Family-run firm to invest $50M annually via venture arm

The Heritage Group, a local family-run business holding company, on Thursday launched a corporate venture arm—HG Ventures—that company officials say will invest $50 million in companies annually.

Officials for Indianapolis-based THG said the fund will focus primarily on early and growth-stage opportunities but could also invest in companies at any stage of development. And while the investments will not be limited by geography, Heritage Group officials said they have a definite interest in investing in Hoosier companies.

“This is a major new initiative for The Heritage Group, designed to position the company for growth and alignment with THG’s operating units, customers and partners,” said Kip Frey, Heritage Group's executive vice president of new ventures.

THG, a privately held company controlled by the Fehsenfeld family, was founded in 1930 and has about 6,500 employees globally in its portfolio companies, with about half of those working in Indiana. The company has various holdings in environmental services and remediation, specialty chemicals and fuel products, and construction and materials.

THG has a stake in 31 companies, including Calumet Specialty Products, Heritage Environmental Services, Monument Chemical, Milestone Contractors and Asphalt Materials Inc.

The new venture arm, Frey said, was born out of the desire of CEO Fred Fehsenfeld and President Amy Schumacher to “invest in innovative institutions looking at opportunities through a different lens.”

“Our aspiration for the new venture arm is to bring THG’s spirit and experience, at scale, to a much broader range of early-stage companies and opportunities,” Schumacher said in a written statement.

HG Ventures will operate out of the New Ventures Group, THG’s newest division.

“Innovation has always been a big part of The Heritage Group’s culture,” Frey said. “We wanted to take some steps to institutionalize that entrepreneurial spirit.”

The venture fund is atypical in two aspects, Frey said.

First, THG isn’t aiming to raise funds from outside sources as many venture funds do. Frey said the money will “come from the balance sheet of The Heritage Group.”

And not only is there no targeted return, Frey said financial gains won't be the sole or even primary goal of the fund.

“We really look at calculating return not just in terms of dollars. We look at it in terms of furthering the entrepreneurial culture within The Heritage Group—and beyond,” Frey said.

Part of the mission includes investing in developing and innovative companies in Indiana and the Indianapolis area.

“Certainly we want to focus on areas where The Heritage Group has substantial subject matter expertise, and we’ll look globally in that regard,” Frey said. “We also want to look very carefully at a broader range of opportunities in Indianapolis and Indiana. We want to look at great companies within our community.”

There’s a “strong desire” within THG to build a strong sense of entrepreneurship and innovation within the state, Frey said. “The Heritage Group wants to be an important part of this area’s growth,” he added. “This is not just a large undertaking for The Heritage Group. The magnitude of resources we’re going to deploy will be meaningful for the region. This company wants to be a part of the growth and evolution of our neighborhood.”

That’s not to say significant returns aren’t expected. The company said the venture arm will have "the capacity to make game-changing investments that will position THG for future growth and business line expansion.”

“When we say game-changing, we’re talking about making substantial bets on exciting opportunities,” Frey told IBJ. “Yes, there are some inherent risks in that, but overall we expect substantial returns.”

In addition to capital, HG Ventures will provide portfolio companies with guidance, contacts and partnership opportunities, said THG officials.

Frey was hired in July in large part to oversee the fund. Prior to joining The Heritage Group, he worked at Duke University for more than 26 years in a variety of capacities. Most recently he served as vice provost for innovation and entrepreneurship.

Frey, who has an undergraduate degree from the University of Southern California and a law degree from Duke, also recently served as a trustee for the North Carolina Humanities Council.

Prior to working for Duke, Frey was a venture capitalist and CEO for several startup companies.