Raleigh’s Lookout Capital expands its investment focus

dranii@newsobserver.comSeptember 24, 2013 

Lookout Capital, a Raleigh investment firm that plows money into healthy small businesses that need capital, has created two new divisions in order to expand its investment horizon.

“We have expanded the investment platform,” said Merrette Moore, managing partner. “We are going to keep doing what we have been doing, but we’re going to widen the focus.”

One of the new divisions, Lookout Ventures, is looking to invest between $250,000 and $1 million in startups and early-stage companies with up to $2 million in revenue. Walt Clarke, the co-founder of MedThink, a Raleigh health care marketing and communications company with more than 70 employees, has come aboard to head Lookout Ventures.

“I really love working with entrepreneurs,” Clarke said, citing their enthusiasm and passion. “I can’t wait to get out there and close our first deal.”

Moore said Lookout’s nearly 60 investors – almost double the number it had when it began operating in 2011 – have been encouraging the firm to move into the startup arena because of the dearth of local companies that invest in early-stage businesses.

In addition, whereas most startup investors focus on information technology and biotechnology companies, Lookout Ventures also will invest in “non-technology startups” such as manufacturers and service businesses, Moore said.

At the other end of the spectrum, Lookout Capital has formed Lookout Advisory Services, which will focus on larger deals that Lookout Capital can’t fund on its own. Moore described Advisory Services as a hybrid of sorts between an investment bank and an investment firm.

Advisory Services will focus on deals ranging from $5 million to $20 million that Lookout participates in while also lining up investment partners.

“If we syndicate a deal, the investors in the deal will pay us for the right to participate,” Moore said.

Lookout has added Tim Lavelle to head Advisory Services. Lavelle was a managing director of Trident Financial, a Raleigh investment banking firm, for 21 years.

Lookout’s co-founder and chairman, Bill Moore, was the founder and CEO of Trident. Moore, who is Merrette Moore’s father, also is chairman of giant research firm RTI and professor emeritus at UNC-Chapel Hill’s Kenan-Flagler Business School.

Lookout Capital has an unorthodox business model. Its investors commit anywhere from $5,000 to $50,000 a year for five years for the right to invest in companies that Lookout brings to their attention on a 10-to-1 ratio. In other words, someone who invests $10,000 a year can invest as much as $100,000 — but they’re not obligated to invest anything.

To date, Lookout Capital has invested more than $4 million in four companies – three of which are based in the Triangle. It focuses on investing in companies that generate between $2 million and $10 million in annual revenue.

Lookout Capital also requires the companies it invests in to hire the business as a consultant. Likewise, the companies that Lookout Ventures invests in will be required to hire Clarke as an interim executive for up to a year “to basically get them pointed in the right direction,” Moore said.

Lookout has seven full-time employees after adding four new hires in the past three months. The company is moving to a 2,400-square-foot building on Glenwood Avenue near its intersection with Hillsborough Street in November. One of the businesses it has invested in, medical device company Contego Medical, also is moving into the space.

Ranii: 919-829-4877

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