Three advocates for Twin Cities startups noticed a lack of investment dollars for entrepreneurs who are women, people of color or identify as LGBTQ. So they decided to create their own firm to support underinvested founders.
Earlier this year, partners Amanda Heyman, Adam Choe and Danielle Steer launched Tundra Ventures, a $10 million national venture capital fund in Minneapolis. The fund focuses on startups in technology, consumer packaged goods and health care.
So far, the fund has invested in five startups, four of them Minnesota-based, like St. Paul-based SoleSafe, a company that built an insurance platform for owners of valuable sneakers; Maazah, a family-run consumer packaged goods company in St. Paul that makes Afghan-style chutney; and GenEqty, a Plymouth tech company behind a financial management web application for small business owners.
Through the fund, Tundra will write checks in the range of $100,000 and $150,000, but can invest as much as $500,000, Steer said. The partners hope to invest in 36 companies through 50 investments that are mix of early checks and follow-on capital, Steer said.
The fund is anchored by a $1 million investment from St. Paul-based F.R. Bigelow Foundation.
"The F.R. Bigelow Foundation sees a strong alignment with Tundra Ventures, allowing us to partner with a diverse team that will provide capital, access to networks and other critical support to underrepresented company founders in the Twin Cities, as we seek investments that support our racial equity and economic development priorities," said Mary Tingerthal, chair of the F. R. Bigelow investment committee.
About 90% of all venture capital deals go to companies located on the East and West coasts, Steer said. With the fund, Tundra is targeting unseen entrepreneurs in the southeast and Midwest regions of the country.
Last year, venture-backed companies in the U.S. raised a record $329.6 billion from investors, but nearly $244 billion of those dollars went to companies in either New York, Boston, Silicon Valley or Los Angeles.
"We've known since the beginning that access to capital is a really critical and important part of the entrepreneurial experience," Steer said. "What we've seen over the past couple of years is there have been a lot of people who are in capital deployment positions, specifically on the debt side, that are working to make it more inclusive and more accessible, but what we haven't seen in the last five years, specifically the past two, is that change on the [venture capital] side."
Of the total amount of investor dollars deployed nationwide in 2021, less than 5% went to companies founded by women or by Black or Hispanic entrepreneurs. Three-quarters of Tundra's 15 limited partners identify as women, and 40% identify as women of color, Steer said.
Tundra's three partners met through Lunar Startups, a St. Paul-based accelerator program designed to help women entrepreneurs, entrepreneurs of color and entrepreneurs who identify as LGBTQ or nonbinary. Some companies in Tundra's portfolio participated in Lunar Startups, but the investment firm and accelerator program operate as separate entities, said Steer, the managing director of Lunar Startups.
Heyman and Choe are also business coaches and leaders at Lunar Startups.
Lunar Startups began in 2018 as a project of Minnesota Public Radio and is now an independently run nonprofit. Sixty businesses have gone through the six-month accelerator program since its inception. According to Lunar's 2021 economic impact report, between 2018 and 2021, the companies selected for the accelerator had a $294 million impact on the Twin Cities through job creation, the spending of employee salaries in the region, contract services and capital raised from investors.
At this pace, graduates of Lunar Startups will have a $1 billion impact on the region by 2025, Steer said.
"This is asset building. This is generational wealth building," Steer said. "These entrepreneurs are good bets, and they're demonstrating that."