There’s a new kid on Wilmington’s venture capital block. Tidewater Equity Partners opened its headquarters here earlier this month after launching last September in Raleigh. W. Merrette Moore is the founder and managing partner of the firm, which still maintains that office in Raleigh.
Tidewater is not a fund, Moore explained. He describes it, rather, as having a “deal sourcing and management structure that allows its participants to invest on a deal-by-deal basis.”
In fact, he added, it is possible that each deal could have a separate set of investors. There is no upfront or long-term commitment required from investors, according to Tidewater’s prospectus.
The firm focuses on two investment segments: venture capital and private equity, as of last month.
“We provide startup health care capital, then do more traditional buyouts or acquisition of controlling interest in small companies across a number of industries,” he said, adding that the firm plans to look at venture capital investments of between $500,000 and $5 million. Private equity investments will range between $3 million and $10 million.
Thus far in its short life, Tidewater has made one venture capital and one private equity investment. The venture capital deal was for Durham-based semiconductor company Phononic, which tested its proprietary refrigerators for health care applications with UNC Rex.
The private equity investment was in South Atlantic Packaging, a contract packaging company in Winston- Salem. After making that investment, Tidewater put in a new CEO but retained some other members of the management team there.
Since Moore’s arrival in Wilmington some months ago, Tidewater has been talking with New Hanover Regional Medical Center about possible collaborations, he said.
Those talks with the hospital are to “help the organization find synergies and potentially develop an innovation platform of its own,” company officials said.
Moore’s move to Wilmington from the Triangle area 18 months ago was mostly a lifestyle choice, he said.
“I’m from New Bern – from the coast,” he said. “My family moved to Raleigh when I was a teenager, and I have lived there since the mid-80s. My wife and I decided a couple of years ago we wanted to move down here.”
Most of Moore’s business dealings and his Tidewater associates are still in the Raleigh-Durham area, he said, but he wanted to do more than live in Wilmington; he wanted to establish a business presence here.
“Part of Tidewater’s mission is to foster economic development through entrepreneurship,” he said. “What do I think of the entrepreneurial scene here? It’s early, young. The ecosystem has a lot of growing up to do, but a lot of the necessary components exist down here. I think there will be a vibrant [entrepreneurial] ecosystem in southeast North Carolina. It will just take some time.
Tidewater Equity Partners At A Glance
FOUNDED: September 2016
MANAGING PARTNER: W. Merrette Moore
INVESTMENT FOCUS: Venture capital for health care-related startups and private equity buyouts or controlling interest in small businesses that meet certain criteria
PROJECTS THUS FAR: $3.1 million in venture capital for Durham-based Phononic; $6.5 million in private equity funds for South Atlantic Packaging in Winston-Salem
“I do find the cycle of investments and entrepreneurship fascinating. You have to do a number of investments to make money. One or two out of 10 will make money. But a lot of investors give up after a few. New people come in. We try to explain the need to put a little money in each [investment] to get a return. That’s part of what Wilmington needs: organizations and people who understand how portfolio investing works in venture capital.”
Moore has been involved in investing – and shaping his business model – since he completed business school in the late 1990s. He started participating in deals along with his father, working with various funds. In 2010, the father and son formalized their own Raleigh-based firm, Lookout Capital, and put together several deals.
Tidewater Equity Partners, Moore said, is a slightly tweaked version of Lookout Capital.
Typically the way Moore works is to research a potential opportunity and then approach possible investors.
“They can pick and choose,” he said. “High-net-worth individuals want to make their investment decisions, they just don’t want to do the dirty work of research and management. That’s what I do, and they can involve themselves as much as they want.”
Tidewater’s model stipulates a fluid investor network that will allow investors to choose investments in industries they understand. That’s good for them and for the companies into which they sink their resources, Moore said.
In addition to Moore and the firm’s four other associates, Tidewater has assembled a group of advisers who are not full time with the firm but are “very hands on in terms of finding deals and investigating deals,” Moore said. “They are all investors and have a stake in our success.”
What is an ideal number of investors in any project?
Moore said that an optimal number depends on the particular deal.
“You want more than one or two, because you need expertise,” he said. “But too many investors, and it’s difficult to manage. More than five, fewer than 25 is the kind of Goldilocks point. One Lookout Capital deal had 90 investors, and it was a nightmare.”
How many deals is a good number for a firm like Tidewater?
“That is kind of arbitrary, but I have established a personal goal of one buyout deal and two to three venture deals each year,” he said, explaining that an investment can take as long as 10 years to reach the exit point. Rarely, according to Moore, does a five-year plan pan out in five years.
“You have to plan for the long term,” he said. “Where you have more control, you could exit in three to four years but if you’re doing well, why sell?”