Allos Ventures captures $52m for Midwestern tech companies

The firm targeted $50mn to $75mn for its third vehicle.

Allos Ventures raised its largest fund yet to invest in tech in the Hoosier State and broader Midwest.

The Indianapolis venture firm secured $52 million for Allos III, it announced today. Allos plans to use the capital to continue its strategy of backing early-stage tech and tech-enabled B2B companies in the Midwest.

The firm focuses on Series A and B deals, but it will invest 5 percent of this current vehicle into seed rounds, said David Kerr, a managing director at Allos. He noted that the firm would look to build an investor syndicate and follow-on with those seed-stage companies.

“We would like to help nurture and grow the company,” he said. “Somewhere in the next 12 to 24 months we would like to see them in a position to raise a Series A.”

The firm invests generally in technology, but Kerr said there are opportunities in such sectors as cybersecurity, healthtech and insurance tech.

The firm has already made eight investments out of Fund III, which is between 15 percent and 20 percent deployed.

The firm participated in a $7 million Series A round for 120WaterAudit, an Indiana water quality program software company, in September. The round was led by HB Ventures and Greenhouse Capital also participated.

In March, the firm participated in a $15 million growth round for Sharpen Technologies. The Indianapolis cloud-based customer service platform also raised funding from Cultivation Capital, Elevate Ventures, and Juniper Peak, among others.

“We are excited about the deal flow that we are seeing and the kinds of companies that are getting started,” Kerr said. “We are casting our net wide and looking at markets that are often times overlooked.”

Kerr said that there are a lot of great benefits that the Midwestern market offers, such as the lower costs of living and starting a business, as well as a rich network of universities.

He added that more than half of the Fortune 500 companies are based in the Midwest, which gives local tech companies great access to proof of concept customers or corporate collaboration.

“There are a lot of laggard industries that are rather rapidly, or slowly, going through a digital transformation. A lot of them are in the Midwest,” Kerr said. “We are always in the lookout for companies that are uniquely founded or a technology that seems to make a big step forward not just an incremental step.”

Fund III secured capital from more than 65 investors according to an SEC filing. These investors included high-net-worth individuals and foundations, among others. Next Level Indiana Fund and Indiana University Foundation both contributed.

Fund II closed in 2013 with $41 million of capital commitments. Fund I closed in 2010 with $11 million of capital.

Allos was founded in 2010 by Don Aquilano and John McIlwraith. The firm has since won multiple awards for its investing in Indiana and was named the most active investor in the state by CB Insights in 2019.