Who Just Raised A $225 Million Financing in North Carolina?
Last Tuesday, while I was enjoying a week off the grid, AvidXchange announced they had raised a $225 million financing led by Bain Capital Ventures. I’m psyched to be joining the board of a company co-founded and run by Mike Praeger, a friend of mine for over 20 years.
It was big news in Charlotte, North Carolina where AvidXchange announced the groundbreaking on a new headquarters complex in the N.C. Music Factory. And, Matt Harris from Bain Capital Ventures wrote a good thought piece titled Submerging Payments, Part II on why AvidXchange is such a big deal.
This was an atypical investment for us as we participated in the financing through our Foundry Group Select fund. While we do late stage investments via Foundry Group Select, up to this point we’ve only used it to invest in companies we are already investors in. AvidXchange is our first Foundry Group Select investment that we weren’t previously investors in.
The price of admission for us to make an investment like this is that we think the company is extraordinary and will be an unambiguous long term market leader. But we see lots of late stage investment opportunities like that and consistently pass on them as it’s not where we engage. And, when Mike initially called me for advice on the financing he was putting together with Bain Capital Ventures, it didn’t even occur to me that it might be something we’d invest in.
But then Mike called me about some more stuff a week later. During this call, he asked if I’d be open to joining the board of directors as part of the financing. I told him that I couldn’t as we don’t join boards for companies that we aren’t investors in. Mike then asked if we’d be willing to invest if he could get Bain Capital Ventures to give us some of their allocation (they committed to the entire round.) I told Mike I didn’t think this made any sense given our strategy and we left it at that.
A few days later, Mike emailed and asked if he and his wife Cindy could come to Boulder to spend some time with me and Amy. We hadn’t seen each other in many years and it seemed like a fun evening if they were already traveling. A week later we had an awesome dinner at Oak and then Mike, Cindy, and I stayed up until after midnight at the St. Julien talking about AvidXchange. Mike again asked me if I’d consider investing. This time I told him I’d run it by my partners and get their feedback.
Seth, Jason, Ryan, and I had a long conversation about it after going through the AvidXchange financing deck and monthly financial package. I expected that we’d decide to pass and set up the conversation with them this way. But I was pleasantly surprised that they were all interested in exploring it more. Besides thinking this was an outstanding business at first blush, there were three other things that caused us to consider breaking our rule about late stage investing.
1. My long standing relationship with Mike. We met through YEO in Boston in the early 1990s when we were each running our first company. Through YEO, I got to know Mike and Cindy (who is also an entrepreneur and was in YEO) very well. A few years after Amy and I moved to Boulder, Mike and Cindy sold their first company and moved to North Carolina. Their experience in Charlotte has been similar to ours in Boulder, as they made it their home and immediately went to work building their next business and their life. In 2000, Mike co-founded AvidXchange and has been building it ever since. While we haven’t seen each other in person for a while, we periodically go back and forth on email and have a deep emotional intimacy that comes from the relationship we built through our time in YEO.
2. We are very interested in investing in fast growing companies in different geographies. When we started Foundry Group in 2007, we stated that we would invest in companies throughout the United States. While roughly 33% of our investments continue to be in California (San Francisco, Los Angeles, and a third city to be named in a week or so) and 33% of our investments are in Colorado (primarily Boulder and Denver), we have developed deep networks in many different cities, including Boston, New York, Seattle, Portland, and Minneapolis through the other 33% of the investments we’ve made. And, through our deep relationship with Techstars, our reach and network is even further and includes cities like Detroit, Kansas City, Austin, Chicago, San Antonio, and San Diego. When the opportunity to invest in one of the fastest growing, and most significant tech companies in Charlotte appeared, we couldn’t resist.
3. We could do our unique thing alongside one of the best fintech investors in the industry. We have enormous respect for Matt Harris and his work at Bain Capital Ventures. While this is the first time I’m working with Matt, my partner Seth has known him going all the way back to high school and Mark Solon, one of the managing partners at Techstars, worked with him during his time at Village Ventures. While fintech is not one of our themes, we think of AvidXchange as Glue in the fintech world, which gave us a comfortable lens to view it through.
Before making a decision to invest, we talked to each member of our advisory board to get their feedback. We knew we were onto something when several of them asked if they could invest alongside us in the round. Their feedback, as one would hope from an advisory board, was direct, clear, and ultimately supportive.
With that, we decided to invest and Mike got me to join the board after all.