$300M+ invested in MD startups, Grotech Ventures raises new fund

Mid-Atlantic investment firm Grotech Ventures closed a fund worth $225 million, its eighth, this month. The size of that raise has bucked a slower funding trend nationwide.
But the timing isn’t quite as consequential as is the potential effect: in Maryland, Grotech has invested more than $300 million of its money in nearly 30 startups, among them Advertising.com (acquired by AOL in 2004) in Tide Point.

“[Maryland] has always been a key part of our investment strategy and target market,” said Chuck Cullen, general partner at Grotech for about six years now. “The state of Maryland and this venture and early-stage ecosystem is very vibrant. We are very well connected in these local markets.”

Out of this recent fund, Grotech has invested in Optoro, a company in Lanham, Md., that helps online retailers sell returned and overstock products.

And as a partner with the state’s $84 million InvestMaryland funding program, the first announced in December, Grotech will be responsible for shepherding $12 million toward early-stage startups.
“It’s a great fit for Grotech, because the state of Maryland has always been a great fit for Grotech,” Cullen said. While the firm’s main investment office is based in Vienna, Va., it maintains an administrative office in Hunt Valley in Baltimore County.
For startups who might try pitching Grotech, here are some particulars to be aware of:

• Grotech makes initial investments of between $500,000 and $5 million. “We do some seed deals,” Cullen said. “But those investments typically start at series A or [the] first institutional round.”
• Its “sweet spot” is between $1 million and $3 million initially.
• The typical Grotech investment: “There will be some traction that the company can demonstrate in terms of market acceptance of their products,” said Cullen.
• Though that is looking more like a Series A level of funding in technology these days, Cullen said it’s a “key tenet” of Grotech’s strategy to invest in early-stage companies. “Most of the companies that we invest in have less than a million [dollars] in revenue,” he said.
• Finally, Cullen mentioned that an essential part of Grotech’s strategy “is to invest in segments where we see very good paths to liquidity. … We expect most of our companies to have exit events that occur as a result of inbound strategic interest.”