GRAND RAPIDS — Michigan Capital Network plans to form a fourth venture capital fund.
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The Grand Rapids-based Michigan Capital Network notified federal securities regulators in a recent filing of plans to raise $25 million from investors. Michigan Capital Network’s Venture Fund IV L.P. requires a minimum investment of $250,000, according to the July filing with the U.S. Securities and Exchange Commission.
“A fourth venture fund is great to see and surely indicates growth in our organization,” said Michigan Capital Network CEO and Managing Director Paul D’Amato.
Jody Vanderwel and Dale Grogan will serve as managing partners for the latest venture capital fund. They also run two prior venture capital funds for the organization. Vanderwel was the original president of Grand Angels that formed in 2004 and is now part of Michigan Capital Network. Grogan joined the organization in November 2020 from Charter Capital Partners, where he ran the Michigan Accelerator Fund I, a venture capital fund.
After reorganizing at the start of 2021, Michigan Capital Network operates as the umbrella organization for three existing venture capital funds and four angel investing groups across the state: Grand Angels in Grand Rapids, Ka-Zoo Angels in Kalamazoo, Woodward Angels in Detroit and Flint Angels.
The four angel groups together have more than 100 members and are “growing quite quickly, despite the pandemic making it difficult to have in-person meetings,” D’Amato said.
“There’s a lot of interest in joining our angel groups,” he said.
The venture capital funds and angel groups invest in life sciences, advanced manufacturing and software companies, usually syndicating deals within the angel groups and with outside investors.
West Michigan-based companies such as Grand River Aseptic Manufacturing Inc. and Tetra Therapeutics Inc., a drug developer that in 2020 sold to Japan-based pharmaceutical company Shionogi & Co. Ltd., are among the funds’ past investments.
More recent investments include health care financial technology company HealthBridge Financial Inc., which closed this spring on the first $14.1 million of a $22 million capital raise, and Facility Health Inc., a software company that uses artificial intelligence to help health care providers monitor and maintain their facilities and equipment.
Michigan Capital Network in the spring also invested in ADHD Online Inc., a Hudsonville-based company with a national network of licensed care providers who perform virtual assessments for children who may have Attention-Deficit/Hyperactivity Disorder.
ADHD closed in May on a $2 million early-stage capital round, according to the second quarter Venture Monitor report from Pitchbook and the National Venture Capital Association.
Michigan Capital Network led the capital round in ADHD Online, which “solves a real market need,” D’Amato said.
“Students and kids in school that have attention deficit disorder are unable to meet with doctors quickly enough, and it’s holding them back in school,” he said. “They have a real need. They need medication to stay focused in class and they can’t get it quickly enough, and it’s making it difficult for them and others in class.”
Statewide deal flow
ADHD Online was one of 67 Michigan-based companies that received venture capital investments totaling $422.8 million in the first half of 2021, according to the Venture Monitor report. That compares to 60 investments in Michigan for $214.3 million in the first half of 2020, which included a second quarter when investments sharply declined during the early months of the COVID-19 pandemic.
Deal flow during the last year has been strong despite the pandemic, D’Amato said. Michigan Capital Network has looked at more than 2,000 investment prospects in the last 12 months, primarily in Michigan.
“We’re busier than we’ve ever been,” D’Amato said. “There’s great deal flow in Michigan.”
During the first half of 2021, six venture capital funds in Michigan collectively raised $121.4 million, according to Pitchbook and the National Venture Capital Association.
Most recently, Ann Arbor-based Renaissance Venture Capital — which invests in other venture capital funds — closed in late July after raising $77.5 million for a fourth fund of funds.
Nationally, 338 funds raised a combined $74.1 billion in the first half of this year, “creating expectations that VC fundraising may clear $100 billion annually in 2021” after a record $81 billion raised in all of 2020 by 529 venture funds.
Venture capital investments across the U.S. totaled $150 billion through 7,058 deals, “setting the stage for what could be another consecutive record-setting year,” authors of the second quarter Venture Monitor report wrote, noting a surge in early-stage investing.
“Recent investment activity has been influenced by the COVID-19 pandemic and the permanent imprint it has left on everyday life,” according to the report. “Many innovators and entrepreneurs are now focused on the abundant opportunities to develop technologies and build companies that address the needs of a reopening economy and a structurally different post-COVID environment.”