Private equity investor Jim Crook and four associates have launched an investment fund to inject $12.5 million into promising Vermont start-ups.
Announced this week, the Dudley Fund will focus on early-stage and mid-stage Vermont businesses that need an initial injection of around $50,000 to $150,000 to grow. The goal is to find and fund entrepreneurs who have demonstrated they can create jobs and inject money into the state’s economy.
“It’s for businesses that are going to create meaningful economic impact, that will create jobs here, pay taxes here, support other local businesses here, and generate wealth,” Crook said. “That’s our most important goal.”
In return for their investment, backers will get a small stake in the business – as long as it is successful. If she goes bankrupt, her money goes with it.
Crook spent 25 years as an executive at IDX Systems, the South Burlington company that was sold to GE Healthcare in 2006 for $1.2 billion. Since then, he has run a private equity firm called JH Capital which has invested in several Vermont businesses including DealerPolicy Insurance of Williston, Greensea Systems in Richmond and Beta Technologiesthe fast-growing electric aviation company based at Burlington International Airport.
Crook’s founding partners in the Dudley Fund – a separate venture – include his daughter, Allison Maino, who runs operations at JH Capital; executive director John Antonucci, former director of LaunchVT; financial consultant Cherian Philip, with whom Crook worked as an investor at Aspenti Health, a Burlington healthcare company that was sold last May; and Tom Moody, director of Downs Rachlin Martin and longtime associate of Crook.
In preparation for the Dudley Fund’s debut, the founders last year raised $250,000 from each of about 50 partners, all but two in Vermont. Another 25 people who are not investors will serve as mentors or advisors to the companies in which Dudley invests.
The group named the fund after Dudley Davis, who died in 2004 after six decades at Merchants Bank. He was also a big financial supporter of the University of Vermont, and his student center is named after him. Davis was a brave and visionary local lender, Antonucci said.
“Some of our most successful companies – IDX, Rhino food, Gardener’s supply and Twincraft Skincare — started thanks to Dudley,” Antonucci said of Davis. Michele Asch, vice president of Winooski-based Twincraft, is part of the Dudley Fund’s seven-person investment committee, which will make investment decisions.
It is more risky to invest in a fledgling business than in an established one. Meeting with other Burlington-area funders and business leaders last year, the Dudley Group learned that this was the type of funding the area needed most.
“In Vermont, there were start-ups where people who had great ideas couldn’t get them off the ground because they couldn’t get their first $100,000 of capital to get the ball rolling in the right direction. “, said Crook. The Dudley Fund will follow up with more money if the venture is successful, he said.
About 70% of the fund’s money will go to start-ups, Antonucci said, and the rest to more established companies. Board roles will rotate among the 75 people involved in the fund, he said. To begin with, Crook and Moody make up the board of directors.
Interest in private equity has grown around the world in recent years as people with money to invest have looked beyond the stock market and real estate. PitchBook, which tracks investment deals, said venture capital-backed U.S. companies raised $329.6 billion last year, nearly double the $166.6 billion raised in 2020, itself a record amount.
Chittenden County’s venture capital scene has also become more active over the past decade, with the development of entities such as the Vermont Center for Emerging Technologies and an increase in private investment deals involving people who have cashed in big sales like that of Dealer.com in 2013.
A relatively recent entrant to the Vermont investment market is Hula, a Burlington-based company that over the past three years has converted the former Blodgett Oven factory into a sprawling lakeside coworking space and launched a venture capital fund. Hula’s fund was an early investor in Beta Technologies, which raised $368 million last year.
Not only are the number of deals in Vermont growing, but so is the amount of money involved, said Cairn Cross, who co-founded Fresh Tracks Capital in Shelburne, a firm that has invested in 55 companies over the past 20 years. Cross, who works on his annual Vermont investment report, said companies in the state landed 31 venture capital deals worth a collective $100 million between 2010 and 2020. He said that the beta deal, and other smaller ones, had contributed to the quintuple year. -year-over-year increase in local investment dollars. The final tally of 2021 transactions is expected next month.
“It’s not just a flash in the pan,” Cross said last week. “Obviously, I’m a cheerleader from Vermont. The number of investments will continue to increase every year, I’m sure. The total dollar amount may not be as large, but the average dollar amount will increase.”
A global trend over the past decade has been mission-based or impact investing, where funds seek projects that contribute to environmental improvements or social benefits. The Dudley Fund considered this route but decided to focus on making money for its investors first, Crook said.
“It’s a personal view: the only way to solve these other really important issues is to create jobs,” Crook said. “The only way you can fund anything green, you name it, to solve thorny social issues, is to have a healthy economy, and Vermont has been lagging behind for a long time.”
The founders of the Dudley Fund expect to work closely with others doing similar work in Vermont. Janice St. Onge, president of the Flexible Capital Fund in Montpelier, said Vermont businesses often need to raise funds from multiple sources.
“It’s a good thing the Dudley Fund is coming in,” St. Onge said, noting that the Flexible Capital Fund doesn’t invest more than $400,000 in a single company. “If they raise a million, we need to work with other investors to help them.”
Crook and the other founders worked with Cross, Hula Founder Russ Scully and Hula CEO Rob Lair over the past year as they explored what kind of investment capital is most needed. The founders also spoke to people like Travis Fitzgerald, the CEO of DealerPolicy, who received both money and advice from Crook when it started in 2016.
Fitzgerald said money and business advice were essential in the company’s early years.
“If it weren’t for Jim and the luck he took on us early on, we wouldn’t be here and over 300 people wouldn’t have jobs,” he said.
Economic growth, particularly in the technology sector, has long been a goal of the city, state, and local business groups in Burlington. Now that this is starting to happen, there is a shortage of affordable housing. Workers and reasonably priced child care are also scarce.
While Crook said he’s confident creating more jobs will solve the region’s other problems, Scully and Lair are taking a more active approach. Scully hopes to build at least 300 homes in the city’s South Quarter, and Lair said Hula has been working with childcare groups to find solutions.
“We’re completely wasting our time if we don’t help solve the housing and childcare issue,” Lair said.
“It’s a fine line between being a backwater where nothing happens — where you can’t get interesting, challenging tech work — and being overbuilt in San Francisco,” he added.
Most of Vermont’s business growth is occurring in the northwestern part of the state. But investors are looking all over Vermont for opportunities. Lair said he works with a group of angel investors in Woodstock and with former state senator Matt Dunne, who invests in rural startups through his Center for Rural Innovation in the Washington region. Springfield. In 2020, Crook invested in For the Biome, a wellness business in Dummerston.
Crook acknowledged that Chittenden County both produces and attracts the lion’s share of Vermont’s economic power. It is the most populous county in the state and by far the fastest growing. It is also home to most of the big tech companies that create ideas and entrepreneurs like IDX did, like IBM, Agilent Technologies, Dealer.com and now Beta. But there are also startups in the rest of Vermont, and Crook is determined to spread the wealth, even though he knows it won’t be easy.
“We have investors outside of Chittenden County, so we’re listening to what’s going on,” he said.