Forge North, an initiative of Greater MSP that last year embarked on a plan to raise a $50 million venture capital fund-of-funds back diverse entrepreneurs, said Monday that it's wrapped the first close on the MSP Equity Fund.
St. Paul-based Greater MSP, which is leading the program with gener8tor of Madison, Wis., didn't say how much capital had been closed on, though an representative at gener8tor said it was at least a quarter of the fund's total goal.
Lead investors for the first close include Allianz Life Insurance Co. of North America, Allina Health System, Xcel Energy Services Inc. and Abova Inc. A previous Business Journal report indicated that Allianz committed $10 million, while Allina and Excel committed seven-figure investments.
The committed capital means MSP Equity Fund can begin making investments in local and national venture capital funds. The fund of funds is designed to provide capital to such funds that then invest in high-growth startups led by minority and women entrepreneurs in Minnesota.
Entrepreneurs who are either already based in Minnesota or willing to relocate there are eligible for funds from the firms that get capital from the MSP Equity Fund, the press release said.
Part of the $50 million MSP Equity Fund now also includes a direct-investment option for startups and an anticipated accelerator program, both of which are intended to allow for more direct alignment of the fund’s strategic goals, according to the release.
“The first close of the MSP Equity Fund demonstrates the strong momentum behind the fund and recognition of the value and importance of the fund’s thesis,” gener8tor partner Al Cornish, who is managing the fund, said in a statement. “But I want to stress that this is just the beginning - the first step in our strategy to partner with high-performing fund managers that see the tremendous business opportunity to invest in high-growth diverse-led startups, an often undervalued yet over performing asset class."
More closes are expected throughout the next 12 months as other organizations formally commit capital, Cornish said.
The establishment of the MSP Equity Fund was announced in early 2022. MSP Equity Fund’s “investment thesis” revolves around investing in high-growth, minority-led startups that can create lasting economic value and community impact, the release said.
Less than 2% of U.S. venture dollars each year is typically received by Black entrepreneurs, according to CNBC’s research of Crunchbase data.
The press release pointed to a 2020 report by Kauffman Fellows Research Center that shows that while companies with ethnically diverse founders have more limited access to capital, when they do raise funds, they have better financial returns.
