A venture capital firm with offices in Minnetonka and significant Minnesota backing announced Wednesday that it has raised $100 million to invest in young business-to-business software companies.
General partners and co-founders Charles Beeler in Menlo Park, Calif., and Jeff Hinck in Minnetonka, both venture capitalists since 1997, have formed the fund, called Icon Venture Partners. The two invested in and helped sell Twin Cities firms such as Compellent and Enstratius in recent years.
"Certainly we do more out in Silicon Valley, but we've had some pretty good ones over the years in the Twin Cities," Hinck said. "We're seeing pretty active dealflow so we expect to have a nice number of companies over the next several years in Minnesota as well."
Through three quarters in 2013, a down year for the state, Minnesota has attracted about $150 million in total venture funding. Most investment in Minnesota has typically gone to medical device start-ups, but Icon Ventures is looking for companies that build enterprise software for businesses.
In the past, Beeler and Hinck have backed firms that were acquired by Cisco and Dell. Compellent, a data storage firm based in Eden Prairie, was purchased by Dell for $960 million in 2011.
The fund is focused on seed and early stage funding, and has already put money into five companies, including Sport NGIN, formerly TST Media, a provider of Web and mobile solutions for sports organizations that's based in Minneapolis.
Hinck expects to add about 15 more companies to the fund's portfolio, while continuing to help the companies already on the portfolio.
The firm has a list of more than 80 "technology partners" with expertise at firms like Piper Jaffray, 3M, Cargill, Google, Microsoft, Compellent and Proto Labs. All of the technology partners are investors in the fund, Hinck said, and they offer a network of advisers for start-ups that attract Icon Venture capital.
Software is the hottest industry for venture capital in the country today, because it offers quicker returns than, say, medical device start-ups, which must sometimes spend years conducting costly clinical trials before taking a product to market. Software firms attracted $3.6 billion of the total $7.8 billion invested in the third quarter.
"It's become more capital-efficient to start businesses today than it was 10 years ago," Hinck said. "You can get three guys, and four months later you've got a product out there and can get some early customers."
That means that while the Twin Cities won't be Silicon Valley anytime soon, the barriers to starting a software company are lower and geography matters less, Hinck said.
He said less than $10 million of the $100 million has been invested so far.