Tim Streit and McKeel Hagerty started venture capital fund Grand Ventures I LP in Grand Rapids last March and went on to make three investments during the year in companies in Ohio, Indiana and Michigan. Each of the deals were co-investments for Grand Ventures, which invests early-stage capital in technology startups in agriculture, manufacturing, mobility and transportation, as well as other industries in Michigan and the Midwest. A regulatory filing last spring indicated the venture capital fund planned to raise up to $50 million from investors.
How’s the first year gone for Grand Ventures?
It was positive. Like most things in life, it’s taking a little bit more time than maybe we hoped or anticipated, but the support has been tremendous. We have investors all across the state as well as across the country, so the fundraising side of things has gone well. From a deal flow perspective, by the end of this year, we will probably have reviewed a thousand (prospective) deals. The deal flow is very strong across all of our core geographies.
What is the state of the venture capital industry in Michigan heading into 2018?
I am very optimistic about 2018 and ’19 for the state of Michigan. We now have second- and third-time entrepreneurs who are going out and starting businesses and who have great track records, and we also have seen all of the efforts that have been undertaken by the universities the last several years to further academic research (and) to boost the entrepreneurship programs. We’re seeing the benefits of that. Michigan is very well positioned because we have a more experienced group of entrepreneurs as well as a greater body of research, and just young and emerging talent and overall interest in entrepreneurship.
What do Michigan VC firms have going for them?
The quality of deal flow is higher than ever. The big question that everybody’s dying to know is when will we start to see some more exits, when will we start to recycle some capital. That’s always a great catalyst to drive another surge in activity. As a community, we’re nearing that point where we’re going to start to see capital distributed, which will be further validation.
What’s an example of that?
Duo Security in Ann Arbor just raised a massive round ($70 million, the largest VC round ever in Michigan) and (has) a $1 billion valuation. So we kind of have our first tech unicorn, if you will, growing at that rate and raising at that kind of valuation. It shows the maturity of the overall ecosystem that we’re starting to see more of those companies have success in Michigan, which is going to be a model for younger entrepreneurs to follow and is validation to both local and national investors that that kind of company can be built here in Michigan.
What have you learned in your first nine months of Grand Ventures?
The technology’s changed, the buzzwords change, but this is really a people business. Business is pretty simple. It’s about building great products that satisfy a big customer and market need. The buzzwords change, whether we’re talking about local apps, or big data or artificial intelligence, but at the end of the day, it’s all about people and about understanding your customers.
It sounds like the biggest lesson mostly affirmed your thinking.
I think so. The reality is you hear about these new trends and you have to get up to speed. At the end of the day, it typically boils down to the same fundamentals.
What’s the biggest opportunity for VC in Michigan in 2018 and beyond?
Steve Case, the founder of AOL, has been traveling all across the country, specifically the Midwest, on his ‘Rise of Rest’ tour, which is part of the name of his most recent book. The whole concept is he believes the next wave of entrepreneurs and innovation is going to come from regions like the Midwest, where you have real people trying to solve real industrial types of problems.
The key to success there is it’s a lot more than just building another mobile app. It’s the successful integration and collaboration between software developers and mature industries like we have here in West Michigan. He’s done a great job shining the spotlight on the Midwest and the opportunities here. He just announced a $150 million venture fund to specifically invest in the Midwest. It’s the who’s who of Silicon Valley and the investors are from all over the country and the world that are recognizing the opportunity.
What does that attention mean for states like Michigan?
This is a turning point for us. We’ve spent a lot of time defending the opportunity in Michigan and the Midwest, and we’re seeing others talk about it. The secret’s out. That’s validation for many of us who’ve been working on it or many years now.