Detroit Venture Partners LLC, a venture capital firm that has filled the Madison Building in downtown Detroit with startup software companies, has closed on a first round of nearly $21 million as it raises its first formal fund
But DVP has ambitions far beyond what it can accomplish with $21 million. It hopes to finish its first fund at $60 million this year or early next year and soon after that begin raising a second fund of $120 million or more.
“The intention was never to have a boutique venture capital firm where Dan (Gilbert) and I would just invest our money. We always intended to build a firm that can stand with the Draper Fisher Jurvetsons,” said managing partner Josh Linkner, referring to one of the brand names of Silicon Valley. “We want to build a nationally known firm with a Midwest focus.”
Until now, DVP — launched in November 2010 by Linkner, the founder of ePrize Inc.; Quicken Loans Inc. founder Gilbert; and Brian Hermelin, co-founder and chairman of Rockbridge Growth Equity LLC, a private equity firm in Detroit — had raised money as needed from its partners to invest in its portfolio companies.
“If you look at Michigan over the next few years, you’ll see Detroit and Grand Rapids both becoming epicenters of venture capital, and you’re seeing the seeds of that now,” said Chris Rizik, CEO and fund manager for the Ann Arbor-based Renaissance Venture Capital Fund, a creation of Business Leaders for Michigan.
In May, Tom LaSorda, the former CEO of Chrysler Corp., announced he had co-founded Birmingham-based IncWell LLC, a seed-stage investment capital firm that will start with less than $5 million from prominent local business leaders including Roger Penske. IncWell plans to go out to institutional investors next year to raise a fund of $25 million or more.
In March, a new early-stage investment fund called Detroit Innovate was launched with a grant of $5 million from the New Economy Initiative for Southeast Michigan. The fund hopes to raise up to $10 million more from private individuals and institutional investors, including other state foundations.
It will operate as a sister fund to the $5 million First Step Fund, another grant recipient of the New Economy Initiative. Both operate under the umbrella of Invest Detroit, a nonprofit created by Business Leaders for Michigan that manages $110 million in funds and tax credits to support business expansion and real estate development.
And in January, Ludlow Ventures LLC, which is based in the Madison Building and has co-invested with DVP, announced it was raising a limited-partnership fund of $15 million as founder Jonathon Triest changed its model from a seed-stage investment firm that raised money from family members as needed.
“Like any gold rush, the first to stake the claim are usually the ones to make the money.”
Brown said the increase in Detroit VC activity is reflected in applications for funding from the state’s Pure Michigan Venture Development Fund, a $9 million fund created to invest $2.25 million in each of four new VC funds.
The first round of winners was announced in January, with two Ann Arbor firms getting the investments — Resonant Venture Partners and Michigan eLab. Of the five applicants, none were from Detroit.
The second-round winners could be announced as early as September. Of the nine companies that applied for that round, four were from Detroit.
Detroit Innovate will be something of a more focused bigger brother to the First Step Fund. The First Step Fund generally invests $50,000 in seed-stage companies throughout Southeast Michigan across a range of sectors. It has invested a little more than $3 million in 51 deals since launching three years ago.
Detroit Innovate will invest between $50,000 and $250,000 in early-stage but not necessarily seed-stage companies in advanced manufacturing, transportation, enterprise software and medical technologies, with a heavy focus on Detroit.
