Early-Stage Investment Firm Groove Capital Raises $3.8M in First Close
Groove Capital, a new investment firm targeting early-stage companies, on Tuesday completed its first round of fundraising.
The investment firm, launched by Beta.Mn co-founder Reed Robinson, raised $3.8 million in its first close. The amount surpassed Robinson’s expectations for the first close by over $1 million.
Robinson declined to name specific investors in the first close, but noted that it’s a mix of entrepreneurs, aspiring mentors, and senior-level leaders at big-name companies in Minnesota. In a Wednesday phone interview, Robinson said there’s a “sense of urgency” among those who have invested.
Groove Capital plans to use the funds to provide capital for young startups that are still in the “pre-seed stage,” e.g., companies that aren’t yet ready to seek multimillion-dollar investments. In startup parlance, this period is also known as the “friends and family round,” a time when startups often tap people close to them for a small amount of capital to kick-start their business.
Groove Capital hasn’t distributed any funds yet, but this week’s close paves the way for the firm’s first investment, Robinson said.
Robinson’s goal for the fund has been to fill in the gap for founders that don’t have capital immediately available to them.
“We’re intentionally trying to target that first-check investment,” Robinson said. “We’d like to put ourselves in position to be willing to work with groups that other investors might not yet be ready for.”
Though Groove Capital’s first close came in higher than anticipated, Robinson said he’s still aiming to raise a total of $5 million for the fund. And while he “wouldn’t be surprised” if he surpassed that number, the fund’s investment strategy remains the same: providing small investments in early stage companies. Robinson still plans to invest about $50,000 to $100,000 per startup, he said.
He’s also been nurturing a group of angel investors to help provide additional funds for startups. Depending on the “appetite for coinvestment” among angels, that could boost individual investments to upwards of $500,0000.
“We know that for many of these people, the first check is the hardest one to get,” Robinson said. “We really want to be that first step.”
Groove Capital is designed to invest in startups that haven’t gotten off the ground quite yet, but Robinson still expects some level of momentum. Qualifications are fairly broad, but he’s not looking for “ideas on napkins.” Startups looking to get investments should have a minimal viable product and a pipeline to revenue. And, of course, startups need to be located in Minnesota.
“Entrepreneurs need to have a plan, and need to show certain qualities and an ability to execute on that plan,” Robinson said. “We want to see that you’ve put some work in, that you’ve made some sacrifices. Those are the types of early indications that we would require to make an investment.”
The fund was formally launched this year to align with the return of Minnesota’s angel investor tax credit.