Investment fund for South Dakota, regional startups aims to address ‘missed opportunity’ for equity

Investment fund for South Dakota, regional startups aims to address ‘missed opportunity’ for equity

Jan. 6, 2025

This paid piece is sponsored by South Dakota Biotech.

A new fund that aims to support promising early-stage and emerging businesses in South Dakota is starting to make its first investments.

Founding partners Dave Bockorny and Mark Stowers launched South Dakota First Capital in October 2024.

The two met years ago when both had roles helping to grow POET and have collaborated on a number of issues facing the biofuels industry.

“Both Mark and Dave have played key roles in the biotech industry and for South Dakota Biotech as an association over the years,” said Joni Ekstrum, executive director of South Dakota Biotech.

“Dave has been a strong adviser in our government relations efforts, and Mark currently serves as our board chair and has brought forward a number of exciting initiatives. Their work on South Dakota First Capital is a meaningful opportunity to support our homegrown biotech companies and introduce our state to promising regional startups.”

Dave Bockorny and Mark Stowers

South Dakota First Capital plans to invest at pre-seed through Series A levels, with priority given to companies based in South Dakota and surrounding states. Funding will be available to a wide range of companies, both business-to-consumer and businesses-to-business, including software, medical devices, food tech, ag tech, animal tech, energy, mining tech, manufacturing tech, government tech, supply chain, logistics and cybersecurity.

We sat down with the founders to learn more about their venture and how it can support South Dakota entrepreneurs.

What made you decide to launch South Dakota First Capital?

Mark Stowers

When we look at South Dakota and the Upper Midwest, we see 7 percent of U.S. GDP getting less than 1 percent of the investment being made in early-stage and emerging companies, so it’s clearly a missed opportunity. Plus, Dave and I share a passion for South Dakota and found that we were aligned on key principles. First, we could leverage our respective global and national experience in business operations, corporate financing and strategic advising to nurture new and emerging businesses. Second, we could, through South Dakota First Capital, provide the missing capital that the talent produced by our universities could use to stay in our state as they launch and build their careers in biotech and advanced technology.

Dave Bockorny

I had done a lot of personal investing but never have brought a group together to raise money and invest in  for South Dakota’s entrepreneurs and emerging businesses. Business leaders and visionaries have helped change the landscape of innovation in the state. We really see the potential to build on that leadership and to continue to catalyze innovation in businesses and create job opportunities. We also see the potential to bring new business to South Dakota and to invest in our region, which has been underrepresented in the venture capital world.

How have the early months gone as you’ve launched the fund?

DB: We worked on developing this for more than a year. With Mark’s background at the C-suite level focused on operations, corporate finance, research, marketing and sales from Fortune 100 companies to startups, we were able to create a new offering for startups and emerging companies across South Dakota and the Upper Midwest needing capital. We named the first fund South Dakota Impact Fund No. 1, with the emphasis on impact. Mark has put together an incredible team, a top-flight due diligence process and a detailed financial model, which have allowed us to make portfolio investments to begin to fulfill our mission of making an impact. Since October, we have evaluated over 100 companies for potential investment. Only a few select great opportunities pass through our process.

MS: Dave has been the champion of working with the investor community, having a network of folks to reach out to, which was very important. Fundraising isn’t the easiest thing, even with a great product. We have enough runway to make our first  investments, maybe up to four additional ones in 2025, so we’re on the path to creating opportunities here.

DB: It’s amazing the number of people who stepped up and said, “I believe in what you guys are doing, I trust you, you have a good track record, and I’m in.”

What kind of companies have you invested in already, and what kind of companies are you looking to invest in?

MS: The two so far are StringTree, which is based in Sioux Falls and is a curated, high-end online musical instrument auction platform, and Roy, a Minnesota-based sports tech company that is innovating in the NIL, or name, image and likeness space. As we look at biotech companies, we’re keenly interested in medical devices, in particular ones ready for regulatory submission. We’re probably not the best fit for biotherapeutics or products that have complicated regulatory pathways or long product development pipelines. Our overriding focus in our investments is the return to our limited partners, which means we need to look potential portfolio investments with a winning combination of clever management, crisp value propositions, large and growing markets and potential to meet our investment criteria focused on a  four-to-six-year return to investors.

DB: We really like companies that draw on data analytics, the application of AI and machine learning – and also linking those to devices, whether it’s ag tech or med tech or supply chain. These are great fits for us based on our background and experience.

As you assess the universe of potential investable companies, what are your takeaways? What has it shown you about the entrepreneurial landscape in South Dakota?

MS: First, we have a pretty high criteria. We need high-growth companies that have really good management, a good execution plan and those that allow us to easily evaluate their operations. That sounds kind of obvious, but many companies aren’t well prepared to go after venture capital. Of the 100 companies that we have evaluated, I would say 80 percent are from South Dakota, and I think we’re continuing to consider about a dozen of them. We’ve seen some ag tech, some medical devices. We had one really interesting company in the biotech space we had to pass on for now because it didn’t look like the market was big enough, but we’re still able to connect these founders with other resources in the state to support their growth. We have another where we really like the product, but they’re not ready yet, so we’re going to take a heavy hand in helping them because it could be a real game-changer for South Dakota. This is where Dave and I can add value given our wealth of experience across multiple industries in strategic and/or operating roles. We have a large “Rolodex” of contacts to help de-risk their business and to make those strategic connections to facilitate problem-solving to product launch.

DB: We also see a lot of potential for working with businesses that have an element of involvement with the federal government given our own relationships and the unprecedented leadership roles our South Dakota elected officials are playing in Washington, D.C. From a political standpoint, we stand out and are no longer a flyover state.

How involved do you plan to become with your funded companies?

MS: Given the level of investment we’re making, we’ve asked for board positions or to be board observers. In one situation, I have a monthly meeting with the CEO to review everything from supply chain to the marketing plan to revenue capture. We also have a desk at Startup Sioux Falls and are officing there because we want to be part of the innovation ecosystem. We’ll take just about every meeting request – at least a first pass.

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