This spring, GREATER MSP joined several other U.S. regions in the Midwest House activation at SXSW. Entrepreneurs, investors, and creatives teamed up from spots like Michigan, Chicago, St. Louis, and Milwaukee to discuss trends across startup and innovation ecosystems.

Thousands visited Midwest House for panel discussions, meetups, concerts, and more. Leaders from several communities discussed the importance of building innovation hubs that center the unique people and assets already present across the Midwest, such as the auto industry of Detroit. (We “don’t need to be the next Silicon Valley,” was a popular refrain.)

Leaders across communities focused on efforts to build more inclusive models. Against that backdrop, three leaders from the Greater Minneapolis-Saint Paul region (MSP) brought forward their own idea – activating local foundations as key investors in the inclusive innovation hubs of tomorrow.

A pivotal role for local foundations

MSP is home to a vibrant network of philanthropic foundations. Through grantmaking, they are a key contributor to the MSP region’s nation-leading civic infrastructure, which includes extraordinarily high rates of volunteering, charitable giving, and voting.

However, in addition to their grant dollars to local non-profit organizations and individuals, there are many billions more in assets that these foundations also invest through their endowments. Relatively little of that money is invested for local economic impact. And while foundations are likely to invest in innovation-focused venture capital funds, those funds are typically located outside the Midwest.

The Saint Paul & Minnesota Foundation (SPMCF) Director of Community & Impact Investing Casey Shultz was one of leaders joining Midwest House. Casey is also the former Executive Director of MSP-based startup accelerator BETA and Twin Cities Startup Week. Casey described how her colleague Shannon O’Leary led SPMCF to a 100% socially responsible investment strategy. It included leading the integrated F.R. Bigelow Foundation to invest in venture capital funds that advanced a more inclusive, vibrant innovation economy in MSP. Doing so required fresh thinking.

“There have been several times when we’ve seen opportunities for investing in a way that aligns with our values, but a vehicle to make those investments doesn’t exist,” said Shultz. “We believe that an important role we play in the ecosystem is leveraging our resources to identify and foster talent and empower local leaders to create these vehicles in which we can invest.”

Danielle Steer is one of those local leaders. As Executive Director of Lunar Startups, an MSP-based accelerator supporting Black, Indigenous and People of Color (BIPOC), LGBTQ+, women, and non-binary entrepreneurs, Steer was attuned to these entrepreneurs’ challenges raising venture capital.

As O’Leary wrote in her newsletter, Steer could be in a promising position to make early-stage investment decisions. With critical foundation support, including a runway for effective investing mentorship and an eventual anchor investment from F.R. Bigelow Foundation, Steer announced the launch of Tundra Ventures at SXSW the previous year.

Since then, Tundra made 8 investments in startups such as SoleSafe, an innovative insurance technology firm tackling the sneaker market. Founder Phil Terrill joined Midwest House to describe how critical it is for BIPOC founders to “protect their cap table” and build trusting “two-way relationships” with prospective investors. “Diverse fund managers have a unique perspective in their local ecosystems,” Terrill said. “They have done the work to create trust and build relationship capital.”

Strength of emerging fund managers

Steer said this ability to build strong, trusted relationships with diverse founders gives funds like Tundra an “unfair advantage.” In fact, impact investing is “not concessionary investing,” according to Shultz. She shared with SXSW attendees how SPMCF is experiencing outsized, top tier rates of return across its portfolio with its socially responsible investment strategy.

An emerging fund like Tundra Ventures was also able to benefit from a vibrant venture capital (VC) community in MSP, where nearly 40 firms connect through Forge North.  “There is a pervasive notion that VC is entirely cutthroat,” Steer said. “While that might be true in some markets, we were welcomed by other VCs with open arms.”

Other relatively new MSP-based fund managers have received investment from local foundations, such as Bush Foundation investments in Black-led Brown Venture Group and first-check fund Groove Capital.

At Midwest House, Steer also described the unique value proposition of the regional MSP Equity Fund, a fund-of-funds led by gener8tor and GREATER MSP that provides corporations, foundations, and other institutions with an opportunity to invest in a diversified regional portfolio of VC fund managers.

Inspiring and connecting with other communities

Terrill and Shultz urged other communities to take and adapt this blueprint for foundations. “It’s dope what we have created here,” Terrill said. “These are tangible examples of impact investing at work.”

Shultz said SPMCF encourages other foundations “to foster and invest in emerging fund managers who will distribute venture capital to founders who have been historically underinvested.”

As follow up to this event, partners will bring this conversation to other forums across the country.

GREATER MSP is also working with Midwest House organizers on additional collaborations, including visiting other regional innovation ecosystems and extending an invitation to this fall’s Twin Cities Startup Week festival in September.

Casey Shultz (Saint Paul & Minnesota Community Foundation), Danielle Steer (Tundra Ventures), and Phil Terrill (SoleSafe) bring MSP innovation ecosystem to SXSW

Entrepreneur Phil Terrill of sneaker insurance startup SoleSafe highlights his signature First Avenue kicks at Midwest House

Danielle Steer announced Tundra Ventures at the 2022 SXSW festival and returned in 2023 to share the venture firm’s progress

Casey Shultz of Saint Paul & Minnesota Community Foundation urged other foundations to take their playbook for supporting and investing in diverse and emerging venture capital fund managers