Democratic investors are starting to look past seed funding for startups and eye larger investments to spur firms’ growth.
On Wednesday, the progressive political angel network New Media Ventures unveiled the recipients of its latest $1.5 million round of seed funding for 17 companies and organizations operating in campaigns, advocacy, and civic engagement.
That announcement came just weeks after the Democratic startup incubator Higher Ground Labs revealed its latest round of investment. HGL is now planning to invest $6 million of a $10 million fund in “follow-on funding” in some of its portfolio companies over the next two years.
That move to help grow firms beyond the startup phase is something that NMV also is now eyeing.
“One of the things that we are aware of right now, there is a lot more early-stage seed funding in the [political] space,” Shannon Baker, director of partnerships at NMV, told C&E. “But as these companies and non-profits grow and really prove themselves and have an impact [there isn’t the same support].”
Baker said NMV, which has channeled some $50 million in investment to more than 70 startups since 2010, is now considering raising a larger round. “The growth capital space is something we’re keeping an eye on. Who are the people to write this million dollar check?”
In some cases, that check is coming from a larger firm. For instance, the Democratic digital shop ACRONYM in January acquired the Denver-based Shadow Inc. Although ACRONYM is a nonprofit organization, it is the primary investor in Shadow, a for-profit company formerly known as GroundBase.
(Previously, GroundBase received funding from HGL, which takes equity stakes in its portfolio companies.)
This week Shadow is unveiling its flagship product, a software meant to serve “as a universal adapter for political data and technology.”
Gerard Niemira, CEO of Shadow, said he expects to see more mergers and acquisitions after 2020 wraps.
“It’s boom and bust,” he said, noting that industry innovation has been happening around presidential campaigns.
“It’s really hard to maintain that cycle over cycle,” Niemira added. “I expect to see more consolidation.”
Meanwhile, NMV’s Baker said her group is looking to alleviate the boom-bust cycle of the industry.
“We were founded 10 years ago, by a group of angel investors inspired by what the Obama campaign had done with the internet,” she said. “We were seeing the boom and bust cycle, and a huge amount of innovation pouring into the field around presidential cycles and then everything disappearing — win or lose.”
NMV, which funds for-profits, non-profits, 501(c)(4)s and 527s, does have the potential to turn its grants into equity stakes, raising the possibility that its investors — or those behind HGL — could help provide the first large exit in the campaign industry.
“We want to build a more well resourced, nimble, progressive movement,” said Baker. “It lives and breaths every year, not just in election cycles.”