Michigan Capital Network plans to raise $10 million from investors to support the investment firm’s existing portfolio companies.
A dozen to 16 of the more than 40 companies in which Michigan Capital Network holds positions would benefit from investments via the Michigan Capital Network Opportunity Fund L.P., Managing Partner Dale Grogan told Crain’s Grand Rapids Business.
Investments from Michigan Capital Network’s fifth fund will go for B and C Series investment rounds for portfolio companies that have surpassed the startup phase, proven their product or service, have cash flow and are “well into revenues,” and require additional growth capital to “get to the finish line,” Grogan said.
“The logic here is that once a fund gets fully deployed, that does not necessarily equal that a company is fully capitalized,” he said. “There are portfolio companies in funds one, two and three that are doing very, very well, and we would love to invest more if we had the capital. When you don’t, you raise an opportunity fund.”
Michigan Capital Network will seek investments for the Opportunity Fund from existing investors involved in its four prior venture capital funds, as well as bring in new investors, Grogan said. He cites two family offices in West Michigan that were interested in investing in Michigan Capital Network’s fourth venture capital fund that raised $37.5 million from more than 90 investors and was oversubscribed when closed earlier this year.
The new Michigan Capital Network Opportunity Fund requires a minimum investment of $500,000, according to a regulatory filing to the U.S. Security and Exchange Commission.
Michigan Capital Network, which has nearly $100 million in assets under management, invests in companies involved in life sciences, advanced manufacturing and software. The investment firm operates four venture capital funds and five angel investing groups across the state in Grand Rapids, Kalamazoo, Detroit, Flint and Midland.
The firm pursues investors at a time when fundraising for venture capital has been trending downward in the U.S.
The third quarter Venture Monitor report from PitchBook and the National Venture Capital Association shows that through the third quarter, 344 U.S. venture capital firms raised $42.7 billion. That’s well below the pace of 2022, when 1,278 venture capital firms raised $172.5 billion through the full year.
The Venture Monitor report attributes the fundraising “sluggishness” to several factors that include a down IPO market for investor exits and heightened caution among institutional investors.
Despite the current fundraising environment, Grogan remains confident the new Opportunity Fund will meet its goal with mostly existing investors who are familiar with Michigan Capital Network and understand its approach. While fundraising is “never easy,” he expects the fund to complete fundraising by the end of the year, with the first closing coming soon.
“We’re talking to our friends,” Grogan said. “Investing is a relationship business, and we’ve built relationships over a very long time.”