If there is a deal going on in the Midwest, it’s likely that the team at M25 knows about it. They like to say that they “bleed Midwest.” We like their focus on the region and their data-informed research that helps them pick winners.
We had the chance to sit down with M25 managing partner Victor Gutwein for our “5 Questions with…” series.
Q: Tell us a bit about M25
VG: We’re very Midwest focused and are zeroed in on what, to us, is just a really great opportunity. For us, investing in the Midwest is not economic development even though it has lots of economic impact. What we see is untapped potential and opportunity. There are a lot of big tech companies coming out of this region now, and we want to be on the ground floor.
At M25 we’re generalists in tech and software and we are going to be among the earliest seed and pre-seed investors in the category and region that we invest in. We’re typically a lead or co-lead investor in those early rounds and have done 135 investments since we started eight years ago across 26 different cities in 13 States.
EnsoData is a good example of the type of companies we invest in. They are a health tech startup based in Madison, Wis. with a digital sleep-scoring tool. We were one of the earliest investors in EnsoData and they’ve raised more than $30 million and completed a Series B round last year.
Another more recent example is a company called Quiver Quantitative, an investment research platform that uses non-traditional data to help users make better investment decisions. The company was started by twin brothers who are graduates of UW Madison. We were part of their seed round and are excited to watch them grow.
There are two things that we really hang our hat on as far as what we’re good at. The first is that we make sure our companies get funded. We’re really good at helping them with capital introductions, which is important in the Midwest where these founders often don’t have a great network of venture capitalists. We pride ourselves in being best-in-class with helping run a fundraise process, get warm introductions and tap into our expansive network. You’re going to get oversubscribed, and you’ll get multiple term sheets with us.
The other thing we can do, because we have a big network, is to help our companies tap into talent, especially coming out of other startups. That’s been a tough nut to crack for companies based in the Midwest. There aren’t as many people who have worked at a fast growing venture-back startup before.
Q: Why are M25 and NVNG a good fit?
VG: The biggest category for us is enterprise and B2B software and if you look at who the customers of these companies are, they look a lot like NVNG’s corporate LPs. A lot of Wisconsin corporations are the prime target customer for our portfolio. So, I’m excited that we’re having opportunities to put potential customers and partnerships in front of our startups.
I also value the industry knowledge NVNG brings. They’ve been really strong with generating deal flow from Wisconsin that maybe we would or would not have seen yet. That’s important to me because I want to make sure that I’m seeing every deal in the Midwest. Now, there’s a lot going on and that’s kind of impossible so having somebody that’s really involved with us and rooting for us and knows what we like has been really helpful.
Q: What’s your take on Midwest venture ecosystem?
VG: When I first started, the landscape was relatively sparse. We didn’t have many local investors, especially in the earliest stages of startups. Even if there was a high-quality opportunity to invest in a great startup, it was challenging to secure funding for those rounds. This is why even a lesser-known firm at the time like M25 could access excellent opportunities.
Now, the landscape has evolved. It has become more competitive as we have seen the emergence of more local and regional firms. Additionally, there’s a greater willingness from investors on the coasts to invest in our region, something that didn’t exist before. They are now comfortable sitting on boards via Zoom and only occasionally visiting in person, maybe once a year, as opposed to the previous expectation of quarterly in-person visits, which was logistically challenging.
However, this increased competition has also pushed firms like ours to strive for continuous improvement. We want to secure our seat at the table and win opportunities to invest in the best companies, actively supporting their growth. So, the increased competitiveness is a positive development overall. It motivates us to be more proactive.
Q: What trends are you seeing in terms of deal flow or starts?
VG: In terms of what’s getting funded, I’ve been noticing a lot of activity in relatively traditional or legacy industries that are undergoing digital transformations. These industries are shifting away from practices we might now consider outdated, such as fax machines and paper records, and embracing digital solutions.
One example from our portfolio is a company, Waldo, in the Upper Peninsula of Michigan in which one of our major co-investors is TitletownTech from Green Bay. This company was started by a multi-generation lumberjack family. Historically the process of tracking, logistics and payments in the lumber and logging industry included a carbon-copy paper that would travel with the truckers to the sawmill, where everything needed to be accounted for. There are five stakeholders in this process: the landowner, the management company, the harvesting company, the specialty trucking company, and the sawmills.
They built an app which allows those involved in harvesting to take photos of the bill of lading for the truck, complete with geotags. This solution transformed the entire process, making it digital and enabling faster payment processing instead of waiting 30 to 60 days for checks to clear.
This is a trend we’re observing across various traditional or legacy industries.
Q: Thinking about the work that you all have done at M25 what are you most proud of passionate about?
VG: We have invested in winners in almost every city in this region so, at this point if you’re a founder in Madison or Omaha or Minneapolis and go to three or four founders in your market that have that have raised $20 million or $50 million, one of those founders will have been backed by M25. Those founders will tell you that you should pitch M25. That’s the flywheel that we hoped would happen and it’s happening.
And it’s not it’s not just me or my partner Mike. It’s the M25 team. We have an amazing team. Abhinaya, Leandro, Katie, Sam – they are the reason people know M25.