Minneapolis-based VC shop Bread & Butter focuses on its own backyard

While many investors say sheltering in place has broadened their appetite for funding companies located outside major hubs, one firm is doubling down on backing startups in America’s heartland.

Launched in 2016 by Brett Brohl, The Syndicate Fund rebranded to Bread & Butter Ventures earlier this month (a reference to one of Minnesota’s many nicknames). Along with the rebrand, longtime Google executive and Revolution partner Mary Grove joined the team as a general partner and Stephanie Rich came aboard as head of platform.

The growth of the Twin Cities’ startup ecosystem is precisely why The Syndicate Fund rebranded. The firm, which has $10 million in assets under management, will invest in three of Minneapolis’ biggest strengths: agriculture and food, health care and enterprise software.

Agtech interest spans the entire spectrum from farming to restaurants and grocery stores. The firm is also interested in the “messy middle” of supply chain and logistics around food, said Brohl and is interested in a mix of software, hardware and biosciences. Within health care, the firm evaluates solutions focused on prevention versus treatment, female health startups working on maternal health and fertility and software focused on the aging population and millennials.

It’s also looking at enterprise software that can serve large businesses and scale efficiently.

Grove said Bread & Butter’s focus on local industries gives it an advantage over other firms: “Would you rather invest in an agtech company in Silicon Valley or in Minneapolis?”

A recent Crunchbase query validates Bread & Butter’s commitment on a size and focus front. Minneapolis startups raised nearly $1.6 billion in venture capital across 41 startups in the last 12 months. Bright Health, a health insurance service platform, raised the largest round in a $635 million financing led by NEA. Other deals were notched smaller, like plant-based food company Puris raising $100 million in two separate rounds and Yardbird raising $4.4 million for furniture made from recycled plastic that would have otherwise ended up in the ocean.

Bread & Butter’s move to stay close to home is a notable step considering the fact that many investors are flocking to different cities to ride out the pandemic. So far, Bread & Butter has written 42 checks into 30 portfolio companies, eight of which are based in Minnesota.

Expect that number to grow, even though Bread & Butter will continue to invest out of its home state. While the firm sometimes leads rounds, co-investing is a core part of its strategy. It partners with firms like Matchstick Ventures, True Ventures, Spero VC, Cross Culture VC and others.

Similar to many emerging startup markets, Minneapolis’s tech scene relies on collaboration; in fact, there’s a Techstars mafia brewing in the venture space. Another Twin Cities-focused firm, Matchstick Ventures, was co-founded by Natty Zola and Ryan Broshar, two former Techstars leaders. Similarly, all of Bread & Butter’s team has Techstars roots. Brohl is the managing director of Techstars’ Farm to Fork accelerator, Rich is an entrepreneur-in-residence in that accelerator and Grove serves on the foundation’s board.

Because Bread & Butter has to collaborate with local, national and global funds to close deals — and manages a relatively small pool of capital — the association is helpful.

This collaboration mirrors Grove’s own career path closely; she launched Google for Startups, which had a global focus, before moving to Revolution’s Rise of the Rest fund, which concentrates on investing in noncoastal cities.

Since the killing of George Floyd thrust Minneapolis onto the world stage, Bread & Butter has drafted a plan to invest in more Black founders, joining a chorus of other companies. The firm is publishing portfolio statistics inherited from The Syndicate Fund and plans to disclose this information on an annual basis — Matchstick Ventures is also committing to this transparency. (A majority of VCs do not publicly disclose their portfolio diversity data, which makes it hard to benchmark whether progress is being made.)

The firm is advising its portfolio companies to think about diversity from more than just a hiring perspective. How do you retain and compensate diverse talent? Who is on your board? Who is on your cap table? These are all ways to bring diversity systematically into a company’s culture and composition.

Leaning into The Syndicate Fund’s ban on closed-door, warm-intro-only investing, the team at Bread & Butter is now taking office hours and accepting cold emails.