GRAND RAPIDS — In seeking to raise up to $50 million for its first fund, Grand Ventures I LP could soon add to the availability and accessibility of venture capital in Michigan.
Partners in the fund intend to invest $1 million to $3 million in early-stage capital in each deal and provide “strategic support” for startup businesses involved in agriculture, manufacturing and transportation. The fund will pursue investment prospects that are nearing or have entered the marketplace with an innovation and have the potential for high growth, said co-founder and General Partner Tim Streit.
Grand Ventures already is scouting for deals, and Streit expects the fund to make four or five investments annually. The fund could close on its first investment in the first half of 2017, he said.
“The Midwest holds incredible potential for startups and early-stage venture capitalists,” Streit told MiBiz. “This is a great time to be an entrepreneur and Grand Ventures wants to help companies realize their full potential. We are trying to focus on entrepreneurs that are fundamentally trying to change the world, and in doing so will create a great business and they will create great outcomes for their communities and their investors.”
Grand Ventures I will operate similarly to Huron River Ventures I, an Ann Arbor-based venture capital fund that Streit co-founded in 2010 that raised $16 million, about $6 million of which was seed money from the state. Streit runs the Grand Rapids office for Huron River Ventures, which has invested in 20 technology companies that went on to raise more than $200 million in follow-on funding.
After demonstrating through Huron River Ventures that enough venture capital demand existed in Michigan for a new fund, Streit set out to form Grand Ventures.
“We demonstrated with Huron River Ventures there are real startups and real opportunities to invest in the early stage in Michigan,” he said. “So I wanted to launch another fund to continue the progress and to capitalize on that.”
According to a filing with federal regulators, Grand Ventures seeks to raise up to $50 million from investors with a minimum investment of $250,000.
Streit teamed with McKeel Hagerty, a long-time friend and adviser for Huron River Ventures, to create Grand Ventures. Hagerty is the president and CEO of Traverse City-based Hagerty Insurance Agency Inc., which insures classic cars. He started the company with 30 people and grew it to more than 840 employees with offices in the U.S., Canada, Germany, and the United Kingdom.
“Combining Tim’s venture capital tenure with my experience building a global company and our shared passion for leadership development, we will be proactive partners to the businesses we support,” Hagerty said.
The fund’s name — which has “a double meaning” — plays on the geographic identity of the Grand Rapids region and the notion of supporting startups that are “doing something grand,” Streit said.
Venture capital investing in Michigan has grown significantly in the last decade and a half, although it remains far from a top-tier state nationally.
In 2016, venture capitalists invested $252.6 million in 75 deals in Michigan, according to the National Venture Capital Association and Pitchbook. There were 14 deals alone in the fourth quarter of 2016 totaling $33.2 million.
While down from 2015, the NVCA stats may not include all of last year’s deals, and the report for 2016 still reflects strong growth over the last decade or more in Michigan. Further data on the state of Michigan’s venture capital industry will come this spring with the release of an in-depth annual research report from the Michigan Venture Capital Association.
Last year’s report from the trade group showed that capital under management by both state-based and out-of-state venture capital firms with an office in Michigan reached a record $5.26 billion, up from the $4.84 billion in 2014 and about double the amount of five years earlier.
Despite that progress and the continued upward trend, Michigan as of 2015 still lagged many states for VC investments, according to an annual benchmark report by Business Leaders for Michigan, a coalition of corporate CEOs and university presidents in the state.
Michigan ranked 26th nationally in per-capita venture capital investments in 2015, according to Business Leaders for Michigan. VC investments that year totaled $79 per $1,000 of state gross domestic product, which compares to an average $421.41 per $1,000 GDP for the top 10 states.
Among neighboring states, Illinois was at $154.72 per $1,000 of GDP, Ohio was at $48.73 and Indiana was at $17.25.