Rob and Ryan Weber, tech-entrepreneur brothers from St. Cloud, on Wednesday announced their venture-capital firm Great North Labs raised $23.7 million from investors in a debut fund that will seed other startups in the Upper Midwest.

Rob Weber said the firm plans to use about half of the money to invest in companies that are just getting off the ground and the rest for firms that are starting to grow quickly.

"If we can do a great job performing for our investors, there's a lot of capital on the sidelines that will invest in our fund," Rob Weber said.

The Weber brothers co-founded, built and sold NativeX, a St. Cloud firm that provides an advertising platform for mobile gadgets. They subsequently started Great North Labs, which currently has investments in 12 tech companies. Great North Labs is dually based in St. Cloud and Minneapolis and comanaged by the Webers and Pradip Madan, who represents the fund in Silicon Valley.

With the new fund, Great North Labs aims to invest in five to six new tech startups by year's end and eventually have a portfolio of 30 tech companies, Weber said. To fit Great North Labs' investment criteria, the tech startups must have the potential to reach a $1 billion market and must be based in, or significantly tied to, the Upper Midwest.

Weber said the company typically invests between $250,000 to $750,000 in a startup during the seed stage and invests between $2 million to $3 million during the early-growth stage, whether that's the seed extension round or Series A and B rounds. He said his company's investment strategy is to enter a startup's funding life cycle during its seed stage, when startup founders ask friends, relatives and angel investors to help finance proof of concept.

"Often times, companies are coming to us when they have $20,000 in monthly revenue," Weber said. "Maybe they've launched over the last 12 months and they think they have a scalable business model figured out. That's kind of our sweet spot."

In 2000, Rob Weber and brothers Ryan and Aaron launched the precursor to NativeX, called, while Rob and Ryan were college students at St. Cloud State University. The website was a free e-mail service that provided clip art and screen savers to subscribers and generated revenue from online advertising.

The company changed its name to W3i in 2007 and then to NativeX in 2013. As NativeX, it made video ad platforms for smartphone apps and video games. The Webers sold NativeX in February 2016 to Chinese mobile advertising company Mobvista for $25 million.

Over the last 10 years, Minnesota's startup environment has benefited from an influx of accelerator programs, co-working spaces, nonprofit support and micro investment funds, which raise up to $50 million, Weber said. But he said tech entrepreneurs are still challenged for early-stage funds because local investors' risk tolerance is low and existing seed funds in Minnesota tend to invest in firms at later stages of growth.

In 2017, TechCrunch reported that local venture capitalists tend to invest more heavily around the Midwest than in the Twin Cities, which ranked lowest among 10 major Midwest cities in funding connections between local investors and startups.

Weber said that the TechCrunch article still resonates with him and that creating more ties between investors and startup founders locally is important.

But he added that backers of the Great North Labs seed fund also expect it to generate returns.

Matthew Niksa • 612-673-7086