Courtesy of Alina Grubnyak via Unsplash

The Bellevue-based 5G Open Innovation Lab (5G OI Lab), which is on the forefront of accelerating digital transformation for numerous industries through the 5G platform and edge computing, has launched a multistage venture fund to invest in promising startups that have participated in the lab.

The lab’s rolling fund offers accredited investors a chance to invest in companies in which the lab has had insight during the companies’ work in the lab. The minimum investment for the fund is $12,500 per quarter over a one-year period, or $50,000 for the year. Investors can contribute more than that and resubscribe for additional quarters. The fund launches Jan. 1 and is now taking applications for subscriptions. The fund’s initial fundraising target is $15 million.

“We anticipate and hope that folks will like what we’re doing so much that they will continue to subscribe,” whether for four, eight, 12, or more quarters beyond that, said Kevin Ober, who’s co-managing the fund as its co-general partner with Jim Brisimitzis, founder and general partner of the lab.

Ober’s past includes seven years at Vulcan Capital (Microsoft co-founder Paul Allen’s family office), where he invested $80 million that generated $647 million, according to the AngelList platform the fund is using for administration. After Vulcan Capital, he founded Divergent Venture Partners, a firm with four funds spanning 15 years.

“This is a democratization of the venture asset class,” Ober said, noting that people don’t need to be ultra-wealthy to participate to access what he called “a pretty interesting class of investment.”

The lab will talk about digital transformation and investment opportunities in 5G and edge computing, and introduce the rolling fund at a virtual event Nov. 17 from 10-11 a.m.

The 5G OI Lab unites startup innovators, global technology platforms, and industry leaders to collaborate on development and deployment of next-generation technology and business solutions using the 5G platform. The lab’s partners include Accenture, Amdocs, Avanade, CNH Industrial, Dell Technologies, Ericsson, F5, Intel, Microsoft, Spirent, T-Mobile, and VMware, which provide business and technology assets, resources, and mentorship.

About 30 startups a year are invited to participate in the lab’s innovation ecosystem. For 12 weeks, they work closely with lab partners to accelerate monetization opportunities of 5G, edge computing, and other use cases and solutions to fuel the global enterprise move to digital (Industry 4.0).

The program has given the lab unique insight into the startups and the fund is a way to participate in their hopeful success long term.

“What we've created here in the program was really an extended due-diligence process, if you will,” Brisimitzis said of the startup teams the lab sees. “If you think of investing as a set of signals from the time you meet teams to the time you plan on an investment, we have a much broader aperture of signaling from the selection of the teams, the mentoring that we've done with them, the involvement that our partners have had, interests from other investors. And so there's this vetting process that goes on for 12 weeks, and then some,” after which the fund could make an investment post-program.

“The 12 weeks that we run our program for is really a great opportunity for us not just to get to know the teams more intimately and see their product in action and traction, but we're also uniquely positioned where we're seeing some really interesting signals from third parties, some of which include our partners, some of which include other investors, some of which include customers as well,” he said. “That’s what we're capitalizing on.”

No matter how many signals one can access, though, venture capital always comes with risk, he said.

“But I would say that for the most part … our mechanism for making decisions on investments through this signaling is certainly a great de-risker,” Brisimitzis said.

The fund will focus on industry verticals in manufacturing, logistics, health care, agriculture, energy and utilities, its AngelList site says. Investment stages will focus on seed funding through Series A, with some later-stage funding where appropriate. It expects two deals per quarter of $50,000 to $1 million each.

Ober believes there are three key ingredients to successful venture investments: access to good deals, good quality due diligence, and better knowledge earlier than anyone else. The rolling fund is well positioned in each.

“In our case, we also are right at the epicenter of how people are thinking about how all this edge computing and 5G networks are going to be rolled out and what applications are going to get built on top of them, and so we have really, really early insight, which again, the way you make money is being able to be smarter, faster, earlier than other people in the business,” he said. “So we think we've got a really good mix of things.”

Ober noted the large opportunity for companies involved in digital transformation, which is estimated to generate more than $6.8 trillion in new spending by 2023.

The lab’s partners, which have been integral to the lab’s launch and through their mentorship of startups, are not invested in the fund, which is a separate entity, Ober and Brisimitzis said. Partners may decide they want to invest in a team directly or indirectly, perhaps through their own corporate venture capital funds, but the rolling fund is a public fund, Brisimitzis said.