic that takes into account factors such as “past performance, network strength (who they know), selection aptitude and brand...”.

In turn UCAN can serve as the model as more groups come into the state’s angel investor network. South Carolina will be the winner as these groups take on the risk of providing the start-up capital for companies that have the potential of seeing extraordinary growth and bringing more high-paying jobs to our state.