Medicis of the Midwest, Part III
Third and final part of the series on funding a startup in Iowa
The final segment of this money in Iowa series looks at the world of venture capital, the seemingly endless source of funds that has transformed American technological, medical, social, and agricultural standing on the global stage. Though available venture capital in Iowa is miniscule compared with Silicon Valley, Boston Corridor and New York, it remains instrumental in growth of business ventures.
Iowa’s first VC, late John Pappajohn, established the first known venture capital fund in 1969, and set in motion decades of funding and innovation across the private and public sectors. His fund was followed by the Iowa Fund of Funds in the late 1990s, Des Moines-based Next Level Ventures in the early 2010s, Cedar Rapids-based ISA Ventures in mid 2010s, and subsequently the Ames-based Ag Startup Engine and Des Moines-based 2946 Ventures. Each of these formulated their individual investment theses, criteria and portfolio approach, all in-service of finding the most promising companies with a likelihood of scale and growth.
Definitions before history
We’ve encountered angel investors and public funding sources before in this series. Angel investors, again, are those individuals, families or small groups who invest their own funds in companies that resonate with their personal investment priorities. Angels must meet minimum income and net worth thresholds established by the SEC and have a relatively long time-horizon for returns. They don’t write large checks but, to maintain diversification, often invest in multiple companies to spread risk across 20 or more companies. They often reinvest any profits into additional companies.
We are also familiar now with public programs where economic development infuses the community with initial funding, tax incentives, and creative agreements to help companies grow their economic footprint, provide employment opportunities, and reinvest in their communities.
Complimenting both are entities collectively under the venture capital umbrella. Organized as a single corporation OR a set of related companies, venture firms generally comprise a Fund entity, one or more General Partners, and multiple Limited Partners. The Fund contains the money and invests in a portfolio of companies. General Partners provide the management oversight of the Fund, proposing investment decisions, remaining in compliance with state and federal requirements, taxes, and reporting. Limited Partners invest their money into the Fund.
The set of entities comprising venture capital are for-profit and most have a limited lifetime to make investments, help portfolio companies grow, help portfolio companies toward an exit event such as an acquisition or, in rare cases, an initial public offering.
Iowa’s First Venture Capital Fund
John Pappajohn’s background and career have been wonderfully told by the University of Iowa’s Advancement Office in their notable stories and the University of Iowa’s Tippie College’s remembrance. His beginnings in venture capital came when he was inspired by the story of another VC, Ned Heizer, in 1969. Ned, himself had transitioned from banking in launching Heizer Corporation. Inspired by Ned’s professional background with parallels to his own, John launched two organizations - Equity Dynamics and Pappajohn Capital Resources, the former a financial consulting firm and the latter a venture capital firm.
John’s initial $100,000 investment in the venture fund was deployed to a Des Moines-based lawn mower company. Although it wouldn’t produce venture-level returns (more later), it did set him on a path to subsequently invest in Kay Laboratories of San Diego and Caremark. Kay, holder of patents in hot/cold packs for hospitals and Caremark, a home health care company, would deliver returns exceeding normal venture returns and set the stage for decades of successes.
According to the aforementioned articles, John made investments in over 100 startups over his storied career, facilitated over 50 IPOs, and impact hundreds of additional entrepreneurs through his philanthropic John Pappajohn Entrepreneurial Centers (JPEC) initiative.
Venture Returns
Venture Capital is neither a bank loan nor philanthropy toward supporting entrepreneurs. It is a class of investing where the Limited Partners commit funds to invest in ventures that are seeking significant growth in a short period (5-7yrs), thereby inherently increasing the risk of success. Although most high-risk experiments fail and some barely return the original capital, a small percentage find outsized success. These small numbers of outsized successes, computed across a venture portfolio, are intended to produce returns in excess of the public markets.
Hidden in the last two sentences above is a mathematical complexity - if, for example, 7 out of 10 investments fail and 2 out of 10 barely return capital, the 1 that succeeds has the responsibility to return above market returns across ALL 10. You just don’t know which of the 10 is likely to succeed so you must pick all 10 for success. Just as every entrepreneurial venture cannot produce returns to lift 10 companies in our hypothetical portfolio, not every business is suited for venture capital.
Practically speaking, a small or midsized business, created to serve a community or region, providing a product or service is likely not suited for venture capital. However, a business with a path to millions of customers at a national or global scale is likely ripe for this class of risk capital.
If you’d like to dig deeper into this mathematical complexity and experience a bit of the science, art, magic, and math of VC, I strongly urge you to attend the upcoming Iowa Angel Investor Summit on Nov 17 and 18, 2025 or pick up a copy of Brad Feld’s seminal work in the book, Venture Deals.
Iowa-based Funds
I have attempted to curate a subset of funds located in Iowa today. As a list such as this cannot be exhaustive, I invite you to visit the Iowa Venture Capital Association for the latest in venture capital across Iowa.
