A new $20 million venture capital fund aims not only to generate returns for investors but also address a wide gender gap in the investing industry.
Individual investors in the Belle Michigan Impact Fund LP are all women, and the fund targets deals at women-owned startup companies.
Based in Grosse Pointe Farms north of Detroit, the Belle Michigan Impact Fund recently made two initial investments after closing this spring on its first $5 million, which it raised from 41 individual investors. To date, the fund has invested in Troy-based Alchemy, which makes games to teach math and science skills, as well as Seeva Technologies, a Redmond, Wash. company that developed a heated windshield washer fluid dispenser.
Belle Michigan Impact Fund hopes to raise the remainder of its goal over the next eight to 10 months, said co-founder and General Partner Carolyn Cassin. During that time, organizers want to reach out to women in West Michigan who may be interested in becoming venture capital investors alongside a “real who’s who” of female investors from Southeast Michigan, she said.
“We’d love to get some interest and traction on the west part of the state because I know a lot of those women have the same values and the same mission as we do, which is to find great women-owned and women-led businesses and give them access to capital they need and deserve,” Cassin said. “Southeast Michigan is just a corner of the state.”
Cassin plans to hold a networking event for women on venture capital investing in West Michigan later this summer.
Geographically expanding the base of investors in the fund brings in additional capital as well as a broader source network for prospective deals and referrals from across the state, she said.
“Good ideas happen all over. That’s the beautiful thing about this whole new economy that’s emerging,” Cassin said. “You don’t have to be in a big city. You can have just as much opportunity and just as much success. We all need to find each other.”
Cassin and co-founder Nancy Philippart, a one-time General Motors executive, started the Belle Michigan Impact Fund as an outgrowth of a previous $2.5 million venture capital fund they formed in 2012. That initial fund, known as the Belle Capital Fund, was backed by 29 female investors and invested in 14 women-owned companies. One company, Ann Arbor-based Accio Energy Inc., closed last year, while another, Ft. Worth, Texasbased Magaw Medical LLC, was sold in 2016, generating 1.85-times return on investment with the exit.
The Belle Capital Fund has deployed all of its capital and now is in the process of selling another portfolio company, Cassin said. The fund also has received interest from a potential buyer for a fourth portfolio company, she said.
The first fund was “kind of a disruptive innovation” to improve access to capital for women entrepreneurs and to get more high-net worth women involved in venture capital investing, said Cassin, who also serves as the president and CEO of Michigan Women Forward. The organization, formerly known as the Michigan Women’s Foundation, focuses on empowering women entrepreneurs and leaders.
“Women have not had access (to capital). The data is really pretty clear,” she said. “It was, I think, kind of groundbreaking and revolutionary that we would put together a fund that invests in women-owned businesses and the investments would all come from women investors. That was a pretty unique proposition back in 2010 and ’11 when we were putting the fund together.”
Cassin and Philippart last year then sought to form a larger, follow-up fund to try to “go big and make a bigger impact,” she said.
ADDRESSING A VOID
The new Belle Michigan Impact Fund comes together as statistics show a relative lack of diversity in the venture capital industry, both in Michigan and across the U.S.
In Michigan as of 2017, just 7 percent of the 134 venture-backed startups were led by a woman CEO, versus 3 percent nationally, according to the annual research report issued by the Michigan Venture Capital Association.
Among venture capital-backed startups in the state, 9 percent were led by a CEO who is a racial minority.
Of the 87 venture capital professionals working in Michigan last year, 8 percent were women, compared to 29 percent nationally. Just 6 percent were racial minorities, versus 22 percent nationwide, according to the MVCA report.
A fund backed by women investors that invests in women-owned startups can become a “leading and driving force in the state of Michigan for more women entrepreneurs and more women investors,” said MVCA Executive Director Maureen Miller Brosnan.
The MVCA first began tracking diversity within Michigan’s venture capital industry in 2014. The National Venture Capital Association soon after started a comparable effort “with a basic understanding,” according to Miller Brosnan.
“As we look to different ways to solve problems, which ultimately leads to innovation and creation, we need different people to bring answers to the table that we might not normally consider. So we look to more women, more racial diversity, and higher diversity within the LGBTQ community joining venture capital and the entrepreneurial space as well,” she said. “There is a strong business case for diversifying not only our investments but for finding diverse entrepreneurs that are looking at specific problems from a very particular vantage point.”
Twenty-one of the 29 investors in the original venture fund invested in the new Belle Michigan Impact Fund, which will look for deals in companies involved in health care, manufacturing and technology, sectors the investors know and in which they have enjoyed successful careers.
However, the fund will consider deals in other industries and remains “interested in anything that is really disruptive and innovative,” Cassin said.
Investors also will become involved in the startups in which the fund invests, mentoring entrepreneurs and growing their businesses to an eventual exit.
“We don’t invest in anybody that we aren’t willing to help nurture, if they need us,” Cassin said. “We’re looking for great companies that ultimately can get to $5, $10, $15, $20 million and then get sold to maybe a private equity firm. We think that’s our sweet spot. We’re really the seed capital to get these women into the big leagues.”
In addition to pursuing more individual women investors, the Belle Michigan Impact Fund has reached out to prospective institutional investors such as banks, foundations and family offices.
Two institutional investors are in the final phase of due diligence “and, I think, will come aboard, and we have two more that we’re talking to,” Cassin said. She’s confident the Belle Michigan Impact Fund will reach its $20 million fundraising goal.
“This is a fund that has momentum,” Cassin said.