Capital A Partners: South Carolina’s Newest Venture Capital Fund

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Before David Mendez founded Capital A Partners in 2013, there was little happening with venture funding in Charleston. Mendez remembers, “South Carolina in the venture capital world was a “fly by” state. There really wasn’t much going on.” Since then, funding opportunities in South Carolina have started to grow. With Capital A taking hold alongside many other early stage investing efforts, new angel groups are forming and VCs are starting to pay more attention to the region.

Capital A Partners is an early stage fund that provides capital to post-revenue startups and businesses. Headquartered in Charleston, Capital A is the first and only committed capital VC fund in South Carolina formed in the state in over 10 years. While they place heavy emphasis on investing in the Southeast, they also have offices in New York, NY and Stockholm, Sweden.

The Path to Charleston

david-mendez-capital-a-partnersAfter graduating from Clemson with an engineering degree, Mendez moved to Wilmington, DE to start his career at DuPont. During his six years there, he worked in engineering, recruiting, and marketing and sales, eventually leaving in 1991 to pursue his MBA at the Kenan-Flagler Business School at the University of North Carolina. While working toward his degree, Mendez studied abroad in Belgium and worked for Conoco in London, gaining strong international experience before returning to the US to finish his studies.

Mendez’s next move was to San Francisco, where he joined GE Plastics. In under two years, he more than quadrupled his territory’s sales, from $6M to $26M. His time at GE gave him valuable experience that he put to use as the co-founder of SupplyBase, Inc., a supply chain software company that went through two rounds of VC funding before being acquired by i2 Technologies in 2000.

With a successful exit behind him, Mendez joined an early stage venture capital firm, Katalyst Venture Partners as Managing Director in New York. After Katalyst, Mendez formed his own investing and advisory firm, DPM Resources. Through DPM, he consulted and invested in startups, held interim management positions, and served as an advisor/equity holder for a wide range of companies and brands. When he decided to re-enter the world of venture capital, he saw the need and opportunity that existed in Charleston and decided to co-found Capital A Partners with Tanya Marvin-Horowitz, his NY/Stockholm-based partner.

Capital A Partners’ Investments

In their first year and a half, Capital A has made twelve investments, ranging from a Durham-based company that utilizes neuroscience for neuro-marketing and clinical treatment for children with neurological learning disabilities, to a Swedish company that manufactures high-tech insulation materials. While some investors tend to favor specific sectors, Mendez explains,

“We’re fairly sector-agnostic. I can’t say that any of our companies are in any same particular sector. Most them are in in technology, consumer, or business services…We’re looking at a wide variety of opportunities.”

One thing common among the companies that Capital A invests in, however, is that they are already generating revenue or have a proven concept at the time of investment. Describing Capital A’s decision-making process, Mendez says,

“One of the major criteria is that the company needs to have proved its viability in the marketplace, meaning it needs to be a company that is out there with a product or service that is showing traction and reducing that development and market risk. We’re pretty firm in those criteria. It doesn’t have to be a lot of revenue or traction. But it has to show that they’re able to launch a product and sell it.”

Geography is also an important consideration: Capital A focuses on the East Coast and on Nordic countries. Most recently, they invested in Small Giant Games, a game studio based in Helsinki that closed off a $3.1M round to launch their first game, Oddwings Escape. It may seem like a big sum for a studio without a game on the market, but the Nordic countries have produced massive gaming successes in the past few years–like Rovio (Angry Birds), Mojang (Minecraft) and Supercell (Clash of Clans)–and VCs are eager to find the next big Finnish hit.

So far in Charleston, Capital A has invested in Alchemy Global, a crowdfunding platform for sports and entertainment; Dynepic, a product design firm launching a line of internet-connected toys; and Best Chefs America, a peer rating platform for the culinary industry.

Capital A is currently raising a $25M fund–a significantly larger sum than the company’s initial fund–that is expected to close in the first quarter 2015.

Charleston’s Evolving Startup Ecosystem

Aside from his work with Capital A, Mendez has played an active role in Charleston’s startup scene. He participated as a judge and contributed investment awards to Dig South’s Wild Pitch and the inaugural Charleston Startup Weekend, and spoke at Startup Grind Charleston, where he shared tips for startups looking to raise capital. He also serves on the advisory board for the Harbor Entrepreneur Center.

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David Mendez presents check to Dynepic, winner at Dig South’s Wild Pitch

This involvement has given Mendez a good picture of how the startup ecosystem in Charleston is developing, and he says,

“I think the Harbor Enterpreneurship Center, the Digital Corridor, the exciting events, and the angel groups that are forming in Charleston and across the state are all contributing to the buzz and people are realizing we can produce a knowledge base here with tech talent. Every entity that’s involved in this transition is contributing very well and I’m excited about it.”

Mendez is also excited about other new VC’s taking notice of the great opportunity in Charleston and starting funds here:

“I’m thrilled about it. We’re not concerned about new funds whatsoever. We’re so undercapitalized in the Southeast. We love to co-invest with other investors, venture capital firms, angels, and accredited smart people and work on deals together – very happy to do it.”

One of Capital A’s major contributions is to help close the gap in early stage funding in the region. Another, less obvious one is their ability to raise awareness of Charleston’s tech/startup scene both in the US and abroad, bringing recognition that could help draw additional funding, companies, and talent to Silicon Harbor.

Watch the full video of David Mendez sharing his story and tips for startups at Startup Grind Charleston:

 

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