High Alpha, a self-described “venture studio” based in Indianapolis, today announced it has raised more than $100 million to fund new enterprise software startups in Indianapolis and the Midwest. The $100 million includes $16.65 million for High Alpha’s second iteration of its startup studio and $85 million for the second fund from High Alpha Capital, its traditional venture fund.
Founded in 2015, High Alpha is led by Scott Dorsey, cofounder and former CEO of Indianapolis email marketing software startup ExactTarget, which was acquired by Salesforce in 2013 for $2.5 billion, as well as two former ExactTarget executives and Kristian Andersen, founder of innovation and design consultancy Studio Science. Given the background of High Alpha’s partners, the firm decided to focus on enterprise software startups.
In a phone interview with VentureBeat, Dorsey said that he and his partners decided to launch High Alpha as a venture studio, rather than just a traditional venture fund, in order to “keep us fresh as investors, in that we’re always thinking about unmet needs.” The studio portion of the firm, called High Alpha Studio, helps conceive of, launch, and scale enterprise startup studios. High Alpha Studio, which is incorporated as an LLC, becomes a cofounder of the business and takes a stake, though Dorsey declined to specify how much. In return, the company gets access to the infrastructure and resources to scale a company — like IT infrastructure and product designers — and mentorship from the High Alpha team. Because High Alpha Studio is structured as an LLC, it raises financing from other venture capital firms. Foundry Group invested in High Alpha Studio II, alongside Emergence Capital, which is based in San Francisco.
High Alpha Studio I helped launch 11 businesses during its first three years in business, according to Dorsey, and the startups that come out of the studio side typically fall into one of three camps. First, the High Alpha team might come up with an idea for a business and then recruit a CEO to help launch a company around it. In other cases, an entrepreneur might approach High Alpha about bringing the studio on as a cofounder. Lastly, a corporation or another institution might approach High Alpha about starting a company, which Dorsey sees as a big opportunity for High Alpha Studio II.
“We were getting approached with frequency from large Fortune 500 companies that see opportunity within their industry but don’t have that startup DNA,” Dorsey told VentureBeat. With High Alpha Studio II, Dorsey said he hopes to launch another eight to 10 startups. Of the startups that came out of the first studio, two have already been acquired — ClearScholar, which was a student engagement platform High Alpha developed in conjunction with Butler University, and Octiv, a document-generation platform for sales professionals. Financial terms were not disclosed for either acquisition.
On the venture side, High Alpha Capital invested in 21 companies with its first $21 million fund — including the 11 companies that came out of High Alpha Studio. Other investments included Minneapolis’ When I Work and Atlanta’s SalesLoft, which announced a $50 million series C in April. Dorsey said High Alpha hopes to invest in between 25 and 30 companies with its second fund.
In addition to raising significantly more money for the second fund, Dorsey said that with this round High Alpha Capital also received more interest from institutional investors, such as university endowments. High Alpha Capital’s first fund was primarily made up of individual investments and also received money from a fund-of-funds.
“The venture studio model has been incredibly well-received. They’ve also been interested in our Salesforce and ExactTarget operating experience, and the competitive advantage we have being in Indianapolis and the Midwest.”