Confessions of A Midwest VC

Follow me on Twitter: @jpmurray5957

Fifteen years ago I was engaged to conduct a study of how to create an entrepreneurial ecosystem in Cleveland, Ohio, with financial support from the Generation Foundation administered through BioEnterprise. It quickly became clear to me that without locally managed early stage venture capital it was impossible to build and sustain an entrepreneurial ecosystem. Perhaps a bit naively, I took the entrepreneurial plunge and decided to start a venture capital fund.

Lacking a couple of requisite skills—namely, any investment experience whatsoever and any relationships with potential Limited Partners—I partnered up with a couple of guys with actual investment experience and access to capital—Jamie Ireland and Jim Petras. That was how Early Stage Partners was formed.

We spent several years building a constituency for a first-time fund in Cleveland to focus on early stage venture capital investing in technology (what an implausible story that now seems) and began raising capital in earnest in 2001—just in time for the bust to lengthen our odds. We had a first closing on January 3, 2002 and ultimately raised a $44 million first-time fund (1) to make early stage (2) technology (3) investments in Cleveland, Ohio (4) in the middle of the bust (5). By my counting, we had five strikes against us.

(A few years later, I met a Professor of Finance from Carnegie-Mellon University at a PVCA luncheon. His comment to me on hearing this story was “that has to be one of the great fund-raising success stories of that era. Nobody was raising first-time funds.”)

In the intervening years, Early Stage Partners raised and invested a second, larger fund (predictably, in the middle of the Great Recession) and has invested in over 25 companies, primarily in the Midwest. The recent $66 million Series E financing of TOA Technologies by Technology Crossover Ventures puts a nice bookend on a twelve-year cycle. Though it’s not an exit, it is a capstone event.

I hope the experience I have gained over these years can be of value to other people. I’ll keep the content flowing as time permits.


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