Two regional venture capital firms are joining forces to raise a new investment fund that will funnel early-stage capital to startups across Pennsylvania, with a focus on rural areas of the state.
- State College-based 1855 Capital and York-based White Rose Ventures hope to raise about $40 million for the new fund, dubbed Keystone Innovation Fund II, which they will co-manage.
- “The intent is to really bring to Central Pennsylvania what’s going on in Pittsburgh and Philadelphia,” said Martin Fedorko, co-founder and managing partner at White Rose.
- In addition, he said, the goal is to show outside investors the kind of innovation taking place beyond the state’s biggest cities.
- The collaborative effort is being funded, in part, by a grant of $412,598 from the U.S. Economic Development Administration, an arm of the Commerce Department.
- The federal grant — which is earmarked for the fund’s operations, not investments — is passing first through Ben Franklin Technology Partners of Central & Northern Pennsylvania.
- “We view this combination of regional venture capital management talent and investment strategy as a tremendous step forward in creating a permanent venture capital institution for our region,” said John Sider, vice president of business development for Ben Franklin.
Why two: The designation as Keystone Innovation Fund II reflects the fact that it is a second fund for both venture capital firms, said Matt Rhodes, managing director of 1855 Capital.
- Rhodes launched 1855 Capital — whose name comes from the year Penn State was founded — in 2018.
- The fund has invested nearly $7 million in startups, including Lancaster-based insurance technology firm Benefix and Phospholutions, a State College-based ag industry startup.
- The investments by 1855 have attracted $65 million from other investors, Rhodes noted, magnifying the firm’s impact.
- White Rose, meanwhile, formed in 2020. It has also invested millions of dollars in startups around Central Pennsylvania.
- They include Lancaster-based ecommerce jewelry firm Wove and York-based cyber security company cyberconIQ.
- 1855 and White Rose have invested in some of the same companies, such as Harrisburg-based crowdfunding platform Pledge It and Lancaster-based athletic training tech firm Reflexion.
What’s next: The two partners plan to start formally raising money from investors in the first quarter of 2024, Fedorko said.
- If all goes as planned, the fund could begin making its first investments by the fourth quarter of 2024, he said.
- The investments will likely average around $250,000 to $500,000, he added.
The trend: The Keystone Innovation Fund II is the second statewide venture fund launched in recent weeks.
- Ben Franklin Technology Partners of Southeastern Pennsylvania is building a $100 million fund designed to provide later-stage, growth capital to Pennsylvania tech companies.
- The fund, Global Opportunity Pennsylvania Fund II, has already raised about $28 million, including $10 million from Lancaster-based Fulton Bank.
