A Richland business

incubator that provides space and mentoring to startups is adding a critical

new tool to its lineup – money.

Fuse SPC, a unique

social-purpose corporation with offices on The Parkway, has launched the Fuse

Fund with a goal of raising $2.5 million to invest in young, local companies.

The fund is capped at $10 million for legal purposes.

The fund, operated

by Fuse Advisors LLC, expects to make its first two investments this month—in a

Kennewick tech company and a Richland food startup.

The Fuse Fund board

is led by Marty Conger, who retired last year as chief financial officer for

the Pacific Northwest National Laboratory, and a team of serial entrepreneurs:

Brett Spooner, Ron Boninger, David Lippes and Megan Chalk.

Collectively, the

board brings deep expertise in accounting and finance, scrutinizing investments

and turning ideas into successful ventures.

Fuse Fund will

invest between $75,000 and $150,000, with a cap of $250,000 on follow-up

investments. It assigns mentors to coach its companies.

To date, six

companies have approached Fuse Fund and four have made formal pitches.

Conger isn’t ready

to announce investments but confirmed it has made conditioned offers to two.

Both are fast-growing Tri-City startups that have broken into their respective

markets and have paying customers.

The fund is less

concerned about the industry than the location. It invests in the Tri-Cities

—defined as Benton and Franklin counties.

Conger said the

investment board is attracted to companies led by a team with drive and passion

to succeed and a market for their product.

If entrepreneurs

have great ideas and passion but thin business résumés, Fuse SPC can help them

become investor ready.

A boost from the

Port of Benton

The Port of Benton

helped kick off the fund in 2018 when it awarded Fuse SPC a $254,000 grant to

create a local seed fund, saying it would lead to investments in more than 25

small businesses in the first years.

The grant paid for

legal fees, website development and development of investment documents, among

other pre-launch costs.

Fuse began

soliciting accredited investors last summer – those with $1 million or more in

assets and an annual income of $200,000 or more, or $300,000 for married

customers. The minimum investment is $50,000, though about a third invest more.

The fund, which is

wholly owned by Fuse SPC, takes the position of general partner. Investors come

on as limited partners in Fuse Advisors.

The fund is capped

at $10 million to stay below the level required to register as a security.

Conger expects to close the fund later this year.

High end of

risk-reward scale

Investing in

emerging businesses is risky and Fuse Fund describes itself as being at the

high end of the risk-reward scale.

However, it notes

that comparable undertakings typically deliver returns in the two- to

three-times range over eight to 10 years but there are no guarantees.

The fund’s mission

is to support local entrepreneurs.

Proceeds from

investments are split 80-20 between investors and Fuse SPC, which takes an

administrative fee.

Conger said 20

investors, including the Tri-City Development Council, have committed $1.3

million to date. It has registered another $300,000 from “probable” investors.

With the exception

of an Arizona investor with Tri-City ties, the investment capital comes from

Tri-Citians, though it doesn’t have to be.

“I’ll take money

from anywhere,” Conger said.

David Lippes, a

real estate investor and serial entrepreneur, is an investor and board member

as well as business coach to one of the fund’s target companies.

Lippes said Fuse

Fund will provide the much-needed third leg of developing a business – growth

capital.

Fuse already

provides real estate in the form of its coworking space in Richland and support

in terms of its mentoring and training program. With the fund, it can help

young businesses leverage local investment dollars.

“This is the last

major piece,” he said.

Not for startups

Fuse Fund invests

in young and emerging businesses, not startups.

It isn’t seeking

would-be entrepreneurs daydreaming about quitting their jobs to pursue an

idea.  Rather, it targets existing

businesses that have outgrown their startup capital, typically gifts and loans

from family and friends. 

Good candidates

have launched. They may be earning revenue or are close to it. They’ve reached

the stage where they need to hire more staff, invest in more equipment, enter

big contracts — beyond the limits of most family-and-friends capital.

“The question

becomes whether they’ve raised $100,000 or $2 million that way, they’ve worked

through that capital. Where do they go next?” Lippes said. “If you live in the

Tri-Cities, the answer is usually somewhere that is not the Tri-Cities.”

Fuse Fund is

positioning itself as a partner rather than one-stop shop. It provides some,

but not all, the funds a business may seek.

The two firms it is

preparing to support are raising $750,000 and $2 million, respectively, to

support expansion plans. Investments from Fuse are helping them attract other

investors. 

“Funds like to see

other funds invest,” Conger said.

Over time, those

relationships will help Fuse draw attention to local firms from larger funds in

Seattle and elsewhere.

The state of

capital

Securing funds for

a promising business is never easy, particularly in rural areas far removed

from financial hubs. That doesn’t mean there isn’t money to be had.

Early stage

investors placed $9.1 billion in seed and angel capital in 2019 nationwide,

translating to a median investment of $1.1 million in 4,556 deals, according to

Venture Monitor, a publication Pitchbook and the National Venture Capital

Association.

The West Coast,

including Alaska and Hawaii, accounted for more than a third of all deals in

2019. But that doesn’t translate to investments in rural areas such as the

Tri-Cities.

The Washington

Department of Commerce said its options to support young business are limited,

but it confirmed it’s a barrier to entrepreneurs who are too young to qualify

for traditional bank support.

The state’s StartUp Washington website offers links to funds: startup.choosewashingtonstate.com/resources/funding.

Learn more

For information about investing in the fund or learning more about pitching a business to the investment committee, contact Marty Conger at conger.marty@gmail.com.

Go to fuse.fund for more information.