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Staking out a well-defined position in venture capital doesn't look to be easy.
Until a track record emerges of generating better returns than the alternatives the fund's investors had for their money, the task seems to be to become well enough known to be shown the best opportunities, maybe by developing deep expertise in some technology or market.
A new venture firm launching this week in Minnesota is saying what it's about just through its name, Bread & Butter Ventures. It's a name chosen only partly because it's also derived from one of our state's nicknames.
"We want to be investing globally out of a fund that is very firmly, two feet on the ground here in Minnesota," said Mary Grove, one of two managing partners for the new fund. "This really plays to the strengths of our economy and Minnesota's backbone sectors."
Three industry sectors — health care, food and agriculture and software for big companies — align well with the experience of Grove and her partner, Brett Brohl. And as she explained, the state's business community can lead in these areas, too, including with the help of the state's constellation of big company headquarters.
"We want to build a destination fund," said Brohl. "All of the assets we need to be able to do that are here."
The big companies headquartered in our region can sponsor programs, serve as early customers for new products developed by startups, even invest some corporate venture capital. They also employ a lot of savvy people who could provide a lot of hands-on help.
The challenges of a running small company are so different from what they likely know, Brohl said, that they may not be great at guiding the founding team on staffing or operations. What they can share in abundance is market knowledge of unmet needs and what solutions might work with the most demanding potential customers.
Of course, they will also have a handle on their own organization's problems and what their colleagues back at headquarters might be willing to spend to solve them.
Both partners are already well known in the Twin Cities entrepreneurial community. There are areas of overlap between them, but generally Grove has experience in health care and enterprise software while Brohl has acquired a lot of expertise in emerging food and agriculture technology.
That includes what Brohl has learned leading the Techstars Farm to Fork accelerator program in St. Paul, in collaboration with St. Paul-based Ecolab and Minnetonka-based Cargill.
Brohl had started a small venture firm as well and worked as a founder and operator of startup companies. As he got into the venture business in 2017, he called his firm the Syndicate Fund, named after an old term in finance that meant forming a group with other financiers to fund a project. In this case it's also meant to include his fund's investors and others joining in to invest their time with the founders of Syndicate Fund portfolio companies.
Brohl's first real success as an entrepreneur, he said last week, came from a company that went from its startup to being acquired in about four years. He's now sure that with hands-on coaching and advice, that four-year journey could have been shortened at least by half.
He met Mary Grove before she even moved to Minnesota in 2018, as she and her husband Steve Grove had already launched Silicon North Stars. (Steve Grove last year became commissioner of the Minnesota Department of Employment and Economic Development.) Their nonprofit helps young students from Minnesota explore the potential of eventually working in technology, including through a week in Silicon Valley.
Grove knows the northern California technology cluster well, having worked in different roles over roughly 15 years with Google, joining the Silicon Valley tech giant in the era of its initial public offering.
Since moving to the Twin Cities, she had been an investment partner with the Rise of the Rest Seed Fund, one of the venture-capital funds created by Washington, D.C.-based Revolution, LLC. Its name comes from its approach, looking to fund entrepreneurs located outside of the technology clusters of Northern California and the East Coast.
Her first investment for the Rise of the Rest fund here in the Twin Cities was into Structural, a software firm in St. Paul with a products designed to improve communication and collaboration inside an organization.
Because the two of them had crossed paths so often since first meeting, as investors and in the community, Grove and Brohl's decision to become partners in a new firm arose out of informal conversations.
With the transition to Bread & Butter to be announced this week, the Syndicate Fund's portfolio of about 40 investments will become Bread & Butter deals. They intend to work as an early stage fund, which generally means providing the earliest professional investor money in a company.
The pair will obviously be raising a new fund, as there is no venture-capital firm without venture capital. They can't discuss fundraising plans, but as Grove put it, Bread & Butter is "deeply committed to the long term, and this is a very long-term strategy."
"Both of us share the same vision," Brohl said. "We want to build one of the best funds for entrepreneurs in the world. It would be really hard to do that alone. And it wouldn't be as fun."
lee.schafer@startribune.com 612-673-4302
