RI Attracts More than $200 Million for Hot Start-Ups
Kate Nagle, GoLocal Contributor
RI Attracts More than $200 Million for Hot Start-Ups
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While Silicon Valley and Boston/Cambridge are two of the biggest hubs for attracting venture capital that fuels hundreds of companies each year, Rhode Island has seen a precipitous increase in dollars and deals.
“We are seeing the logical outcome of having a healthier startup scene in Providence. We have a half-dozen startups with big ideas that are coming into their own around the same time. In the past we've had one at a time, and long stretches when there weren't any obvious breakout successes. Venture capital is increasingly mobile, it will follow the best entrepreneurs and startups if they prove their business,” said Allan Tear, one of the founder of the business incubation company Betaspring.
SEE SLIDESHOW BELOW OF SOME OF THE COMPANIES RECEIVING INVESTMENTS
Led by high profile companies like Swipely, Teespring, Alex and Ani, and at least ten others, Rhode Island may have more hot start-ups than ever before in the state’s history.
Swipely has had two $20 million rounds and in 2013 was tagged by Forbes as one of the most promising companies in the United States. Teespring has raised $55 million in 2014 alone. GoLocal flagged this breakout company, founded by two recent Brown University grads, as a company to Watch in 2014. Alex and Ani in 2013 raised $75 million in private equity and ShapeUp has raised more than $10 million.
Companies who have raised more than $1 million and will be raising additional capital in 2015 include Giovanni Feroce’s BENRUS - the lifestyle brand that is looking to compete with Michael Kors and Tory Burch -- it offers a sweeping array of products from watches to apparel.
GoLocalProv’s parent company, GoLocal24 which is the only multi-state media company located in Rhode Island, raised more than $1 million and expanded to Portland, Oregon just three months ago.
According to URI Distinguished Professor of Business Edward Mazze, more venture capital is coming to Rhode Island entrepreneurs and businesses today for four reasons:
(1) the strategic location of the state and its nearness to markets because of its transportation systems;
(2) the existence of a number of businesses on the frontiers of their disciplines such as in the marine sciences;
(3) the state is an "educational" center for entrepreneurial education and;
(4) businesses developing from new technologies in the sciences and telecommunications are growing and need more capital.
“Every public and private college and university in the state offers business courses in entrepreneurship. The size of the state makes it an ideal place to test new ideas, and new products and services. The year 2014 may be a record year compared to past years because of favorable economic trends in the Rhode Island and U.S. economy, however, future years will bring even more venture capital to the state as the new Governor and current leaders of the General Assembly welcome new businesses to Rhode Island,” said Dr. Mazze.
Rhode Island still has much to improve on according to one top start-up CEO. “Compared to other states, Rhode Island attracts virtually zero venture capital investment. It would be a mistake to characterize recent investments as "so much VC coming into RI." Through the end of Q3 2014, RI had just 11 VC investments totaling about $87 million. That's nothing compared to Massachusetts, which saw 282 deals totaling nearly $2.7 billion over the same period,” said Swipely CEO Angus Davis.
He says the recent success can be greatly improved upon. “Venture-backed companies in New York attract nearly as much investment in a single week as RI companies raise in an entire year. The real question we should ask is why so little venture capital is invested into Rhode Island companies? The answer is there are not enough high-growth companies in Rhode Island for investors to back - yet,” said Davis.
Moreover, the only venture capital funding firm - Point Judith Capital - moved out of Rhode Island two-years ago to Boston. That firm was founded by RI’s Governor-Elect Gina Raimondo.
“It means a few things: These startups that have begun hyper-growth and attracted venture capital will be our new job creators; Leadership should pay attention. It is a reminder that RI grows when we are the home for entrepreneurs with global ambitions, who play way beyond state borders. Finally, startups go through a lifecycle that hopefully ends in being bought by a giant or becoming a giant. We need to be starting the next crop of promising companies now if we want to keep on the right track in the future,” said Tear.
The growth of Rhode Island’s start-ups, whether funded by venture firms or private equity concerns, is more than just money. Rhode Island needs talent and a culture of entrepreneurship.
“The simplest, fastest way to accelerate growth in Rhode Island would be to draft off our neighbor to the north in Massachusetts, by making it easier for RI companies to access talent and capital concentrated in MA, and making it easier for MA companies to employ Rhode Islanders,” said Davis.
Another critical factor is the need to develop and retain talent in Rhode Island. Too many of the young and highly educated have left RI. Rhode Island is ranked among the worst for business climate by Forbes in part due to the loss of population. "Rhode Island needs to attract and retain more talent. Today, companies are about talent and the companies that can attract and train-up potential will win," said Josh Fenton, CEO and Co-Founder of GoLocal24.
“Over the long term, we must address our chronically under-performing education system and adopt a culture that is less parochial ("I know a guy") and more oriented towards aggressively increasing prosperity, welcoming businesses to compete on a fair, even playing field. High growth companies enjoy one of the healthiest private capital markets in a lifetime, and state income tax rates are of little concern to high-growth companies. We do not need more government; we need more entrepreneurs to start and grow companies that can scale,” said Davis.
