Published in Finance
Grand Angels Venture Fund III LLC Managing Director Paul D’Amato Grand Angels Venture Fund III LLC Managing Director Paul D’Amato COURTESY PHOTO

Grand Angels raises $11.7 million for third VC fund

BY Sunday, February 02, 2020 04:30pm

GRAND RAPIDS — After completing fundraising at the end of 2019, Grand Angels has a couple of new deals in the works for its latest venture capital fund.

The Grand Rapids-based investment firm closed Dec. 31 on $11.7 million raised from nearly 100 investors for Grand Angels Venture Fund III LLC. Since launching in August 2018, the fund has co-invested in five deals, four of which were with companies based in Michigan, plus one in Chicago.

Managing Director Paul D’Amato expects two more deals to close in the coming weeks.

“We’re plugging away,” D’Amato told MiBiz.

Grand Angels consists of a West Michigan angel investing network and three affiliated groups in Kalamazoo, Detroit and Flint, plus three venture capital funds. The two prior Grand Angels venture capital funds combined invested in 33 companies through initial and follow-on rounds made with other funds.

In Fund III, Grand Angels initially targeted raising $15 million. The amount netted still represented “a substantial increase over our last fund,” D’Amato said.

“It’s a successful outcome and we’re very happy with it,” he said. “This will definitely meet our requirements for the fund and let us still support a lot of these companies in the area here.”

Fund III will invest in about 20 companies with the goal that three-quarters of them will be based in Michigan and the rest in adjacent or nearby states. Grand Angels invests mostly in Series A rounds in companies involved in advanced manufacturing, advanced agriculture, life sciences and software.

About half of the investors in Fund III put money into the prior two venture capital funds or have been involved with Grand Angels as an angel investor, D’Amato said. Many of the individual investors are from West Michigan.

“One of the interesting things about our fund is how much local support we have. This is a modest-sized fund, but we have almost a hundred investors,” he said. “So, really this is a fund supported by individuals in the community that are interested in building companies in this ecosystem. It’s a really nice show of support from a lot of our members and past investors.”

Grand Angels Fund III also attracted a few institutional investors through family offices and professional investment groups, D’Amato added. 

Building a network

While the lengthy fundraising process for a fund is never easy, D’Amato finds that people who have the net worth to get involved in venture capital are more open today to conversations about putting a portion of their portfolio into an alternative investment class.

“People seem interested in taking some money out of the public market and putting it into direct private investments,” he said. “The public market is high and so some diversification makes sense.”

As Grand Angels Venture Fund III scouts Michigan and nearby states for further investments, there’s no lack of prospects to support good deal flow, D’Amato said. He looks at about 400 deals a year and will probably examine 500 prospects in 2020 as Grand Angels reaches into surrounding states.

“I’m really excited about the companies and the technologies we’re seeing here in Michigan. There’s amazing research coming out of the University of Michigan, Michigan State and other universities, and I just love the deals we see and the deals we see in our portfolio already,” D’Amato said.

Most recently, Grand Angels Venture Fund III led a $2 million, later-stage financing round that closed Nov. 5 for Portage-based Micro Laser Assisted Machining Technologies LLC.

Like all of Grand Angels’ deals, the Micro-LAM investment involved a syndicate of funds “committed to the long-term success of the company” that will participate in follow-on financing rounds, D’Amato said.

“Our fund really leverages the investment of a lot of people,” D’Amato said. “We’re interested in building a syndicate that will let the portfolio company be successful in the future and have future financing already wired.”

Active market

Micro-LAM was among three West Michigan companies that secured a collective $7 million in later-stage venture capital funding during the fourth quarter, as investments in Michigan reached a new high.

Locally, Grand Rapids-based VNN Inc., which provides hundreds of high schools across the country with a web-based platform to distribute content on sports programs, closed Nov. 11 on a $4 million round, according to a quarterly report from Pitchbook.com and the National Venture Capital Association. Grand Rapids-based MessageWrap LLC, a maker of antimicrobial conveyor belts for store checkout lanes that carry advertising, closed Dec. 3 on a $1 million investment.

Fourth quarter venture capital investments across Michigan totaled $147.1 million in 25 deals, with most of the funding going to firms based in the Detroit and Ann Arbor areas, according to Pitchbook.

For all of 2019, Michigan saw 115 deals for $771.6 million. That compares to 126 deals for $458.4 million in 2018.

The amount invested in the state in 2019 topped the previous best year in 2015, when venture capital firms invested $507.3 million in 135 deals.

The NVCA and Pitchbook findings show that Michigan continues to make progress in building a broader venture capital industry, said Ara Topouzian, executive director of the Michigan Venture Capital Association.

“2019 was a great year. We all thought it would be a great year. I think we just keep continuing to build on the momentum that Michigan has,” Topouzian said. “We’re a great state for innovation. More people need to realize that.”

Nationwide, venture capital investments in 2019 totaled $136.5 billion across 10,777 deals. The amount is off slightly from the $140.2 billion in 10,542 deals in 2018, the best year ever for the U.S. venture capital industry, but marks the second year in a row that the dollar value nationally topped $100 billion.

Read 1028 times Last modified on Monday, 03 February 2020 09:53
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