With a focus on early-stage software companies, a new Southeast Michigan investment fund brings together two brothers, each with years of experience in venture capital and entrepreneurial ventures.
Josh Linkner, who co-founded Detroit Venture Partners with Dan Gilbert and Brian Hermelin in 2010 before stepping down as CEO in 2014 to pursue a career as an author, is getting back into the early-stage investing game.
Linkner, 51, along with his younger brother Ethan Linkner, is in the process of raising $40 million and earlier this month officially opened Muditā Venture Partners. The Bingham Farms-based venture capital fund aims to focus on four areas: the future of learning, the future of work, the future of sustainability and the future of safety, Josh Linkner said . He said the brothers have considerable expertise in these areas.
“We just see an opportunity to not only make money, but also create impact,” Josh Linkner told Crain’s in an interview, saying the fund plans to be intentional about the types of investments it makes. he will continue.
“Like I don’t care how good the technology is in new fry technology that helps obese kids get more obese. The answer would be ‘no,'” Linkner said. “We only invest in opportunities that we believe can have a positive impact on the world and deliver strong economic returns.”
Prior to leading DVP, Linkner founded Pleasant Ridge-based online promotions company ePrize LLC, which was acquired by a private equity firm in 2012. Linkner was honored with Crain’s 40 under 40 in 2003 .
Ethan Linkner, 38, was co-founder of Chicago-based enterprise training software company LearnCore, which made a $50 million exit in 2018. Since then, he has served on the boards of a handful of startups and recently moved his family to Ann Arbor.
Of the fledgling fund’s investment strategy, Ethan Linkner said it was an opportunity for investors to “vote with their dollars”.
The name of the fund, “Muditā” (Moo-deet-ah) is a Sanskrit word meaning “to derive joy and sense of success from others”, according to the Linkner brothers. So far, the fund has made two portfolio investments, both in Chicago-area companies where Ethan Linkner previously served on the board.
While early investments have been familiar businesses in Chicago, Josh Linkner said the fund will have a broader geographic reach over time, with a particular focus on markets such as Michigan and other regions, largely in beyond the coast.
Investments, he said, will mainly fall into three categories: pre-revenue businesses; those who are just starting to generate sales but before a Series A fundraising; and “opportunistic” investments in companies that Josh Linkner called companies that are not “broken”, but which may need “some operational adjustments”.
Linkner particularly pointed to the first bucket, saying these pre-revenue companies will be part of the fund’s “venture studio” model, an emerging trend in which venture capital firms launch start-ups themselves, instead of seek agreements.
The emergence of Muditā Ventures comes at one of the most turbulent times on record for the venture capital industry.
“Deal, exit and venture fundraising values all broke records in 2021 with eye-popping amounts,” says a January press release from industry trade publication PitchBook and the National. Venture Capital Association, an industry group based in Washington, DC.
Last year, the US venture capital industry invested a total of $329.9 billion in 17,000 deals, and venture capital funds raised an “unprecedented” $128.3 billion “according to the joint quarterly report of the two organizations.
“By all metrics, 2021 has been a banner year for the U.S. venture capital ecosystem,” John Gabbert, Founder and CEO of PitchBook, said in a statement. “A good portion of the new investment records can be attributed to record levels of capital washing through the system. venture capital transactions With returns from venture capital outpacing all other private capital asset classes, we expect LPs to continue to allocate capital to venture capital at unprecedented rates in the course of the coming year.”
The strategy Muditā is seeking to adopt, by intervening early, will allow the fund to avoid some of the likely downsides when the venture capital climate changes, Josh Linkner said.
“In other words, we think valuations have gone crazy. We’re not going to overpay,” he said. “We like this notion of the middle ground, like post-income. Companies that have proven they can actually get a customer and fill a real need. But they haven’t hit a growth spurt yet, we so let’s become the first institutional investor. (That way) we don’t overpay for equity.”