GRAND RAPIDS — The sale of RespondWell LLC last summer for an undisclosed sum was the first exit recorded by venture capital firm Michigan Accelerator Fund.
While not a big win and generating only a moderate return on investment, the deal was still a success for Michigan Accelerator Fund and the first investment that went “full cycle,” said Dale Grogan, the fund’s co-managing director and a partner at Charter Capital Partners in Grand Rapids.
“We were thrilled with it,” Grogan said. “It shows that we can assess the opportunities, invest prudently, and help coach the company to an exit.”
Formed in 2010 with $6 million in state seed funding and $9.1 million raised from private investors, Michigan Accelerator Fund invested in 10 portfolio companies and has essentially deployed all of its capital. Michigan Accelerator raised another $5 million this year for a subsequent fund, MAF Opportunity Fund, to provide follow-on investments to portfolio companies. That new fund is half deployed.
A year ago, Michigan Accelerator Fund invested a “modest” $600,000 in RespondWell in a single round.
Wakestream Ventures, the VC fund led by Rick DeVos that spun out of Start Garden earlier this year, was also an early investor in RespondWell and provided support for the company.
“Wakestream Ventures was RespondWell’s first institutional investor. We saw Ted (Spooner) as a talented leader with a vision and were eager to partner with him. As a result, we helped incubate RespondWell in the Start Garden shared space, worked closely with them as they grew, and helped with facilitating the sale to Zimmer Biomet,” said Mike DeVries, a chief investment officer at Wakestream. “We are very pleased with the outcome.”
Despite recording its first successful exit, Michigan Accelerator still needs to do more to prove itself and achieve other exits and returns. The return from RespondWell’s sale probably is not enough on its own to showcase to prospective limited partners if Michigan Accelerator seeks to form a subsequent larger fund, Grogan said.
Limited partners generally want to see the return on the entire fund, not just for individual deals, he added.
“Getting a ‘W’ always matters. It validates that there are investment opportunities here in the venture community and Grand Rapids where investors can make money. There’s always skepticism until it’s actually done,” he said. “But on a net basis for the entire fund, I’m not convinced it’s enough to say, ‘OK, you’ve proven it. This was your one winner.’”