Before Adrian Fortino joined Mercury Fund, an early-stage venture firm investing in startups in the middle of the United States, he ran two Detroit-based seed funds.
One was technology-focused, targeting healthcare, transportation and industrial applications; the other was industry-agnostic, intended to help revive the economy of Southeast Michigan.
That dual experience taught Fortino that “it’s much more effective to be a thematic investor,” he says. “You drive a ton more value if you really know the sectors that you’re investing in and, equally important, know the people in the sectors. It’s impossible for you to have a deep network in every sector you invest in.”
At Mercury, where he leads the Midwest office in Ann Arbor, Michigan, “all of us have very specific investment themes.”
Fortino focuses on intelligent manufacturing, “software that enables better, faster, cheaper processes within the manufacturing supply chain.”
The firm was formerly known as DFJ Mercury, but rebranded in 2012 before raising $105 million for its third fund, which closed the following year.
Mercury now has a little more than $220 million in assets under management. And, with operations in five states, Fortino says the firm has “a geographic interest in that we’re focused on the mid-continent, even more specifically on what we call the commercialization gap within the middle country … the difference between the amount of R&D spent in a given region — from universities, corporates, etc. — and the venture capital available to build those companies.”
Fortino says Mercury has been active for a few years in the industrial Internet sector, which has been dominated by General Electric’s GE Digital offering. The company has hired hundreds in San Ramon, California, investing substantially to make itself a player in software. Siemens, too, is moving into digitalization, with its Digital Factory Division.
Fortino sees “the next significant wave of investment” coming as corporations “really build out their industrial automation and analytics tools.”
One such set of tools is offered by Sight Machine, a Mercury portfolio company that provides manufacturing analytics. Fortino, who sits on the company’s board, says that Sight Machine’s tech integrates datasets that are “completely disconnected” and can also help with “cleaning” data that’s “very dirty: It doesn’t correlate well.”
Giving a holistic picture of the manufacturing floor can improve operational quality by, for instance, reducing scrap. Another area of interest is edge computing: generating and exploiting information at logistical endpoints, like oil and gas rigs.
A mechanical engineer by training, Fortino had an interesting pre-VC career. He worked in the automotive industry as manager of power-train development for Ricardo, then co-founded three software companies.
One of these, Sidecar, was the first smartphone app to connect passengers and drivers outside the framework of taxis or hired cars, a model that was soon overtaken by market leaders Lyft and Uber.
Reflecting on the outcome of the rideshare wars (“a good, interesting battle” he calls it), Fortino says it came down to cash. Although Uber began as a black-car-hailing service, its head start in fundraising, and the “amount of money” it accrued, enabled it to execute the rideshare concept most effectively, delivering drivers to users “faster than anybody else.”
Fortino left San Francisco-based Sidecar at the end of 2012 to be with his family in Michigan, and the company was sold to General Motors in January of this year. But its short life provided a lesson for his work as a startup investor.
“Money raised is something that is a big deal to me,” Fortino says. “When I look at competition, companies that might have better technology, for example, than another company, but that company has raised significantly more money, or probably even more importantly has some large funds already behind it, that certainly comes into my mind.”
Action Item: For more info about the Mercury Fund, visit the firm’s website at http://mercuryfund.com/
Photo of Adrian Fortino courtesy of Mercury Fund