Midwest venture capital firms may always respond to the coasts, but that doesn’t stop some firms from raising good-sized capital to support startups in their local ecosystems and overall region.
Despite the fact that investors focused on the coasts are the so-called “cities beyond flights”, money continues to flow into this region. For example, Michigan’s Grand Ventures brought in $50 million in capital commitments last October. In 2023, Columbus-based Rev1 secured $30 million for its third Catalyst Fund targeting the life sciences.
Now is Hyde Park Venture Partners‘ turn. The Chicago-based early-stage company has secured $98 million in new capital commitments for Fund IV. The closing of Fund IV gives HPVP total assets under management of approximately $320 million. It has four general funds and a $30 million Opportunity Fund established in 2021.
Collect money
Managing partner Greg Barnes and partners Allison Lechnir and Guy Turner lead the 12-year-old firm that invests in founders primarily in the Midwest and Toronto.
“We’re very excited to launch the new fund,” Barnes told TechCrunch “Whenever we raise money, it’s a good reminder of what our companies are going through.”
The trio said it was a tough time raising capital last year, with Turner saying much of the challenge was “driven by the really fast-paced fundraising environment of the last two years”.
“A lot of institutional LPs seem to focus on existing managers,” Turner said. “That said, we’re really pleased with how the fundraising went for us and we were able to showcase a lot of great foundations that were new to our funds and our company. We have been building over the years and have seen larger funds become more institutional. This is important for funds and geographies like ours.”
The limited partner makeup for this fund includes approximately 25% institutional, 35% family office, and the remainder are ultra-high net worth individuals. New institutional partners, including NVNG and Cintrifuse Capital, are backing the fourth fund. They join repeat backers including the Illinois Growth and Innovation Fund, the RK Mellon Foundation and Renaissance Venture Capital.
Hyde Park Venture Partners is known to have visibility into more than 90% of mid-continent startups and is an early backer of companies such as ShipBob, FourKites, G2, LogicGate and Dentologie.
In April, logistics company ShipBob announced that it was investigation of an initial public offering. While the company said it couldn’t comment on what’s going on with the company, Turner said HPVP led the Series A in 2016 and that “it’s been an amazing group of resources and it’s just been a real pleasure.”
HPVP often leads deals, writing average check sizes between $500,000 and $4 million. The new fund will be deployed across 20 to 22 companies. HPVP has already invested in two companies from the fund: Diffit, which leverages genetic artificial intelligence to enable teachers to create customized lesson plans, and CivCheck, which works with cities and architects to speed up the building permit process permits.
The company declined to share information on cash-on-cash returns for any of its previous funds. Instead, it said its portfolio companies went on to raise a total of $1 billion in follow-on funds. Notable exits include workforce management startup VNDLY acquired by Workday and restaurant tech startup Tock acquired by Squarespace.
Midwestern moment
Meanwhile, the Midwest continues to gain ground as a place for startups. TechCrunch also saw this while highlighting what’s happening in Columbus Ohio’s startup ecosystem in 2022. Much of it is fueled by “universities and R&D money that comes from the federal government that goes directly from the universities,” said Christy Cardenas, managing director of Grit Ventures. as part of a panel discussion with Midwestern VCs then.
At the same panel, Kelli Jones, general partner at Indianapolis-based Sixty8 Capital, said that “all the legacy industries that have not been touched by technology and digitization are the things that will drive our economy forward. You have to look at the South and the Midwest as where that innovation is really going to take off because of the people on the ground or the people who have been doing this work for so long.”
Lechnir of Hyde Park Venture Partners said one of the advantages of being a Midwest venture capital firm that invests in the seed stage is “slightly lower valuations than you would see on the coasts in the seed stage.”
Additionally, the pandemic has given Midwesterners a reason to go home, or for others a chance to live there for the first time.
“Our whole thesis from day one is that this is a great place to invest in tech startups,” Lechnir said. “The quality of founders has really increased over the last decade, and we’re seeing a great product manager become the next founder. They brought this influx of talent.”
Speaking of talent, the trio noted that one of HPVP’s differentiators is bringing in Jim Conti as a talent partner.
Barnes believes that Hyde Park Venture Partners is one of the smaller funds that anyone has in this type of role.
“We are focused on bringing top talent to our teams and also growing our network,” Barnes said. “This area is where everyone intersects. They were 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 area, so there are a lot of really close connections we’ve made over the years.”
