Southeast Minnesota Capital Fund, a Rochester-based angel investment fund, has raised $7 million for its second fund.
Over the next three to four years, SMCF expects to deploy the fund into 12 to 15 seed-stage companies and make five to 10 follow-on investments to its portfolio companies.
Those portfolio companies include Oculogica, Marani Health, Abilitech Medical and Omnia Fishing.
SMCF has already used Fund II to make one new investment and three follow-on investments, including participating in Vyriad Inc.'s $29.5 million Series B.
SMCF launched with a $2 million Fund I in 2017 through Rochester Area Economic Development Inc., a Rochester-based economic development organization.
In the first few years of that first fund, the organization functioned more like a sophisticated investment club, said co-manager Harry Hoffman. In order to bring a more formal managerial component to the fund, Southeast Minnesota Capital Partners LLC was formed in early-2022 to oversee and administer investments in both Fund I and Fund II.
Now Hoffman, along with co-manager David Herbert, lead SMCF by screening companies and conducting due diligence. Any recommendations they make are then passed onto a board of managers that approves the investments.
Hoffman said the group set out to raise between $3 million and $5 million for Fund II, but stopped fundraising after reaching the $7 million mark.
Hoffman didn't expect such high demand, but he credits the bump to investor satisfaction, low fees and his and Herbert's investing background.
Hoffman previously served as chief investment officer at Mayo Clinic for 25 years. Meanwhile, Herbert's resume includes executive roles at Mayo Clinic, Mayo Clinic Laboratories and Geneticure.
After making investments in the $100,000 to $200,000 range in its first fund, Hoffman said Fund II will make investments starting at $300,000.
SMCF's Fund I portfolio includes 14 Minnesota-based startups, 10 of which are located in southeastern Minnesota or based on technology developed in the region.
While SMCF is the only multi-million dollar fund based in the Mayo Clinic's backyard, Hoffman doesn't think its location gives it any particular advantage.
"We find our investments more than they find us. You don't sit and wait for the phone to ring," he said. "...We want to be a catalyst for growth and the development of the bio business sector in southeastern Minnesota and Rochester in particular."
