We’re thrilled to announce the start of the second cohort of Flywheel Fund, our member-managed capital fund for early-stage and high-potential startups. Flywheel Fund I launched in the summer of 2020. The first cohort of 11 members planned to make four investments of $25,000 in a year. By January 2021, the fund had exceeded expectations, investing $120,000 across five companies in less than six months. The second cohort has quadrupled membership to 50 investors and grown the investment fund to $640,000—an increase of over 500%.
We’re seeing a lot of excitement around the opportunities in Indiana right now. When we launched Flywheel, we knew promising startups existed here. With critical investment at the right time, the opportunities for innovation and investment can increase exponentially. In five years, the startup and investment landscape in southern Indiana in particular is going to look very different. The snowball is starting to roll.
Flywheel Fund II plans to make six to eight investments of about $50,000 each, double the investment from Fund I. One-third of the fund is reserved for follow-on investments of $50,000 to $150,000 in Fund I’s five companies (Boost, Civic Champs, FloWaste, Qualifi, and Stagetime), as merited by their progress, terms, and opportunity.
Flywheel Fund aims to grow not only the pool of startup funding in the region, but also the pool of experienced investors. Many of Flywheel’s members are first-time investors, East said. The Mill educates them on how the investment process works, what to look for in a pitch, and what to expect in terms of return. About 80% of the members and total dollars in our second fund are from Bloomington, but we’ve also got members from Indianapolis, South Bend, and across the state. Two-thirds of the investors have contributed $10,000 to Flywheel Fund II; about 30% of members have contributed $20,000.
As a member-managed fund, Flywheel forms a separate LLC for each investment. We seek early-stage and high-potential companies with an Indiana connection, with our thumb on the scale for Bloomington. Flywheel reserves a minimum of 13% of its funds for Black founding teams and awarded 20% in its first cohort.
Our Executive Director Pat East, who is himself a founder of Hanapin Marketing and an experienced angel investor, sources startups for the fund and mentors founding teams after investment. In March, we brought on Brian Hatton part-time to help manage the fund’s rapid growth. His four years of VC experience at the UK firm QVentures are an incredible asset to our fund, and we feel very fortunate to have him on the team (he’s also a Flywheel investor). Brian will oversee startup screening and due diligence.
In addition to Brian, Flywheel has added three Kelley School of Business interns to the team. “Intern” really doesn’t do justice to their experience and skills. Justuss Boice, Will King, and Angela Smith developed investment and analytical experiences at Mirro Center for Research and Innovation, Cain Brothers, and Parallax Advanced Research, respectively. Big thanks to Samantha Ginther at IU Ventures for connecting us to such amazing interns.
Flywheel Fund II will hear its first startup pitch in early April. We can’t wait to tell you about the exciting startups we’ll fund in this cohort!