Hot Rhode Island Start-Ups
Swipely
Swipely
The Angus Davis-founded data company has had two $20M rounds in the past two years.
"Swipely is excited to be the fastest-growing tech company in Rhode Island, having recently announced merchants now manage over $4 billion in annual sales on our platform that helps restaurants and retailers understand customers and grow sales -- up 100% in 6 months and up 4x in just one year's time.
Private equity investors are excited about Swipely because a big market of potential customers are clearly excited to buy our product, and because we have a scalable sales model that allows us to grow quickly in a sustainable way. Investors are attracted to strong management; at Swipely we built a veteran team by recruiting experienced executives to our key marketing, sales, business development, engineering and finance leadership roles from across the country," says Davis.
Nabsys
Nabsys
The Providence-based life sciences company pioneering solid-state, single-molecule positional sequencing with broad applicability in DNA analysis, has raised about $40 million. In March of 2013, it announced that they closed a $20 million Series D financing to support the commercial launch of the company’s positional sequencing system with initial applications in genome assembly and finishing and in analysis of structural variation in genomes.
Teespring
Teespring
In 2014, Teespring has closed two rounds totalling $55M.
As GoLocal wrote in December of 2013:
This Betaspring darling and Walker Williams brainchild is set to revolutionize the way that custom-designed tee-shirts are produced. The company allows customers to design a style, set a sales goal, and pre-order the product, cutting out the need for a middle man.
"No paying thousands of dollars upfront, no guessing how many shirts or what sizes you'll need, and no passing out t-shirts one by one and chasing people down for cash," writes Teespring on their website. And folks are taking note—Forbes contributor Alexander Taub wrote in January of Teepsring, "Is this Rhode Based startup the future of custom apparel?"
Alex and Ani
Alex and Ani
The Cranston-based jewelry company has been one of the fastest growing companies in the United States over the past three years.
Over the past five years the company has grown from just $5M in sales to over $220M in 2013.
In 2013, the company closed $75M in private equity financing. The most of any RI company.
G-Form
G-Form
The company was founded by avid athletes that shared in a common vision of using advanced polymer technology to revolutionize impact protection and vibration dampening for competition. The founding team included expertise in a wide variety of sports, but perhaps more importantly expertise in polymer chemistry, 3d design, photography, mold making, entrepreneurship, innovation and out-of-the-box thinking.
Rather than have products developed and driven from a “board room” down marketing approach, the team has worked together to make products developed from the athlete’s point of view — making use of state of the art smart materials and polymers to make products no one previously knew could possibly be made.
ShapeUp
ShapeUp
The company has raised in excess of $10 million.
ShapeUp is the leading global provider of clinically-proven, social networking and incentives-based employee wellness programs that help people exercise more, eat healthier, and improve their overall well-being. Founded in 2006 by two medical doctors, ShapeUp has pioneered an innovative approach to behavior change called Social Wellness™ that leverages the power of social networking, gaming, and financial rewards to improve the health of large populations and reduce healthcare costs. ShapeUp’s social wellness platform covers millions of lives across 129 countries and is used by more than 500 employers and health plans.
Voltserver
Voltserver
In 2013, the company closes $2M Series A financing
Voltserver closes its Series A round of Finance of $2M with participation from the Rhode Island Slater Center, Marker Hill Capital, Natural Resources Capital Management, Angel Street Capital and the Clean Energy Venture Group. Voltserver has developed a digital power solution which enables Telecom Providers to remotely power remote equipment including cellular radios with absolute safety over existing twisted pair communications wiring. This eliminates the need for remote power infrastructure and remote battery backup. Voltserver supports the safe delivery of eight times the power normally available from Power over Ethernet technology, and is UL Approved. Future applications include Renewable Energy, Data Centers and Building Power.
Utilidata
Utilidata
The Providence-based company is a leading supplier of voltage optimization and digital automation systems for the electric utility industry, today announced that it has secured more than $20 million in Series B financing. Formation 8 Partners and Saudi Aramco Energy Ventures (‘SAEV’) led the round and were joined by existing investors Braemar Energy Ventures and American Electric Power – one of the nation’s largest utilities.
BENRUS
BENRUS
Raised more than $5 million and looking for a $20 million round in 2015.
The company reinvented by Giovanni Feroce says, "Today we embrace our rich heritage which we are so proud of. The re-launch of BENRUS watches and the introduction of our bags and backpacks has inspired a whole new generation. The utilitarian style and military look of the original watches are stylistically represented in the fashion details of all our products. Each time piece and bag is branded US Military, as a nod to its past, but offers a contemporary fashion look that is unique to the market. A great deal of thought as well as rigorous testing goes into every product before we put the BENRUS name on it as we hope to honor all those who have worn the BENRUS name before us.
