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Saturday, 18 August 2018 17:20

Grand Angels targets up to $25 million for new VC fund

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D'Amato D'Amato

Investments could bring new advanced manufacturers to Michigan, execs say

GRAND RAPIDS — Investment firm Grand Angels plans to launch its third venture capital fund, MiBiz has learned.

Grand Angels Venture Fund III LLC seeks to raise $15 million to $25 million that builds off of two prior, smaller venture capital funds at the organization. The new fund would target investments in advanced manufacturing, advanced agriculture, life sciences and software, all of which were focuses of the previous funds.

Managing Director Paul D’Amato expects the new venture capital fund to make four or five new investments annually over three years in companies with “strong management teams and strong intellectual property.” The fund will invest $250,000 to $500,000 in each portfolio company, primarily in seed, Series A and Series B capital rounds.

While Fund III will invest mostly in Michigan-based companies, it also will look at prospects outside of the state. One focus of the new fund is potentially luring advanced manufacturing companies to the region through a capital investment, D’Amato said.

“Advanced manufacturing is sort of a natural in West Michigan,” D’Amato told MiBiz. “We think there are opportunities to bring companies outside of Michigan to Michigan in the manufacturing area.”

However, Grand Angels will not require a company outside of Michigan to relocate here in order to receive an investment.

“We’re Michigan-focused but regionally opportunistic,” D’Amato said. “Fund III will follow very much how Fund II was. We’ll have a couple investments that will be in the region, but outside of Michigan. The majority of our investments will be (in) Michigan companies. If we’re successful, we may also have a couple relocate here.”

CONTINUED INVESTMENTS

Grand Angels also will continue to scout investment prospects at university research labs in Michigan as one possible source for deals. A number of Grand Angels’ existing portfolio companies — including Vestaron Corp. and Micro-LAM LLC, both of which started at Western Michigan University — spun out of university research.

“The universities in Michigan are getting better and better at commercializing technology,” said Grand Angels President Tim Parker.

Grand Angels began 14 years ago as an angel investing group that later moved into venture capital. The angel group now consists of 50 members, plus 17 investors in Kalamazoo with the Ka-Zoo Angels affiliate that came together in 2017 and has invested in seven companies.

The formation of Grand Angels Venture Fund III comes seven years after establishing the group’s first venture capital fund that invested in 17 companies, all of which were in Michigan. Nine of those companies remain active, and Grand Angels recorded an exit in the eight other firms in which it invested.

Now operating out of downtown Grand Rapids, Grand Angels formed a second venture capital fund three years ago that went on to invest in 14 companies, two of which have recorded exits. Twelve of the companies remain active.

As it winds down, Fund II probably will make one or two more new investments by the end of 2018, plus follow-on investments in existing portfolio companies, D’Amato said.

Since 2004, Grand Angels has invested in more than 40 companies across more than 100 capital rounds.

“We’ve built a lot of knowledge on how to do this and, quite frankly, how not to do it,” D’Amato said. “We have a track record now and have shown what we’re doing works.”

VC HEATS UP

In seeking to raise capital for Venture Fund III, Grand Angels will first approach existing investors and members of the angel group to participate in a private placement, D’Amato said.

The fundraising effort should kick off in September and also will reach out to institutional investors, such as family offices, he added.

“We’re talking to a few people so far,” D’Amato said. “We have a reasonable amount of inbound interest from our membership and other people we’ve worked with.”

Grand Angels Venture Fund III becomes the latest venture capital fund formed in Michigan this year.

MiBiz in the last month reported on the formation of two new funds.

Charter Capital Partners in Grand Rapids formed the Henrickson Nauta Venture Fund 1 LP on behalf of Belmont-based wealth management firm Henrickson Nauta Wealth Advisors Inc. that seeks to raise $10 million. The fund so far has netted $1.13 million from 13 investors, according to a July filing with federal securities regulators.

In Southeast Michigan, the Belle Michigan Impact Fund LP aims to raise $20 million for a venture capital fund. The Grosse Pointe-based fund, which closed in the spring on the first $5 million from investors, targets deals at women-owned startup companies.

Read 2592 times Last modified on Sunday, 19 August 2018 19:33