Seedfunders is launching the Catalyst Fund, a $5 million fund that will co-invest in deals with the St. Petersburg-based investment group.
The new fund is a signal that the Tampa Bay technology ecosystem continues to mature. As additional local financing alternatives become available, more startups can create high-skill, high-wage jobs that are needed for a competitive economy.
Seedfunders, with 22 partners, has invested in six companies since it was launched in late 2017. The Catalyst Fund gives Seedfunders investment options, said David Chitester, CEO.
“It gives us more dry powder to invest. We can look at larger deals. We can look at follow-on investing which we haven’t done yet. We can also look at participating in syndication deals led by others that we haven’t done yet either,” Chitester said.
In every deal Seedfunders does, the Catalyst Fund will provide 60 percent of the total funding. The remaining 40 percent will come from Seedfunders partners and the group’s accredited investors list.
The average deal size for Seedfunders is $300,000. At that size, the Catalyst Fund will have enough capital to fund 25 deals.
Seedfunders has a five-stage vetting process. Only one out of 150 prospects makes it through the process, Chitester said.
It also has a well-established investment criteria.
“We are looking for pre-revenue or early-revenue technology companies. We want to be the first professional investors on board. We join the board of directors of the companies we invest in and we help them get to the next level of higher funding,” Chitester said.
That hands-on approach makes the Catalyst Fund special, said Joe Hamilton, a Seedfunders partner, co-founder of St. Petersburg Group and St. Pete Catalyst publisher. Hamilton will be Catalyst Fund director and responsible for marketing the fund.
“A key differentiator in funds, what makes a fund successful now, is getting to those great opportunities, the great prospects, first. There’s a lot of competition for that. Leveraging our marketing capabilities and the communications network we have will give us a chance to get out there and attract the best companies first,” Hamilton said.
Hamilton also will manage administrative aspects of the fund and relationships with investors.
In 2013, when Chitester started Florida Funders in Tampa, there were few local investors interested in technology firms. People with money focused primarily on real estate and hospitality. Some startups left the area to move closer to financial backers.
Investor education has changed that. It’s also made funding more competitive.
“There’s more money looking for companies than there are companies looking for money,” Hamilton said.
Because Seedfunders partners bring education, expertise, mentoring and a broad network, the Catalyst Fund stands out, Hamilton said.
“Seed companies are the highest risk companies,” he said. “We are mitigating that risk by putting our own money in with the fund and our time and networks as well, which minimizes the risk in a way that really hasn’t been available before.”
The Catalyst Fund is only open to accredited investors, people who are financially sophisticated, have $1 million in net worth and can deal with securities not registered with financial authorities. The minimum investment in the fund is $50,000.
The fund will launch at an accredited investor-only event April 17 at One St. Petersburg. Register here.