Seed Funds Are Finding the Midwest, But We’ve Been Here All Along

Facebook founder Mark Zuckerberg came to St. Louis recently, visiting with entrepreneurs, local leaders and small business owners at the Cortex Innovation Community, not far from the iSelect office. He was in town to launch a new small business development initiative called Facebook Community Boost which, according to them, is going to help business owners in flyover country finally reach their digital potential.

That’s great, and the fact that St. Louis was his first stop on a planned 30-city tour was no accident.

Zuckerberg is also visiting off-the-beaten-path destinations such as Albuquerque, Des Moines and Greenville, S.C., but by coming here first he sent a strong message to the city and the Midwest as a whole: There is a real groundswell of innovation happening in St. Louis, and the world is taking notice.

But I have news for Zuckerberg (Mr. did-he-or-didn’t-he-open-the-door-to-Russian-interference). He’s late to the game on this. Years late.

I’ve been in St. Louis since 1989. I know full well just how much innovation is happening here. That’s why iSelect was created in the first place.

We’re happy to welcome newcomers to town, but this has been going on for far longer than the folks from the coasts think. Entrepreneurs have been building companies, developing products and generating investment interest in St. Louis for years. It’s just what we do here. It might not be sexy to admit on the street in Palo Alto or San Jose, but St. Louis is a hotbed of innovation activity in agtech, healthcare, software and more, and we don’t need Facebook’s help to do any of it.

In fact, investment dollars are already finding their way from the coasts to support ventures here in Missouri and beyond, which is great to see.

According to a recent report in TechCrunch, seed venture funds—which have been generally quiet through 2017, with fewer new seed-stage funds launching and fewer investment rounds being completed—are currently focusing their attention on three major themes: hot new technologies like artificial intelligence and virtual reality…and the Midwest.

Sorry TechCrunch, but this is nothing new. Not at all.

AOL founder Steve Case launched his first “Rise of the Rest” tour in 2014, focused on Midwestern cities and allowing entrepreneurs in Detroit, Pittsburgh, Cincinnati and Nashville to pitch their ideas directly to Case and a panel of other successful founders. A year later, he did it again. Now he’s raising a $100 million seed fund to support entrepreneurs like these.

At iSelect, we’re supporting companies that are solving some of the world’s biggest problems, bringing new innovation to agriculture (like Benson Hill Biosystems and Agrible), healthcare (like Cofactor Genomics and Gila Therapeutics), resource efficiency (like Bractlet and Holganix) and more. We’ve been investing in early-stage companies since 2014 and have to-date made more than 30 investments in startups in Denver, Austin, Minneapolis, Cleveland, Columbus, Champaign, Memphis, Kansas City and more. (Yes, including St. Louis.)

And we aren’t alone. According to the 2017 Kauffman Index of Growth Entrepreneurship, entrepreneurial growth is no longer limited to places like Silicon Valley, Boston and New York City. In fact, the five metropolitan areas with the highest levels of entrepreneurship in 2016 were, in order: Washington, D.C.; Austin, Texas; Columbus, Ohio; Nashville, Tenn.; and Atlanta, Ga.

And the word is out.

It was great to have Zuckerberg in town and it was great to see the media coverage that his visit generated. But we’ve been here all along, and we’re not going anywhere. “The Rest” isn’t just rising. It’s been here for years, and we’re excited to welcome the rest of the investment community to our ecosystem at last.

Read the full article on TechCrunch

Consideration

With 2021 well underway and with public markets still strong, we think it is an important time to highlight some of the key private market, venture investment themes that iSelect fund has identified for the year. We believe technologies transforming the Agriculture, Food and Wellness markets will flourish, with a focus on four areas: technologies that enable better food choices to drive better health outcomes, technologies that drive better, more profitable farm operations, technologies that drive the Consumerization of Healthcare, and biome-based treatment technologies. At iSelect, we invest for impact AND performance. We offer qualified investors access to emerging growth companies through our national venture capital strategy. Our unique structure allows our investors to continue to invest in these companies as they develop.

Timing

Why is now the right time for venture? The answer is that now is not explicitly the right time. Venture is something we need in our economy at all times. Now is not better than any other particular time. The question is, why ever stop? When we look at the challenges we’re facing in food and healthcare the reality is there is someone, somewhere who has an insight about how to build a product that will solve those problems. And if they put the right resources to it, they will succeed. As long as we need new technology to make life better or make our lives more enjoyable, we need venture capital to help fuel those entrepreneurs.

What is iSelect as a product?

iSelect is a very unique product, but when you break it into its parts it’s fairly easy to understand. On the front end we’re a traditional venture capital fund. We have a diligence process. We have an investment process. We have categories of industries where we have focus and real expertise, and we invest in companies in those areas that meet requirements for the fund. On the back end we’re unique in that we don’t raise a large amount of capital at one time and deploy it over the life of our fund. Each deal that we bring onto the fund, our investors have to prove and determine to invest in that deal. We have to constantly prove our diligence standards. It’s accessible, transparent and easy for investors to come in and see our comprehensive process.

What is the ideal iSelect company?

We are looking for founders that are passionate and we want the problem they’re trying to solve to be big, real, and painful. We want the solution to be revolutionary and we want our capital to be able to help them solve that problem. We want to know that they have customers involved and that the solution they’ve come up with actually meets those customers’ and market needs. And we want the team to be capital efficient with the money they’re spending.

What does the ideal iSelect company look like?

We’re looking for a company that has an opportunity to have a 10x return to our investment or greater in a period of three to seven years. What excites us at iSelect are companies that are solving big problems. We want companies that are going to be the Monsantos of the future. Not just in the size and the scope, but the impact they have on people’s lives. We want to create positive impacts on people’s lives, so we invest in areas like agricultural production and areas like producing healthy foods for our kids. They are problems that impact real people’s lives on a daily basis. That’s what we’re trying to do at iSelect. We’re trying to solve the big problems out there. Find ways to bring capital to the entrepreneurs who are the real heroes out there getting up every morning, beating away at these things that are problems that you and me and everyone else faces in their everyday lives.

What is iSelect?

iSelect is a venture capital firm. What that means is we look at hundreds and hundreds of different companies and we apply tough diligence standards to each of them, looking at whether the team has a good plan for growing the business, whether the team is qualified and credible, and more. We do that to resolve the few who provide the best opportunities for investors. And then iSelect takes that smaller set of investments and goes to investors who are interested in venture capital and provides a way for them to invest in these companies, either individually or all at once. We co-invest alongside other venture capitalists. We source transactions through to an exit where the company would become public or get bought. And we manage that whole investment process on behalf of our investors.