An equity fund focused on South Dakota is investing in early-stage companies who plan to develop and grow within the state.
Plans for South Dakota Equity Partners (SDEP) began in October 2015 after former governor, Dennis Daugaard, encouraged one of the partners to pursue a state-focused equity fund. By 2016, the partners were actively pursuing companies, and in June 2018 they had their first close.
According to Blaine Crissman, one of three partners at the firm, other states have state-specific funds, but the focus doesn’t prevent investees from growing or expanding operations out-of-state.
Instead, it allows SDEP to source exclusively within South Dakota and leverage their understanding of both the state’s network and infrastructure.
“Our exclusive focus on South Dakota is a difference from other funds, but it’s not better or worse,” Crissman said.
Funding Sources & Strategy
Primary goals for SDEP include diversifying the state’s economy and helping to commercialize technology coming out of the university systems.
However, because their geographic focus is so narrow, Crissman says they keep their options open as far as company type.
“It’s easier to define what we won’t do: retail, oil and gas leases, gaming, and real estate,” he said.
Crissman has been involved in private equity and venture capital for over 20 years, and between the three investment partners, the team has a wide array of finance and operations experience.
As far as stages of investment, SDEP never aims to be the first money in any company.
“We start helping out before our investment, but we want them to fundraise from individual angel investors or funds in South Dakota first, to build out some traction,” explained Crissman. “Then we’ll engage and start digging more into the product, service, market, and team.”
Though they don’t focus on seed funding or early-stage startups, Crissman says SDEP likes to watch a company’s story develop from the beginning.
“Our answer might be ‘No, not right now,’ but we’ll make introductions to investors and advisors and continue to work with those early-stage companies,” he said. “I like to think we provide more than just money, we provide advice.”
Additionally, Crissman says that not all early-stage companies should even consider pursuing capital from SDEP. Ultimately, the firm is looking for companies that are built for scalability.
Investors for SDEP are primarily institutional, which Crissman views as a unique benefit.
“A lot of the venture capital and private equity invested in South Dakota is from individual investors pooling together with fund managers making the decisions,” he said. “Our investors are institutions, typically banks or universities, so we’re held to a high standard.”
According to Crissman, being involved with institutional investors allows more room for scaling as time goes on, as well as making introductions within the investor base.
“If we’re looking at a financial technology company, for example, we’re able to do our due diligence with one of our bank partners,” he explained.
Interacting with potential companies is SDEP’s key to successful investments.
“To do venture capital and early-stage investing right, you really need to dig into industry and people,” said Crissman. “South Dakota has hard-working, smart, honest people, a great university system that has been untapped from a tech transfer and commercialization standpoint, great natural resources, and low regulation.”
For those interested in working with SDEP, it’s important to be aware that securing an investment can be a lengthy process.
“Several of the early investments we made, we were talking with those companies for more than two years,” said Crissman. “Anywhere from nine months to two years is the timeframe.”
According to Crissman, investors must understand a company’s vision and see how much they’ve thought about it.
“We say ‘no’ a lot, and we say ‘maybe’ a lot, so we’re highly selective, but we absolutely believe in South Dakota,” Crissman said. “We want to make sure the state and the economy are successful, and we want this to last long beyond just us. We’re not just a one-time fund, we’re building a firm and a source of capital.”
Regarding Sioux Falls, Crissman says he believes it’s well-positioned from an entrepreneurial standpoint.
“We really believe in people who are developing new businesses,” he said. “There’s a prior generation of wealth looking to develop that next generation through mentoring and other support for people developing their businesses.”
Two Things You Can Do This Week:
- Email or call Blaine Crissman at 605.553.6032 to sign up for the South Dakota Equity Partners newsletter.
- Interested in pursuing funding through SDEP? Crissman recommends organizing your business’ story and mission before contacting potential investors.