The fund is based in St. Cloud and Minneapolis, Minnesota, with a partner located in Silicon Valley. This is one of the largest debut seed funds ever raised in the Midwest. The VC firm was started by twin brothers Rob and Ryan Weber, who previously ran ad monetization company NativeX.
They sold NativeX to China’s Mobvista in 2016, after which they spent 18 months at Mobvista. Then they took some time off. But the two had spent 15 years working together, during which time they sold four software companies, so another venture was all but inevitable.
“We decided we wanted to stay close to the startup life and scale up our investing activities,” Rob Weber said in an interview with VentureBeat. “We raised our money from Midwestern investors. They are more risk averse than Silicon Valley investors. But it’s great to get so much support in the Midwest. It’s definitely more nascent here.”
The bulk of venture capital in the U.S. is still raised and spent on the coasts. Fifty-two venture capital funds were formed in the country in 2018, with the majority formed in California, New York, and Massachusetts. Those states accounted for 79% of the $5.3 billion in capital raised, according to the National Venture Capital Association.
Nationally, some larger funds are becoming more active in seed stage investing in the Midwest. The most active is Techstars, which operates an accelerator in addition to a venture fund, and Revolution’s Rise of the Rest Seed Fund.
Funds that invest in early-stage startups, or “seed funds,” are generally smaller in size, and only about half a dozen have ever debuted in the Midwest with over $20 million committed. In the Upper Midwest (defined as North Dakota, South Dakota, Minnesota, Indiana, Wisconsin, and Illinois), there are only two examples besides Great North Labs, both from Chicago.
Hyde Park Venture Partners raised $25 million in its 2013 debut, and MATH Venture Partners raised $28 million in 2015 (sources: data compiled from Pitchbook, CB Insights, Crunchbase, and public databases). Both Hyde Park and MATH have gone on to raise larger funds since their debuts.
“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,” said Ryan Weber in a statement.
Great North Labs invests in consumer or enterprise startups that have the potential to reach a $1 billion market, show early signs of product-market fit, possess defensible attributes, and leverage new technology. Startups must be based in, or significantly tied to, the Upper Midwest. The focus will be on software-as-a-service, on-demand marketplaces, and consumer internet companies.
Great North Labs has also committed 10% of the fund ($2.37 million) to investments in preseed startups with founders from under-represented groups, or startups located in under-served markets, such as St. Cloud, Minnesota; Sioux Falls, South Dakota; and Fargo, North Dakota.
At a time when 45% of deals by Midwest investors are still going to startups outside of the region, 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 fund has three managing partners: Ryan Weber, Rob Weber, and Pradip Madan.
Madan is a Silicon Valley tech executive with a long history of success at both Fortune 100 companies and startups and has been part of several seminal moments of tech and venture history. The Webers live in St. Cloud and Maple Grove (Minnesota), respectively, and Madan is located in Silicon Valley. The team also includes a network of accomplished advisors from successful tech companies throughout the Upper Midwest and Silicon Valley.
“The opportunity in the Midwest is significant for investors with the right experience, criteria, and investment thesis. For four decades, capital has gravitated toward Silicon Valley, Boston, and New York. With the high cost of living and a talent supply-demand imbalance, making a startup successful is now more difficult in Silicon Valley,” said Madan, in a statement. “As a result, investors are starting to pay more attention to the startup ecosystems in places like Chicago, Minneapolis, Madison, and Des Moines. Plus, many of the industries — financial, food, travel and hospitality, health care, insurance, manufacturing, mining — that entrepreneurs are now disrupting are native to these areas. In the new Gold Rush, the gold is the hard-working entrepreneurs and their startups in these regions.”
The Webers serve as mentors with Techstars, are on the board of Minnestar, and lead the local chapter of Singularity University. The partners regularly speak at industry events, mentor founders, advise startups, and provide financial support to Gener8tor/gBETA Greater MN-St. Cloud, Beta.MN, St. Cloud State, St. John’s Center for Entrepreneurship, SingularityU Minneapolis-St. Paul, and MNCup.
Great North Labs also provides educational support in valuable industry skills, such as Lean Startup, Agile Scrum, and Innovation Design, at a low cost for founders and students through the Great North Labs Startup School.
Rob Weber said they want to focus on about 30 investments, with reserves for follow-on investments. Each investment will be around $250,000 to $750,000.