Looking for funding? Stay flexible.
Co-founder and chief technology officer
Durham, North Carolina
In the 1980's, I was in grad school at North Carolina State University in Raleigh, NC, pursuing a science path. That's where I met Eric Hunter, Calvin Carter and John Edmond. Eric then introduced us to his brother Neal Hunter, also an NCSU graduate, and Tommy Coleman. Together, we co-founded Cree, Inc. a market-leading innovator of lighting products, LED components and semiconductor products for power and radio-frequency (RF) applications. The closeness of our core group of founders was a major strength for us, as was the fact that we stayed together for so long. Eric was our first CEO in 1987. When he left in 1994, Neal took over. Tommy Coleman left in 1999.
Looking for funding in all the wrong places
When the time came for us to grow, we looked to venture capital. Of course. Everyone did. We were lucky and lined up a venture capital investment to get the company started.
As fate would have it, we were set to sign the deal in October 1987, on what became known as Black Monday. When the market crashed that day, everything began to unravel. Wall Street was reeling and our venture capital guys smelled fear and pulled the deal. We were crushed. We felt the rug had been pulled out from underneath us and that all our hard work was for nothing.
Black Monday, 1987: a win for us
But that event, as bad as it was for almost everyone else, was a lucky break for us. When our VC collapsed, we ended up with angel investors. And angels are exactly what they were.
Our investor angels provided multiple rounds of financing that got us up and running. This investment model allowed us to proceed at our own pace and stay put in North Carolina. The other model, the venture capital guys, had a very different approach. The first thing they said was, "You have to move to Silicon Valley." None of the founders wanted to move, but at the time there wasn't a high-tech community or entrepreneurial atmosphere in the Raleigh area.
If we had gone with the venture capital, we potentially would have been forced to move and go through multiple rounds of financing that would have diluted us out of a controlling interest in the company. By contrast, the angel investment group was patient, worked with us to build the company according to our vision and enabled us to maintain control.
The biggest takeaway in the story of Cree is to be flexible. Don't get so myopic in your vision that if something better comes along you don't even see it.
Our funding experience shows that, if you're open to it, what may look like the absolute worse turn of events may indeed be the best possible scenario for your company. Not to mention being the most educational and character-building moments in your life. For us, what we thought was our downfall turned out to be our foundation. And by being open to change, we were able to roll with the markets and find alternative funding.