Mission-focused venture capital funds started within the last three years in Columbus are investing – and already seeing returns as startups are acquired – amid a rough year for VC in general and emerging fund managers in particular.
Pride Fund LLC, focused on LGBTQ+ founders, and Ohio Impact Fund LP, backing for-profit social enterprises in the state, so far are making good on the thesis that promoting societal good is a practical way to make money.
"By investing diversely in people who are solving problems, you can also have an impact on your bottom line," Impact Fund CEO Jenny Lane said.
The funds are joint ventures of VC firm Loud Capital and Venture Atlas, which itself pivoted in the last year, said founder and CEO Wolf Starr.
The network, formerly called Atlas Venture Partners, will partner with additional VC firms as it launches additional impact funds making the venture world accessible to overlooked and underrepresented populations.
The funds also are active with their startups, introducing potential clients or investors and advising on operations – another way to maximize future returns, Starr said.
"We have really thought intentionally about partnering with these companies and these people," Pride Fund CEO Densil Porteous said. "If they choose to pivot, we're believing in them and they're able to pivot."
That approach became even more essential as capital became harder to raise amid rising interest rates and inflation last year.
"I’m kind of glad we had that evolution forced on us, because it taught us to be a better firm," Starr said.
The targets had been $10 million for Pride and $5 million for Impact. Progress toward those goals is not released because of regulations against public solicitation, but Starr said both should finish fundraising this year.
"It's a lot tougher place to be, raising a new fund as a new manager," Lane said. "But we've had some incredible new investors and incredible conversations."
In July, Venture Atlas plans to launch American Dream Fund, focused on immigrant founders, in partnership with a Chicago VC firm, Starr said.
Loud and other partner firms provide the "science" of VC, he said, while Venture Atlas brings the "art." Lane said she relies on Loud for compliance and due diligence expertise.
Already celebrating exits
Founded in 2021, Impact has invested in 13 companies with two in process, Lane said. All of the startups do business in or affect Ohio. By the end of 2022, the market value of the portfolio had already grown by 2.4 times.
This year brought exits for:
Pegasus Specialty Vehicles LLC agreed this month to acquisition by Resonate Blends Inc., a publicly traded Nevada-based cannabis company that is making a dramatic pivot to leave that industry for the Ohio company's electric and hydrogen-powered school buses, according to a release.
Impact Fund was the first investor in the fleet company, doing business as Pegasus Bus Co. and based in Dunkirk, about 75 miles northwest of Columbus. When the merger closes, expected in the third quarter, Resonate is to spin off its cannabis brands and provide Pegasus with $3.5 million cash plus stock, according to regulatory filings.
In March, the fund had a partial exit when Columbus-based tech-enabled pharmacy GiftHealth Inc. sold a majority stake for $40 million to a private equity firm.
Pride Fund also had an exit: S'More, a dating app that emphasized talking first before exchanging photos, was acquired for undisclosed terms in February by matchmaking service Tawkify, according to a release.
Impact Fund recently added its first startups in Northeast Ohio and Appalachia, including Accelerate Wind, a Cleveland startup developing affordable wind turbines for the edges of buildings, where physics makes the wind force stronger. A local portfolio company is Aunt Flow, which sells menstruation products for employers and venues to provide for free.
"We really do have the entire breadth of the state," Lane said. "I don't think there's a single company I could point to that isn't significantly changing something important for Ohio."
As part of Pride month, Venture Atlas and Loud brought startups from all over the state and country for a full day of events, including one-on-one meetings with someone each needed, such as an investor, adviser or client, and in many cases paid for their travel and lodging.
The day culminated in the Venture Out showcase with founders, fund investors and strategic partners from eight states, hosted at Stonewall Columbus, where Porteous is also executive director.
Steve Walsh, a Boston angel investor who has co-invested in some Pride Fund deals, brought a potential prospect: Melis Dural, founder of Boston-based Ekos AI, an AI-powered engagement platform for hybrid communities that so far has raised $2 million.
"This event is unique," Dural said. "I felt very accepted; it's not something I've experienced before. Columbus is trying to do something very different."
Venture Atlas and Pride Fund are "first and foremost great people," Walsh said. "When I have a really good founder I want to introduce, they're my first call."
Even if the investment isn't the right fit for Pride Fund, he said, "they still go out of the way to be helpful."
VC support is more than money
Pride Fund's portfolio includes W*nder, a CBD beverage company that is expanding into non-CBD lines with its flavors, to enable faster expansion in states with restrictive laws. The company opened its first retail store in the Short North last year; 30% of sales are online since a subscription service was introduced last year.
Support from the fund encompasses much more than money, founders said at the Venture Out event.
Colby Harvey, CEO of Rizse, which uses drones and computer-aided vision to automate aircraft visual inspections, said that before meeting Porteous and Starr, he encountered a lot of mistrust from VCs.
"Am I good enough or do I need to have a white founder?" he said he thought. "Do I need to have a straight founder?"
Revry, a Los Angeles-based streaming service featuring LGBTQ+ stories and characters, has grown to 7 million monthly active viewers, with advertisers including Nike, General Motors and Procter & Gamble.
When the company started in 2015, VCs said they'd take a look once the company hit $5 million revenue, co-founder and CEO Damian Pelliccione said.
"We don't get access and privilege in the venture capital world," they said. "That money is controlled by people who walk, talk or look like their same network."
