Minneapolis-based Traction Capital this week announced the launch of its second fund focused on scaling businesses born in Minnesota and the Midwest. With $33 million already raised in just 90 days, the target for Fund II is around $50 million—three times the size of Traction’s first fund.

A hybrid venture capital and private equity firm founded in 2020, Traction’s team is made up of entrepreneurs who understand the journey firsthand. Its founder, Shane Erickson, co-founded beverage industry marketing firm IMC. Two well-known names in local startup circles recently signed on as strategic growth partners for Fund II: Scott Litman and Matt Meents. Litman is a serial entrepreneur, adviser, and investor with five exits to his credit, including, most recently, Lucy, an AI answer engine for businesses. He also co-founded MN Cup, now the largest statewide startup competition in the country. Meents worked with Litman as co-founder of sales platform Magnet360, which was acquired by Mindtree in 2016. He then co-founded Yardstik, a VC-backed software platform, and stepped down as CEO in 2024.

“This is a role I love, getting to mentor, coach and advise,” Litman said in an interview with TCB on Wednesday (Meents was unavailable to comment). “We just completely bought into [Traction’s] investment pitch of building great businesses.” Traction Capital subscribes to the EOS [Entrepreneurial Operating System] model and implements the business management process within all of its portfolio companies. That was another selling point for Litman. “I’ve been partnering with Matt on businesses since 2006 and everything we’ve touched runs on EOS.”

Traction Capital has already made two investments in local startups through Fund II: Blank Metal, an AI software engineering firm, and PARQA, a technology consulting firm for staffing and recruiting. Traction is “industry agnostic,” says firm president Brian Cox. Most of the startups it invests in are already generating revenue. Fund II will write checks up to $1 million.

“We’re investing in businesses that aren’t being invested in from traditional VCs,” Litman adds. “The traditional VC model looks for unicorns. We’re looking for good businesses and we’re huge winners if they sell at 3 to 10x.”

Traction Capital’s first fund invested in 13 companies including Kwikly, a dental staffing firm named Minnesota’s fastest-growing private company in 2024 on the Inc. 5000 list.