Midwest enterprise capital firms may all the time be playing catch-up to the coasts, but that is not stopping some firms from attracting sizable funding to support startups in their local ecosystems and across the region.
Although according to investors focused on the coasts, these are the so-called flyover cities, money continues to flow into the region. For example, Michigan-based Grand Ventures committed $50 million in capital last October. In 2023, version 1.1. based in Columbus secured $30 million as a part of the third Catalyst Fund dedicated to life sciences.
Now is Partners of the project in Hyde Park(HPVP) phrase. The Chicago-based early-stage company has secured $98 million in recent capital commitments for its Fund IV. The closing of Fund IV brings HPVP’s total assets under management to roughly $320 million. It has 4 general funds and a $30 million Opportunity Fund established in 2021.
Collecting money
Managing partners Greg Barnes and Guy Turner and partner Allison Lechnir lead the 12-year-old firm, which invests in founders primarily in the Midwest and Toronto.
“We are very excited to launch this new fund,” Barnes told TechCrunch. “Every time we raise funds, it’s a good reminder of what our companies are going through.”
All three said last yr was a difficult time to raise capital, and Turner said much of the challenge “was due to the really fast pace of fundraising in the previous two years.”
“A lot of institutional executives seem to be focusing on existing managers,” Turner said. “That said, we’re really happy with how the fundraising went and we were able to attract a lot of great institutions that were new to our funds and our company. We have built over the years and seen larger funds become more institutionalized. This is important for funds and geographies like ours.”
The limited partners of this fund include roughly 25% institutional institutions, 35% family law offices, and the remainder are people with very high net price. The fourth fund is supported by recent partner institutions, including NVNG and Cintrifuse Capital. They join regular sponsors including the Illinois Development and Innovation Fund, the RK Mellon Foundation and Renaissance Venture Capital.
Hyde Park Venture Partners is known for providing insight into over 90% of mid-continent startups and early support of firms similar to ShipBob, FourKites, G2, LogicGate and Dentologie.
In April, logistics company ShipBob announced that it could examining an initial public offering. While the company said it couldn’t comment on what is going on on inside the company, Turner said HPVP led the Series A in 2016 and that “they were a phenomenally resourceful group, and it was just a real pleasure.”
HPVP steadily transacts, writing checks with an average value ranging from $500,000 to $4 million. The recent fund will probably be launched in 20-22 firms. HPVP has already invested in two of the fund’s firms: Diffit, which uses generative artificial intelligence to enable teachers to create custom lesson plans, and CivCheck, which works with cities and architects to speed up the construction permitting process.
The company declined to share information about money returns for any of its earlier funds. Instead, it said its portfolio firms had raised a total of $1 billion in follow-on funds. Notable exits include workforce management startup VNDLY acquired by Workday and restaurant technology startup Tock acquired by Squarespace.
Midwestern moment
Meanwhile, the Midwest continues to gain popularity as a startup destination. TechCrunch has noticed this as well, highlighting what’s happening in the startup ecosystem in Columbus, Ohio in 2022. This is largely driven by “universities and federal government R&D money being pumped directly into by universities,” said Christy Cardenas, managing partner of Grit Ventures, in part panel discussion featuring Midwest VCs then.
On the same panel, Kelli Jones, general partner of Indianapolis-based Sixty8 Capital, said that “all the legacy industries that have not been impacted by technology and digitalization will move our economy forward. You would have to look at the South and the Midwest as places where this innovation will really start to come from people on the ground or people who have been doing this work for so long.”
Hyde Park Venture Partners’ Lechnir said one of the benefits of being a Midwestern enterprise capital firm investing at the seed stage is “slightly lower valuations than you might see on the seed-stage coasts.”
Additionally, the pandemic has given Midwesterners a reason to return home and others a probability to live there for the first time.
“Our whole thesis from day one has been that this is a great place to invest in tech startups,” Lechnir said. “The quality of founders has really improved over the last decade, and we’re seeing the next founder become a great product manager. They brought this influx of talent.”
Speaking of talent, the trio noted that one of HPVP’s differentiators is the hiring of Jim Conti as talent partner.
Barnes believes that Hyde Park Venture Partners is one of the smallest funds employing a person in this sort of position.
“We are focused on attracting top talent to our teams as well as growing our network,” Barnes said. “Everyone is moving in this region. They’re born here, they go to college in the next state, and then they go to the next state because their husband or wife is from there. Our talent partner spends a lot of time getting to know people in the region, so we’ve built a lot of really close connections over the years.”