To stop potential startup decline, this NC Foundation is doing something it’s never done

For the first time in its history, NC IDEA, a foundation that provides seed grants to startups, will accept private donations to grow its ability to funnel money to promising young companies across the state of North Carolina.

It’s a necessary move, the Durham-based foundation’s CEO Thom Ruhe said, because with the coronavirus devastating the the nation’s economy, younger companies are more fragile than ever — especially if the pandemic leads to a longer-term slowdown.

“I am worried that we are going to see several years of setback” for the startup ecosystem, Ruhe said, “with new companies not starting and ones that are five and less years old folding.”

Many startups in the Triangle are moving into a more conservative mindset after years of momentum. Investors here are instructing their young companies to horde cash and freeze hiring to make sure they are viable when the economy is ready to restart.

Ruhe said NC IDEA needs donations because it is already maxing out how much it can give and still operate.

In 2019, NC IDEA awarded $900,000 to 42 different companies in North Carolina. Thirty of those grants were in $10,000 increments and 12 of the grants were at $50,000.

The $10,000 micro grants are given to companies looking to validate or advance new ideas, while the larger $50,000 seed grants go to startups looking to increase scale.

Private foundations must pay out 5% of their net investment assets every year to retain tax exemptions, Ruhe said. The foundation has been doing nearly double that in recent years to meet demand from so many new companies seeking grants.

Notable companies that have received grants from NC IDEA include Automated Insights, ArchiveSocial, Bee Downtown and TransLoc.

Ruhe said he is concerned that early-stage capital could dry up in the coming year, if there is a downturn. So NC IDEA wants to do its part and increase what it gives.

“I don’t know if we are going to raise $200,000 or $2 million. But we can deploy 100% of any additional fundraising we can raise,” Ruhe said.

This story was produced with financial support from a coalition of partners led by Innovate Raleigh as part of an independent journalism fellowship program. The N&O maintains full editorial control of the work. Learn more; go to bit.ly/newsinnovate