Seasoned Kansas City investors have started a new venture capital firm to meet an underserved need in the startup ecosystem.
Target Hill Capital focuses on early-stage funding for entrepreneurial companies past the “friends and family” stage — typically $50,000 to $100,000, but not yet ready for seed funding ($1 million or more).
“We are interested in companies with products or services that are ready to fill a need in the market,” said Marshall Dougherty, a partner in Target Hill. “We recognize that many companies have financial demands at that earlier stage. We want to partner with these companies to position them for success and ensure that they achieve the next seed round.”
The company provides funding in the range of $250,000 to $500,000. Target Hill takes a hands-on approach, working with business owners to implement best practices for operations, finance and customer acquisition to help ensure success.
Target Hill works primarily with technology startups that have an existing product and that have identified a market with significant growth potential. Each prospective portfolio company must undergo a rigorous due diligence process, with only about 5 percent of companies receiving funding.
Target Hill was founded by Jim Ferree, a former NASA designer and owner of J&A Industries. Attorney Brendon Barker is another partner.
The company was named for the field used as a shooting target for West Point cadets in the 19th century.
Filling a gap
After selling J&A to a private equity firm, Ferree briefly retired before recognizing the opportunity in the venture capital ecosystem in Kansas City.
“While you can find some VC firms in this space on the coasts, it’s virtually nonexistent in the Midwest,” Ferree said. “We are excited for the opportunity to help innovative and successful entrepreneurs realize their goals.”
Because the majority of funding in the region is concentrated in the seed to growth-capital stages, Dougherty said Target Hill has an opportunity to not only fill a gap in the VC landscape but also help construct scalable growth companies and investment opportunities.
To encourage growth in the region, Target Hill encourages its portfolio companies to have a presence in Kansas City if they’re not already located here. The current portfolio includes the following companies:
- Digital Baron – A text-to-order and payment tech platform using standard smartphone capabilities that targets the fast-food and quick-service restaurant markets.
- PlanIT Impact – A SaaS model platform that calculates and analyzes the impact energy, water, stormwater and transportation design decisions have on building performance and efficiency.
- Blipd – A location-based augmented reality mobile app development company.
- Tweedl – A mobile app created by the former CFO for Sean “Diddy” Combs that connects aspiring music artists with music lovers everywhere, empowering users to select the next hot artists and boost their influence as tastemakers in music.
- Novel Growth Partners – A flexible capital firm working to improve access to capital for companies in underserved markets.
- Vesta Realty LLC – A boutique, privately held real estate investment firm that focuses on the acquisition and management of opportunistic and value-add multifamily properties (through which Target Hill invested in Jenk’s Best Living LLC and Bixby’s Best Living LLC).
For investors, Target Hill offers both VC holdings as well as high-quality, income-producing multifamily real estate assets to mitigate risk and balance its portfolio. This approach reduces the volatility of early-stage venture investing without sacrificing its benefits. After launching in January, the existing portfolio is on track to achieve a 12 percent cash-on-cash return for 2018.