New $10M rolling fund + the company behind it & more!
July 29, 2021
A CHAT WITH AN INNOVATOR
Comeback Capital's new $10M rolling fund
Scott Shane, managing director, Comeback Capital
Last month, Comeback Capital announced the appointment of two general partners and the launch a $10 million rolling fund. The VC firm, with a group of coastal and local LPs, focuses on providing early stage funding to startups in the U.S. heartland. Flyover Future spoke with Scott Shane, the managing director of Comeback Capital about their efforts.
Tell us the origin story behind Comeback Capital.
Shane: In early 2018, a group of top coastal investors — from Bloomberg Beta, Founders Fund, General Catalyst, GGV Capital and Softbank Corp. — took a bus tour through the Midwest with Congressman Ro Khanna from Silicon Valley and Congressman Tim Ryan from the Akron-Youngstown, Ohio area. They were looking for ways to invest in the heartland. They visited places like Pittsburgh, Cleveland, Columbus, Flint and Detroit; known as “comeback cities.” For example, in the 1920s Cleveland was one of the wealthiest cities in the U.S. Then there were declines, but things are coming back with new generations of technology.
I met them in Youngstown. I had been a high-volume angel investor for a while. I talked to them and I convinced them that I had a model for investing in the Midwest. The model was to connect two groups of limited partners — the coastal investors from these bigger funds who are basically looking for a scout fund and the people within the heartland who are looking for deal flow outside of their local area.
Those two groups of people invest in comeback capital into our fund. Then we deploy money into the companies where limited partners have the opportunity to sidecar and invest alongside us in the companies at the stage we're investing. They can also follow on an investable later.
How did your first fund go?
Shane: We did a very small demo fund — $2.25 million — which we finished deploying in late May of 2021. We deployed that demo fund into 27 companies. It had quite a good record. Our markup on invested capital is around 1.91 percent, and 13 of the 27 companies had markets in the last two months. We just launched our rolling fund to continue investing.
What we're finding is the companies that do really well are the ones that have developed some front-facing or investor relationships in the places where there's a lot of capital, like New York or San Francisco. However, they are smart enough to know that customer success and back-office operations are probably better suited for places like Columbus and Kansas City. That's where the labor force is really good, but the cost of living is less. I always use this example: 'Do you really want your customer support people to be stressed out, living in New York City and not being paid enough [to cover] the cost of living there? Or, do you want them sitting in Kansas City, where they're kind of laid back and talking to your customers in a more relaxed way?’
“Do you really want your customer support people to be stressed out, living in New York City and not being paid enough [to cover] the cost of living there?"
— Scott Shane, Comeback Capital
How do you find the companies you want to invest in?
Shane: We find them lots of different ways. We’re involved with a lot of accelerators. We see a lot of Techstars and Gener8tor companies.
The second source is just market activities. I’m also a professor of entrepreneurship at Case Western Reserve University, so I see a lot of early ventures started by students in different universities.
There’s also word of mouth. A founder in Milwaukee is likely to know of other startups in Milwaukee, and they’ll refer them to us. Our LPs are all active investors and will refer companies, too.
You recently added new general partners.
Shane: It’s a little bit of a change in involvement. Phil Hagerman and Patrick McKenna were limited partners before. Now, they are going to not just devote capital to the effort but also the time. [Patrick McKenna, co-founder/executive chairman of Facet Wealth and Phil Hagerman, CEO of Forum Health, will help the firm capitalize on the bounty of talent and entrepreneurship in emerging tech hubs beyond the Midwest.]
Money is a commodity. The value comes from the money being associated with people who know what they're doing.
Share this story!
FEATURED TECH EVENT
With TALK Louisville and TechFest
Techfest is coming up soon in Louisville!
TALK, the Technology Association of Louisville KY, gears up on Aug. 26-27th for its 5th biennial, live, two-day event called Techfest Louisville which draws tech and business professionals looking to learn more about tech trends, tech policy, entrepreneurial breakthroughs, and how new technologies work. TALK has now been an active tech council since 2014 in the Louisville, KY area, with activities at the state and national level including participating with the CyberReadiness Institute, CompTIA, Connected Nation, Cyber.org, Teachcyber.org, and Code.org.
About the event
Sessions throughout the day will include
Sessions will be concurrent. The first two keynotes on Day 1 include a new entrepreneurial startup envisioned by a former Louisvillian Mike Slone in the wine and spirits industry called SimpleLabs-- 1 PM, Aug 26th. “Re-Inventing the Wine and Spirits Industry: A Look at A Simple Labs Startup”—Speaker: Mike Slone, Founder & CEO, Simple Labs; and a deep dive into 5G via a Verizon expert-- 1 PM Session Title: “Mobile Access & 5G” Speaker: Arvin Singh, Managing Director of Verizon 5G & Edge innovation, Verizon.
About the organizers
TALK’s primary mission is workforce and economic development. Techfest Louisville draws 200 people from the region and all-access passes will include two networking and luncheons, a Day 1 cocktail hour, and a mini-tradeshow, over 15 booths to determine where your company needs to engage with technology on the market today. The event is also a chance to get your sneak peek of a brand new venue, Noble Funk Brew Co., 922 S. Second Street, in Louisville.
Supporting players of Techfest include Norton Healthcare, Mirazon, Aspectx, LAL Computing, Marwood Veneer, Cloud Nexus, Volta, V-Soft Consulting, Rapid Scale, Amplify Louisville, Baird, Advanced Business Solutions, Spectrum, Verizon, and Frost, Brown & Todd.
Share this story!
Purdue earned 175 U.S. utility patents on one year
WEST LAFAYETTE, IN—Purdue University earned 175 U.S. utility patents in 2020, the most among all Big Ten universities. The Purdue Research Foundation is the home of the school’s Office of Technology Commercialization, which manages the licensing, patents and technology transfers for innovations created by university researchers.
New robotic arm for manufacturing
PITTSBURGH, PA—RE2 Robotics released its newest robotic arm for manufacturing, the RE2 Sapien 6M. The company says the newly designed robotic arm is different from others in that it is designed to work in harsh conditions and in mobile platforms.
Columbus most friendly to remote jobs
COLUMBUS, OH—When Telstra Ventures analyzed 37,000 jobs posted between April 1 and June 30, 2021, Columbus came out on top as being the friendliest to fully remote positions. It was followed by San Diego, Phoenix, St. Louis. and San Francisco.
Hoosier tech companies attract $400M
INDIANAPOLIS, IN—Hoosier tech companies have attracted more than $400 million in fresh investment in their operations, just halfway into the year. This TechPoint article looks at some of the most prominent gains by the city.
Visualization tech for trucking and logistics sector
GREEN BAY, WI—A trucking and logistics service provider plans to build an innovation center to study collaboration and visualization tech. Schneider’s 20,000 square-foot building will let employees leverage AI, machine learning and automation to drive forward new business processes.
Share these stories!
FUELING THE FUTURE
What is fueling Flyover Country innovation? In this weekly feature, we share a variety of announcements covering funding, acquisitions, exits, grants and everything in between. Got something to celebrate? Click here to share your story.
Share these stories!
NAME THAT FLYOVER CITY!
It's time for our favorite trivia game!
Here are the questions:
Share stories, offer suggestions, or send comments!