Grand Angels, the West Michigan angel investing collective, is raising a third venture fund, called Grand Angels Venture Fund III.
Paul D’Amato, a member of the group and the manager of GA Fund III, says the goal is to raise $25 million. As in previous Grand Angels funds, it will focus on advancing startups working in advanced manufacturing and materials, agricultural and food tech, life sciences, and software. GA Fund III plans to deploy investments valued between $250,000 and $500,000 per company.
Although angel investing has become increasingly popular in Michigan over the past few years, D’Amato says there is room to grow. The new fund is intended in part to provide follow-on funding to the group’s portfolio companies.
“There’s a lot of opportunity in Michigan,” he says, pointing to the state’s robust rate of patent generation and the University of Michigan ranking second in the nation in terms of research and development spending by public universities. “A lot of interesting technology comes out of Michigan,” he continues. “We’re leveraging our success to bring more capital to more entrepreneurs.”
Since its inception in 2004, the 44-person angel network has invested in 40 companies across more than 100 funding rounds. Its portfolio includes some of the state’s fastest-growing startups, including Varsity News Network and Zipments. A number of portfolio companies have been acquired or gone public, such as Accuri Cytometers; ProNAi Therapeutics, since renamed Sierra Oncology (NASDAQ: SRRA); and Armune Bio.
Grand Angels president Tim Parker says that angel collectives like his can help timid or novice investors get more comfortable with backing early-stage companies by distributing risk and sharing due diligence duties. In addition to financial support, Grand Angels members also help mentor companies, identify potential business opportunities, and facilitate customer introductions.
“We become a resource for companies as they need it,” Parker explains. “We don’t come in with demands and force them to pretend we know the business better than they do.”
D’Amato says Grand Angels concentrates on investing in companies representing sectors that its members know well. It prefers to fund Midwestern startups because of their “excellent work ethic, lower carrying costs, and a better quality and cost of living.”
With GA Fund III, he says there’s a new objective: Attracting manufacturing companies to the Midwest.
“That’s an area we’re unquestionably good at,” he says. “It’s a huge growth sector now. We think we can attract companies from around the world to locate here and commercialize in partnership with Michigan manufacturing companies.”
D’Amato says this effort will be key to the group’s future strategy, which is based on feedback from members who are “close to industry,” he says.
“We see manufacturing moving back to Michigan from Asia,” D’Amato adds. “We believe that’s the direction things are going.”