In places with a less established tech industry and venture capital density, like the Midwest, I’ve often heard VCs complain that it can be difficult to get institutional investors off the sidelines and investing in local venture capital funds. They are hesitant to invest in venture capital in general, and even more reluctant to invest in newer funds. One potential solution is to create a fund of funds, one that invests in other, more established venture capital funds. In Michigan, a fund of funds called Renaissance has become a well-known local entity.
The fund recently closed its third fund, which counts Blue Cross Blue Shield of Michigan, AAA Michigan, and La-Z-Boy among investors. To date, Renaissance has invested in 30 other venture capital funds, which have in turn invested in 39 Michigan startups. Those startups have raised a combined $1.3 billion, though not all of that money has come from VC firms Renaissance has invested in.
I spoke with Chris Rizik, CEO and fund manager at Renaissance, to see how other cities can learn whether a fund of funds is right for them.
“In addition to supporting the local venture capital community, we wanted to attract venture funds that hadn’t previously invested in Michigan, with the belief that if they came and looked, they would see great opportunities,” Rizik told me via email. To that end, Michigan hosts UnDemo Days every year, inviting 150 to 200 venture capitalists to meet with 50 top Michigan startups. This allows members of both groups to see if they might be a good fit to work with one another. They also host “immersion days” for out-of-state venture capital firms, introducing them to the Michigan startup landscape through a few days’ worth of meetings.
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As with most other startup initiatives, follow-through is key — having a fund of funds doesn’t automatically ensure that the money raised goes back into the community. Fund managers have to make sure that they are consistently keeping in contact with out-of-state venture capital funds and updating them on what’s happening in their state.
Thanks for reading, and as always, please send me your thoughts via email. You can also sign up here for VentureBeat’s Heartland Tech newsletter to get this column in your inbox weekly.
Anna Hensel
Heartland Tech Reporter
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