Key takeaways

What do tech investors want?
In this challenging post-pandemic economy, startup companies andentrepreneurs seeking capital are asking if investors’ priorities andgoals have changed. What are investors in the tech space askingfor — and what are they buzzing about? Three veteran investors
addressed those questions at Bank of America’s recent Triangle
Innovation Summit in Raleigh, NC.

• Post-pandemic, both companies
and their investors are focusing on
efficiency while balancing the need forrevenue growth.
• Venture capital is flowing more
broadly to parts of the country outside
California, including the North Carolina
Research Triangle.
• Veteran tech investors are excitedabout the potential of “moonshot”
technology like generative AI andquantum computing.

A focus on efficiency
In the current economy and with interest rates at a 22-year
high, investors’ focus has shifted to efficiency, they say.
Especially in a startup or early growth environment,
companies need to find a balance between growing revenue
and working to have as little cash burn as possible. “Whenmoney was free, you weren’t worried about how muchmoney you spent — you focused on growth. You knew there
was more money behind the money you were spending,”says Mark Rostick, VP and senior managing director, IntelCapital. “The minute money got more expensive, multiplescompressed. It got more expensive to run out of money.
Everybody had to react to that and say, ‘Well, now I have totalk about efficiency. And how much does it cost to buy$1 of growth now?’ As money has tightened, we’ve shiftedfrom a growth to efficiency focus.”
Michael Sorensen, partner at QHP Capital, says a few years
ago, management presentations and business plans typicallyoffered a “huge list of all the different things they weregoing to attack and do — some of that because there wereendless sources to do it.”“Now companies are focusing down on one or two
ideas, to see if they stick and if they can executeand get traction in the space.”
Michael Sorensen, Partner, QHP Capital

Rostick says frankly that unless you’re a company in thehottest of emerging technology areas — like generative
AI — “It’s a very, very tough market to raise money.” It’s beena tough environment for investors as well. “Times havechanged,” he says. “Our companies look to us and the otherinvestors to understand where the guardrails are now,
because the rules have changed. Performance benchmarks
are different today. And that means I’ve been Darth Vader alot more in the last 18 months than I was in the previous18,” he says.
Just a couple of years ago, the market hype centered oncompanies pursuing “unicorn” status — a billion-dollar
valuation. Now the talk is about which of those companies
will end up as “zombiecorns”— once-hot, now dying
unicorns — because of the recent market pullback
by investors.
Scot Wingo, partner in the Triangle Tweener Fund and CEOof Get Spiffy, says part of the shock to the system has beenthat “the world changed literally overnight” and many
younger entrepreneurs hadn’t experienced anything like it.

“Our biggest concern has been that 80%of the investing partners had never lived
through a downturn.”
Scot Wingo, Partner, Triangle Tweener Fund/CEO, Get Spiffy

Sorensen also says that especially in a tougher economicenvironment, honesty is key to a good investor relationship.
“As an investor, you hate it when you feel like you’re adetective,” he says. “We appreciate it when companies are
upfront about the challenges they’re facing today, when theylook at you as a partner — and know that you’re focused on
making their company successful.”what do tech investors want?

Finding opportunities
On the bright side, investors are still looking foropportunities. As Wingo’s North Carolina-based firm knows,
the venture capital world is not as focused on California andSilicon Valley anymore; capital is flowing more broadly toother parts of the country. That includes emerging markets
like the North Carolina Research Triangle. Wingo’s Tweener
Fund has focused on local companies with revenue between$1 million and $80 million, across “the widest possible
spectrum of Triangle-headquartered high-tech companies,”
he says. “We have a good MarTech (Marketing Tech) clusterof companies here, and e-commerce — now we have anawesome GreenTech cluster too, and a lot of cool hardware
ideas.” He says entrepreneurs are choosing to base theirstartups in the Triangle because of the availability of land forfarms or factories, and because the area is more affordable
than heavily hyped areas like Silicon Valley or Austin.

And what opportunities are investors excited about?
The three panelists say technology investors are buzzing
about generative artificial intelligence (AI) and its potential
in many different industries, including applications inhealthcare, corporate efficiency and informationmanagement. Does generative AI represent a “smartphonemoment”? “I think it’s a seismic shift,” says Rostick.
“I think it’s here to stay.”
He also says battery technologies and quantum computing
are places where “a ton of money is being invested to see
if they can change the world.”“That’s what’s cool about venture capital in theU.S. economy. It reinvents itself all the time,and if it takes a beating, it comes back for more.
I’m excited about how these technologies
could change how we live.”
Mark Rostick, VP/Senior Managing Director, Intel Capital

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