A hybrid venture capital and private equity firm called Traction Capital has closed on a new $16.6 million fund to invest in and acquire Midwestern companies, it announced last week.
The fund closed on March 5. Fifty of its 76 investors are Minnesotans, Traction Capital said. It hopes to make three or four investments and one acquisition in 2021, it said.
Mound-based Traction Capital was founded in 2019 by Shane Erickson, the CEO of Innovative Marketing Consultants, a company that makes collectibles and other marketing tools for businesses.
"It’s encouraging to see the investor base we were able to gather because I think it speaks volumes to our belief in Minnesota and its early-stage businesses and the opportunity for a great return in the long term," Erickson said in a statement.
Related: Read Traction Capital's from last year here.
The hybrid of private equity and venture capital mitigates some of the risk to investors associated with traditional venture capital funds while still offering the chance to get in early on high-growth startups, Erickson said.
For venture capital investments, Traction will look at early-stage companies with between $250,000 and $5 million in recurring revenue and the potential for further growth. Its private equity investments will look at more mature companies with recurring revenue between $500,000 and $1.5 million. The firm will have an eye towards industries like technology, niche manufacturing and consumer products.
Traction's advisory committee features a strong roster of Minnesota entrepreneurs including former Revel Health CEO and Insite Software founder Jeff Fritz, Magnet360 and Yardstik co-founder Matt Meents.
"Minnesota and the Upper Midwest are areas of huge opportunity but can be overlooked by the coastal investment firms. We can’t wait to unlock the massive potential that we believe entrepreneurs in our region possess," Erickson said in a statement.
