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This week, more than 600 entrepreneurs and investors gathered in Charlotte for the Southeast Venture Conference, the largest of its kind in the region, to showcase promising tech startups.
One of the panelists was venture capitalist Don Rainey, 53, of Grotech Ventures. Rainey was one of the early investors in daily deal site LivingSocial, which launched in 2008, and he’s been involved in startup communities along the East Coast for more than 25 years.
He is an adviser for a Defense Department program regarding emerging technologies, and he has also taught classes on venture capital at American University and the University of Maryland.
Rainey recently decided to relocate to the Charlotte area, where he sees great startup potential. He and his wife and their six children will move into their new Cornelius home in June.
The Observer caught up with Rainey at the conference to discuss Charlotte’s startup community and what attracts investors like him.
Here are excerpts from the interview:
Q: Tell me about your venture capital firm, Grotech Ventures.
Venture capitalists are described by three characteristics: the geography they invest in, the technology they invest in and the stage they invest in.
Geography for us is primarily Mid-Atlantic. We invest in IT (information technology). And our stage is early, companies that have made no sales and have a finished or nearly finished product.
We have a $200 million fund, and we write checks as small as $250,000 and as high as $5 (million) or $6 million at a time.
Q: Why did you decide to move here from Washington, D.C.?
I’ve worked around startups for 25 years, both in Raleigh, where I lived in the ’90s, and in D.C., where I’ve been for the last 13 years.
I want to be part of startup ecosystems from the ground floor. I’m a moth, and that’s the light I’m attracted to. I see (in Charlotte) an opportunity.
Q: What are your thoughts on the startup scene here?
There’s more than meets the eye. It’s early for me, but all the initial feedback is positive.
Q: What sectors do you see succeeding here?
I think startups would emerge from the native skill sets. This is city with a great banking industry, so what do people learn? Data protection, financial advising, payment technology, general computer security.
I don’t see any of that right here right now, but the potential is there. The alchemy (for a successful startup) is: core competency, innovative idea and money.
Q: Given that formula, what does Charlotte lack? The money?
I think the challenge is always innovation, a novel idea or a novel way to solve a problem. That’s why there’s a bias in many startups for young people or the young at heart.
Initially, LivingSocial was four 26-year-old guys in an apartment that was not being cleaned (trust me), above an antique store in Georgetown.
I gave them $4 million. None of them had ever held a senior position. But they had an innovative idea.
As venture capitalists, our primary concern is: how is the world going to look in three years. I want to invest today in mobile app or service or utility that every American is going to be using in the summer of 2016.
Q: But Charlotte’s venture capital community isn’t flush right now. Is that a stumbling block?
I think if great companies are created, there will be an endless amount of money to support them. Money doesn’t create great companies.
Q: What’s your advice for early-stage entrepreneurs?
Consider the possibility that you could be unlucky, that you can do nothing wrong and still fail. And with that message clearly and firmly held to heart, let it rip. Go for it.
Q: You served on a panel at the Southeast Venture Conference. What did you talk about?
A lot of the questions in the room were about, “How do you get a fair valuation?”
First thing is, the price (you’re quoted) doesn’t matter. The point is to be involved in the creation of great companies, and if you do that, you’ll be richly rewarded. If you buy into a company that turns out to be a complete failure, whatever price you (were quoted) is immaterial.
The other thing is this: to (give a value) to a company that has no revenue, doesn’t have a finished product and doesn’t have customers, is an agreement between two people that’s a joint fantasy. You’re making it up.
So the point is not the price. It’s about building something that’s great, that other people want to be a part of. That creates value, and not just to the investors. Startups are usually about people pulling themselves up, and very soon after, they’re pulling others up.
