Startups, it’s time to polish your pitches. Hyde Park Venture Partners has more than $20 million that it’s looking to put into early-stage technology companies in the Midwest.
The Chicago-based investment firm said Thursday that it has closed its first fund with $25 million in commitments.
Hyde Park Venture Partners has put $2.7 million into eight companies, with five of those startups in Chicago, said Guy Turner, one of the firm’s principals.
The venture firm focuses mostly on early-stage companies doing software-as-a-service or health care information technology. Its portfolio includes Food Genius, a local startup that gathers and analyzes data from restaurant menus, and FarmLogs, a Michigan-based maker of farm management software.
Hyde Park Venture Partners came out of Hyde Park Angels in 2011. The venture firm and the angel group have the right to co-invest with each other and can conduct shared due diligence on investment opportunities, but are not obligated to overlap.
Hyde Park Angels was founded in 2006 by University of Chicago Booth School of Business classmates. Angel networks typically consist of high-net-worth individuals and entrepreneurs looking to make personal “friends and family” investments in early-stage ventures, while also providing mentorship or serving on the board of directors.
Similar groups in the area include Wildcat Angels and IrishAngels, which have ties to Northwestern University and the University of Notre Dame, respectively.
The venture firm, meanwhile, commands a dedicated fund. Turner said Hyde Park Venture Partners’ typical seed stage investment will be $100,000 to $200,000, with the angel group putting in a comparable amount if they are teaming up. Recipients of that funding will be either — just pre- or just-post launch — and looking to raise a total of $1 million or less, Turner said.
Hyde Park Venture Partners will also look to make investments of $500,000 to $750,000 in companies that are further along and on track to make annual revenue between $250,000 and $2 million. In those cases, the angel group would contribute $500,000 or less. Startups at this stage typically will be raising a total of $1.5 million to $2.5 million in their Series A, or first round of institutional funding.
Between one-quarter and one-third of the venture fund’s $25 million came from Hyde Park Angels members, Turner said. Roughly half came from non-Midwestern investors.
“To us, it’s really exciting because it brings capital to Chicago that otherwise wouldn’t be here, he said.
Turner said that while startups in Chicago and the Midwest have been raising seed capital, only a minority are able to reach a Series A. The number drops even further at the Series B level, which typically pulls in venture capital firms from the coasts.
“Once (companies) are at a B stage, if they’re well-supported, funds outside the Midwest will take a chance,” Turner said. “But they need (local) funds on the board and involved. It’s hard for them to monitor their investments because they’re far away. They’re not part of the same networks; they’re not at the same cocktail parties. So they like to know that someone is involved locally, and it can make a big difference to the company.”
Hyde Park Venture Partners’ most recent investment was in SimpleRelevance, a digital marketing startup completing the TechStars Chicago accelerator program. In that Series A round, which totaled $750,000, Hyde Park Venture Partners and Hyde Park Angels were the lead investors.
The venture firm has seen one exit. In December, Chicago-based Tap.Me, a mobile game advertising startup, was acquired by New York-based advertising technology company MediaMath.