Next Level Ventures
Next Level Ventures was born in early 2010s when Craig Ibsen researched the need and structure for an Iowa-first venture fund. He committed time and resources to explore tax incentives available to Iowa taxpayers, structured the fund, began friend and fund-raising and launched in May 2013. Since then, three funds have collectively deployed capital across nearly 50 Iowa companies. The fund has also launched a national investment fund, the Curql fund, whose limited partners are credit unions seeking innovation and growth in their specific sector. Their Iowa-focused fund III, managed now by Liz Keehner, is eligible for Iowa Seed Investor Tax Credits.
ManchesterStory
Iowa’s deep expertise in Insurance is an enviable position for a relatively small state. Admirably competing with global insurance markets in Hartford, CT, New York, and the home of insurance, London, the state was perfectly suited for a confluence of expertise and funding with the Global Insurance Accelerator in 2014, ManchesterStory Group in 2016, and BrokerTech Ventures in 2020.
ManchesterStory’s principals, Matt Kinley and Dave Miles hold deep expertise in insurance, financial services, and healthcare technology. They launched their firm to focus primarily on insurance and have made strategic investments in financial services and healthcare technology.
ISA Ventures, Ag Startup Engine, and 2946 Ventures
Relative newcomers to the state, the above three funds are approaching early stage investments in companies that exhibit signs of potential venture level returns. Observing these signs is an art and science accounting for the founding team’s mettle, trajectory of early revenue, product development, product efficacy with customers, the dynamic global markets, and competition.
ISA Ventures is a Cedar Rapids-based Iowa-focused fund operating under the guidance of Eric Engelmann whom you met in the Substack post about Geonetric, Inc. This fund is eligible for Iowa Seed Investor Tax Credits.
Ag Startup Engine is an Ames-based, nationally-focused fund seeking innovations in Ag with a potential outsized growth opportunity. It is operated by a team of ag-first entrepreneur investors, two of whom (Kevin Kimle and Mikayla Sullivan) publish with me on the Iowa Startup Collective.
2946 Venture Fund is the newest among the group, operated by me and JD Geneser and structured to invest in pre-revenue and early revenue Iowa companies and is also eligible for Iowa Seed Investor Tax Credits.
Innoventure Iowa
InnoventureIowa is a unique fund, separate from the above funds in that it is deploys public funds in following private investments. It is the state’s first publicly-funded venture capital fund, funded through a portion of the $96 million received in 2022 from the US Treasury as a part of the SSBCI funding in the wake of the COVID-19 pandemic. It is operated in concert with the Iowa Economic Development Authority and Bioconnect Iowa. These funds have have made a significant impact on funding availability across the state for Iowa-domiciled and operated companies.
Other Funds
There are numerous other funding sources that operate as part of professional organizations or associations and make investments in targeted theses. Even though I haven’t listed each such entity, their impact is immeasurable. The Iowa Farm Bureau Federation and its Renew Rural Iowa fund, the Ag Ventures Alliance, CMA Ventures, and Iowa Corn Opportunities are four such initiatives with a narrow but impactful focus. They are joined by regional funds such as Wisconsin-based ideafund and Chicago based m25 Ventures with a history of investing in Iowa companies.
The long-standing group of venture funds across Iowa or with Iowa-interests is now organized under the Iowa Venture Capital Association.
Beyond Iowa Borders
Startups are not limited by artificial boundaries established as state lines. They invent and innovate in garages, basements, coworking spaces, colleges, labs, farms, machine shops, warehouses and schools. A spark of innovation can birth a Google, a desire to create a directory of potential “mates” can birth Facebook, frustration with an employer can create the semiconductor industry, allegation of harassment can create Bumble, need for a hay baler can create Vermeer Corporation. Whatever the home for innovation, startups can and must go where they can grow the fastest, make the largest impact, and produce a return for the Limited Partners. In this particular area, therefore, venture-funded startups are different from those supported purely by public or angel funds.
Purely angel funded startups often have an affinity to the angels who invest in them and tend to remain close to those early supporters and mentors. Publicly-funded startups often have requirements to remain within the state boundaries or restrictions from moving without repayment.
Similarly, enterprising and rapidly growing startups in Iowa have accessed capital well beyond the state’s borders. Although a scarcity mindset may lament the lack of stateside capital that necessitated ex-Iowa resources, these resources have brought additional markets, connections, employees and growth prospects. Iowa startups from the last decade have expanded into the Middle East, Western Europe, UK and Silicon Valley. Some have relocated to those markets to continue growing while others have maintained a HQ in Iowa.
We have focused this three-part series on funding for early-stage, high-growth potential companies. The series isn’t exhaustive as it does not attempt to curate the various funding options for the engines of US economy - small businesses. The two types of business, their lifetimes, operating modes, growth focus, and employment patterns differ considerably and must be considered as two separate but complimentary parts of our economy.
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