Minnesota firms pull in $500 million of venture capital in first half of year

Minnesota businesses raised nearly $500 million in venture capital the first half of 2021, a sizable jump from the $350 million raised at the same time last year.

But the state's companies raised $2 billion in the second half of 2020 and it will be difficult to match that level of investment this year.

"Last year set a record for VC financings, but we're seeing some larger financings this year, too," said Jeff Hinck, managing partner of Rally Ventures of suburban Minneapolis and Silicon Valley. "While the total [Minnesota] number might not top last year, it's still likely to be a large number."

U.S. firms already have raised $150 billion through June, compared with $164 billion in all of 2020, a record year for the industry, according to PitchBook and the National Venture Capital Association (NVCA).

Health care and med-tech continue to be favorites in Minnesota.

In the second quarter, 36 early-stage medical equipment and health care companies in Minnesota raised a total of $52 million, according to Medical Alley, the Golden Valley-based association that supports the state's medical device and health care industry. Of that capital, $30 million went to medical device companies, followed by digital health at $17 million, and biotechnology and pharmaceuticals at $2.4 million.

Twenty-four of the 36 companies raised less than $1 million. Among the companies raising funds last quarter was Minneapolis-based Foxo Technologies ($10 million), whose technology develops predictive models for researchers and insurers that can be applied toward lifespan and wellness analysis. Foxo has raised a total of $40 million.

The money will be used to purchase Memorial Life Insurance Co. of America, which will be renamed Foxo Life.

"We are harnessing these technologies to create proprietary, hyper-personalized epigenetic biomarkers of health and wellness that work synergistically with life insurance," said CEO Jon Sabes of Foxo. "Not only will our technology better predict lifespan, but it will help improve it as well."

Also in the second quarter, venture investors who invested in four Minnesota-based health care and medical equipment companies recently saw hefty returns on their investments. Bright Health and Agiliti raised $924 million and $368 million, respectively, following their listing on the New York Stock Exchange. CVRx and Miromatrix raised $126 million and $43 million, respectively, after listing on the Nasdaq.

Hinck said his company has done more deals in Minnesota over the last two years than since its start in 2012.

"VC-backed companies continue to be a driver of job growth in Minnesota and nationally, and talent is becoming more fluid with the rise of remote work," Hinck said. "We've also seen the [number] of out-of-town investors coming to Minnesota increase. We've seen this with larger financings, like Bright Health and Arctic Wolf, and with smaller rounds."

Bright Health, a Minneapolis insurer that recently went public, set the record in 2020 for the largest venture raise by a Minnesota company at $900 million.

Eden Prairie-based Arctic Wolf, which helps businesses guard against cyber threats, just closed on a $150 million round, on top of $200 million raised year.

To get the second-half tally going, 75F, a Bloomington company that uses software to cut energy consumption in commercial buildings, closed this month on a multi-investor inaugural round of $28 million in venture capital.

But the second-half total will have to compete with $2 billion figure that was shaped by Bright Health's huge deal last year. Also in the second half of last year, Revol Greens, an Owatonna indoor-farming operation, raised $204 million in venture money.

Revol Greens and 75F are in different industries but are all about using less energy, less water and generating less pollution to produce more indoor comfort and locally grown food.

The new wave of climate-related investors has accelerated thanks to the staggering rise in extreme weather disasters, an international push for net-zero emission targets and tech breakthroughs that can mitigate climate change.

So far in 2021, global investors have already closed as many climate-focused funds as were raised during the previous five years combined, according to PitchBook data. The flood of capital has led to a remarkable first half of the year for VC-backed climate tech companies, which have raised more than $14.2 billion worldwide — 88% of the total for all of 2020.