Local venture capital firm Great North Labs announced Wednesday that it has closed its first fund at $23.7 million – likely one of the largest debut seed funds raised in the Midwest.
Based both in Minneapolis and St. Cloud, Great North Labs will use the funding to back fledgling startups in the Upper Midwest, which it defines as Minnesota, the Dakotas, Iowa, Wisconsin and Illinois.
Few Midwestern seed funds have debuted in the region with over $20 million in committed capital. MATH Venture Partners raised $28 million in 2015 and Hyde Park Venture Partners raised $25 million in their 2013 debut. Both firms are based in Chicago.
"We are very appreciative and humbled by the tremendous support shown for our debut fund by our limited partners" Great North Labs Managing Partner Rob Webers said in a release. "Our investors' support shows not only their conviction for us as fund managers but also their conviction to backing the next generation of startup founders across our region."
Although there's been a boost in funding activity in the Midwest in recent years, the region is still far behind the coasts. Last year, 52 venture capital funds were formed in the U.S., mostly in California, New York and Massachusetts, according to the National Venture Capital Association. Those same states accounted for 79 percent of the $5.3 billion in capital raised.
Great North Labs backs consumer or enterprise startups that have the potential to reach a $1 billion market. Its local investments include B2B delivery startup Dispatch, sports-tech company TeamGenius and St. Paul-based AI startup Structural. The firm plans to use the fresh funding to invest in five to six startups before the end of 2019.
Great North Labs already has 12 tech companies in its investment portfolio. These initial investments were made largely with money that the Weber brothers received after selling their marketing startup NativeX.
The firm will also commit 10 percent of the fund to investments in pre-seed startups with founders from under-represented groups or startups based in underserved markets such as St. Cloud, Sioux Falls, and Fargo.
"Great North Labs is committed to catalyzing the potential of the region by not only capitalizing on existing exceptional opportunities but by cultivating new ones," the firm said in a statement.
Great North Labs Founders Rob and Ryan Weber have historically been staunch advocates for companies in Greater Minnesota and other small startup communities in the Midwest.
The Webers are alumni of St. Cloud State University and founded their first company, NativeX, while in college there. They sold their business in 2016. Even though Great North Labs is based in Minneapolis, the Weber brothers have remained rooted and invested in Central Minnesota. They worked with Midwest startup accelerator gener8tor to bring a suite of educational programs to entrepreneurs in the St. Cloud area.
"Exponential technologies are causing accelerating changes, and the implementation of these technologies is greatly enabled by the domain expertise living inside our strong industries throughout the Upper Midwest, creating fertile ground for high-growth, technology-driven entrepreneurship," Managing Partner Ryan Weber said in a release.
