Grand Ventures I LP’s lead investment in a Chicago digital health company typifies what’s occurring in venture capital in Michigan and neighboring states: Funds based in the region are backing Great Lakes-based startups.
The Grand Rapids-based Grand Ventures led the $2.5 million investment in TimeDoc Health Inc., which developed a digital platform to coordinate care for people with chronic illness. Two other funds based in Great Lakes states — Serra Ventures in Champaign, Ill. and Columbus, Ohio-based Break Trail Ventures — joined Grand Ventures in investing in the capital round for TimeDoc Health.
The deal parallels a pattern identified by Pitchbook.com and other industry watchers that has emerged over the last decade in Great Lakes states with the development of new venture capital funds dedicated to supporting tech companies and startups in the region.
“That’s the basis for our whole fund,” said Tim Streit, a general partner and co-founder who started Grand Ventures two and a half years ago for what he calls altruistic reasons.
Streit wanted “to be part of creating the next generation of amazing companies and jobs” in his home state. Grand Ventures has since spread out into neighboring markets in the Midwest that are nearby or within driving distance and “have the same challenges” as Michigan and Grand Rapids: namely, the need for more capital for promising technology companies.
“We’re based here in Grand Rapids, but the fund’s whole concept is to focus on the top underserved Midwest regions … these underserved, Midwest hometowns that are turning into entrepreneurial hotbeds,” Streit said. “By being here, we hope to support Grand Rapids companies, and we also hope and plan to support great technology companies in cities like Grand Rapids across the Midwest.”
Prior to co-founding Grand Ventures, Streit ran the Grand Rapids office for Huron River Ventures and maintains a connection with the firm. He started Grand Ventures with partner McKeel Hagerty, the CEO of Hagerty Insurance Agency Inc., a Traverse City-based insurer of classic cars.
Grand Ventures recently added to its staff with the hiring of Camila Noordeloos as a principal and Kayla Kavanaugh as an analyst.
The fund has closed five deals since forming in early 2017 and expects soon to announce a sixth deal, all as the firm wraps up a “very strong” fundraising effort. The firm has a seventh deal in the pipeline that should close within a couple of months and presently holds positions in tech startups in Ann Arbor, Chicago, Indianapolis and Cincinnati.
A Farmington native who attended the University of Michigan and then worked in Chicago, Streit moved back to Michigan a decade ago to focus on investing in startups across the Midwest. He settled in Grand Rapids, positioned midway between Chicago and Detroit.
The Midwest now offers plenty of opportunities for investors to invest in their home region without heavy competition for deals from large venture capital funds on the coasts, Streit said. He also noted the changing entrepreneurial culture in Grand Rapids with the formation of 5x5 Night, Start Garden and other venture capital funds, including the DeVos family-backed Wakestream Ventures LLC.
“I believe the Midwest is one of the most exciting investment opportunities in the world right now and at this point in time,” Streit said. “The momentum is really building. There’s never been a better time to start a business, and as an extension of that, there’s never been a better time to be an early-stage investor in the Midwest.
“I think a lot of us got into it altruistically and now at times we go, ‘Wow.’ We’re actually on the cutting edge of what I believe is actually a really, really compelling business opportunity that I would rank up there with anything in the world.”
An August report from Pitchbook.com also focused on that opportunity.
Pitchbook highlighted the top 10 venture capital funds in the Great Lakes, including Invest Detroit, and how funds created over the last decade are part of a broader push to encourage the development of an entrepreneurial culture in the region.
“Although traditional entrepreneurial markets such as New York and Silicon Valley continue to maintain the lion’s share of VC dollars in the U.S., that hasn’t stopped a handful of investors based in the Great Lakes from trying to develop a favorable startup ecosystem at home,” Pitchbook reported. “And it’s working: All the VC firms in our list of the 10 most active investors in the region since the beginning of 2008 are local.”
Pitchbook notes that VC investments in six Great Lakes states — Michigan, Illinois, Indiana, Minnesota, Ohio and Wisconsin — totaled more than $4 billion in 2018, an increase of 135 percent from 2013.
Growing the pie
The rise of both venture capital funds and investment opportunities in Great Lakes states also has attracted the attention of more outside investors.
For example, in Michigan in 2018, capital under management by out-of-state venture capital firms totaled $3.73 billion, according to the Michigan Venture Capital Association’s 2019 research report. That’s down from a peak of $5.26 billion in 2015, as firms deployed their capital and moved on, but still well above the $2.4 billion from a decade ago.
Streit also points to 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, and Grand Rapids-based software developer Blue Medora LLC as prime examples of local tech companies that have raised millions from investors “from all over the country.”
He often gets calls from non-local venture capital firms, including large funds on the coasts, that are scouting for opportunities in the Midwest.
“I get these phone calls weekly, if not daily. It happens all of the time,” Streit said. “It shows the word is getting out and the Midwest is open for business. We’re really just at the start of what’s going to be a great economic environment in Michigan and the Midwest for years to come.”