Successful serial entrepreneur David Gardner has raised $10 million for a new venture capital fund that will focus on making seed and early-stage investments in business-to-business software companies based in the Triangle.
Gardner said that his new Cary-based fund, Cofounders Capital, also has obtained commitments from investors for an additional $2 million that he anticipates closing on at the end of this month.
The fund is a welcome addition for Triangle entrepreneurs who are all too aware that although the region is a hotbed for startups, venture capital funding is hard to come by. Moreover, raising the initial round of funding is regarded as being the toughest of all.
Gardner himself has co-founded or founded seven startups, including PeopleClick, which was sold for $100 million. His most recent venture, ProviderLink, was acquired by Compuware for $12 million.
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“When I sold my last company,” Gardner said, “my wife made me promise I would never start another company.”
Cofounders raised its funds from about 80 investors who invested a minimum of $100,000 in the fund, including a number of well-known Triangle business executives and investors.
They include: Scott Moody, the co-founder of AuthenTec, which was acquired by Apple for $356 million; Scot Wingo, co-founder and executive chairman of ChannelAdvisor; Bruce Boehm, a former general partner at U. S. Venture Partners in Menlo Park, Calif.; and Jeff Stocks, the former CEO of Manpower’s Raleigh office.
Moody said that he invested, first and foremost, because of Gardner and his track record as an entrepreneur and an angel investor.
“They always say it for startups, but it is (also) true for VC funds: you invest in people,” Moody said.
In addition, he said, he likes that Cofounders is committed to investing in Triangle businesses, viewing it as an opportunity to make money while at the same time being “socially responsible to the area.”
“Frankly, there’s not a lot of venture capital money in the community,” Moody said. “We’ve all heard that a thousand times.”
Gardner anticipates that “95 percent to 99 percent of my investments will be right here in the Triangle.”
Cofounders anticipates making initial investments of $300,000, plus follow-up investments, in more than 20 companies. The new fund is an outgrowth of Gardner’s angel investing.
Gardner’s approach to investing in startups, which he will continue at Cofounders, is to provide free mentoring services while he gets to know the entrepreneurs and their business.
“I only invest in companies that I have worked with, have been on sales calls with ... helped recruit for them,” he said.
“That’s the best due diligence in the world,” Gardner added. “I think that is a very novel concept in the venture capital world.”
Cofounders also has two part-time venture partners – Alex Osadzinski and Whitney Rowe – who will work with startups. A number of the fund’s investors have expressed a willingness to roll up their sleeves as well, Gardner said.
The fund also offers entrepreneurs free space in a 1,730-square-foot business incubator; the space was provided by the Town of Cary.
Investors in Cofounders are able to take advantage of the fund’s due diligence and make personal investments alongside the fund without paying the firm any fees.
“I did that because I wanted the fund to really be able to command $25 million or $30 million, even though the fund is only $12 million,” Gardner said. “Because I think we’re going to need that.”