High Alpha secures more than $100 million for two new funds

Indianapolis-based "venture studio" High Alpha on Monday announced plans to take operations to the next level by adding two funds worth more than $100 million and two new investors with national reputations.

High Alpha said it secured $85 million for its High Alpha Capital II, a seed and Series A venture fund, and $16.65 million for its High Alpha Studio II, an enterprise-startup studio focusing on software-as-a-service companies.

The more than $100 million raised is almost triple what High Alpha raised in its first fundraising effort in 2015.

“We are doubling-down on our initial vision and making sizable investments in design, engineering, data science and corporate innovation resources,” said Scott Dorsey, managing partner of High Alpha, which facilitates entrepreneurship by launching companies and raising venture capital to help fund them.

High Alpha companies include Sigstr, Zylo, Lessonly and Doxly.

High Alpha officials said they are especially excited that San Francisco-based Emergence Capital and Boulder, Colorado-based Foundry Group have chosen to invest in High Alpha Studio II, and that Gordon Ritter, founder and general partner of Emergence Capital, and Brad Feld, partner at Foundry Group, have become the first two outside board members in High Alpha.

Feld and Ritter join the four High Alpha founders and partners—Dorsey, Kristian Andersen, Eric Tobias and Mike Fitzgerald—on the six-person board.

“It would be hard to overstate the magnitude of the validation of the involvement of those two entities," said Andersen, speaking of Emergence Capital and Foundry Group. "These are two of the most pedigreed venture funds in the United States. We think it’s very remarkable that these two [organizations] invested with us and that these two men joined our board. In investment circles, we think that’s going to be national news.”

Emergence Capital was an early investor in cloud luminaries Salesforce, Box and Veeva Systems. Foundry’s Feld is a high-profile investor with a popular blog—Feld Thoughts—and various articles and books to his credit.

While Emergence Capital was an investor in High Alpha I three years ago, Foundry Group is new to the venture.

“With the success of ExactTarget and Salesforce, Indianapolis has emerged as one of the most promising tech ecosystems globally,” Feld, author of the books "Venture Deals: Be Smarter Than Your Lawyer" and "Startup Communities: Building an Entrepreneurial Ecosystem in Your City,” said in a written statement.

“We believe the venture studio model will drive the next generation of tech entrepreneurship, and we are excited to be partnering with the High Alpha team to bring this vision to life.”

While High Alpha Studio II will focus primarily on central Indiana startups, High Alpha Capital II will be more nationwide and focus on tech companies a bit further along in their development.

The High Alpha Capital II fund was primarily funded by large institutional investors, including the Next Level Fund, a state-backed venture fund established last July.

High Alpha launched in 2015 with High Alpha Capital I, which raised $21 million for investments, and High Alpha Studio I, which totaled $15 million. Some of the money generated in the studio fund goes to cover expenses for the 25-person High Alpha staff.

The vast majority of the money from Capital I and Studio I has been spent or earmarked, including funding for two unnamed startups under the High Alpha umbrella and for other companies in which High Alpha previously invested.

Andersen declined to discuss the two High Alpha Studio companies still in stealth mode. Those firms will bring the total companies launched by High Alpha Studio I to 11.

High Alpha’s success with its first round of funding, Andersen said, led to the larger second round.

“We have a proven track record now. We’ve raised the bar,” he told IBJ.

Andersen said High Alpha’s location in central Indiana has helped the company and its startups.

“A lot of locations can offer an affordable cost of living and doing business,” Andersen said. “But Indianapolis exists at the intersection of a favorable cost of doing business, an abundance of talent and a very supportive government. And where those three intersect, the air is very thin.

“Our investors like our tight focus and feel launching and scaling those companies in Indianapolis is a big advantage,” he said.

High Alpha will continue to focus primarily on enterprise cloud technology and business-to-business software-as-a-service companies, Andersen said. “It’s kind of a Warren Buffett thing. Invest in what you know.”

Because High Alpha Capital II is much larger than the first iteration, investments in individual companies will be larger, Andersen said. High Alpha Capital I typically invested $250,000 to $1 million per enterprise. Capital II’s investments will be from $750,000 to $2 million, he said.

Andersen expects Studio II to invest in eight to 10 startups.

High Alpha last week completed what it calls a “sprint week,” an intensive week of vetting ideas and proposals. Andersen expects one or two of those proposals to become the first piece or pieces of High Alpha Studio II. 

While much of High Alpha’s focus will remain the same, there is one change in the second phase. 

"We think there’s a huge opportunity to partner with big companies,” Andersen said. “We’re going to ask big companies what their biggest problems are, and look to build companies to fit specific needs of big companies. We’re flipping the paradigm.”

Andersen said High Alpha officials see many more opportunities ahead.

“We think this is just the beginning,” he said. “There’s a lot more left to be done."