Proven Ventures Has a Final $1 Million Left for Nebraska Startups

Omaha-based Proven Ventures has $1 million left to deploy, and it wants to spend the money on Nebraska startups.

The fund plans to put the final $1 million of a $20 million pool into "founder-led companies that have moved beyond proving an idea," according to a statement. It is especially interested in business-to-business firms generating a quarter million dollars in annual revenue or more. Revenue, the fund's release noted, is not the only factor it weighs.

Erica Wassinger, co-founder and general partner, said the $20 million came from high-net-worth people inside and outside Nebraska who "shared the same ethos." The fund, established in 2018, has already invested in 17 portfolio companies.

How many checks are left?

"So, we're really looking for two to three great new portfolio companies where we can help put some capital in and ... put a little bit of support and rolled up sleeves around and make sure that they can keep growing," Wassinger said.

The fund's leadership team also includes Chief Financial Officer Mary Blaney and Portfolio Manager Gabi Keaton. Proven Ventures is an affiliate of Omaha-based Burlington Capital. Companies seeking financing can apply through the fund's website.

What is 'debt equity'?

Proven Ventures finances startups with what it calls "debt equity." The structure sits apart from typical venture capital.

"I think at the core, the founder who is best suited for taking 'debt equity' is one who knows they're going to create more value in their company, and they want to own more of that value in the long run," Wassinger said.

Blaney explained the mechanism. "It is debt that is backed by the founder's equity as the collateral," she said. "And we work with the founder to establish what those payment terms would look like for them."

Those payment terms, Wassinger confirmed by email, form the structure of the buyback. As founders make payments, Blaney said, they buy back equity from the fund through a collateral agreement.

"And say that's why we work with founder-led and founder-operated businesses," Blaney said. "Because they're using their equity to collateralize the debt."

Where does debt equity fit in private markets?

Nicholas Waller, an assistant professor of finance at the University of Nebraska-Lincoln who teaches entrepreneurial finance, frames "private equity" as an umbrella term with two directions: company buyout or venture capital. Waller previously worked in private equity at Werner Bank on the investor side.

Private equity investors take the buyout direction when funds are used, for example, to take a public company private — likely with heavy debt. Venture capital, he said, is private equity used for "usually minority ownership positions that you take in — and that's, I think, the key part of the definition — in young companies or companies that are still growing."

What does a portfolio company look like?

One young company in the portfolio is Centese, an Omaha-based medical technology firm that developed the Thoraguard device. Centese is about five years old, according to CEO Randy Preston, who called Proven Ventures a great partner.

"You know, they've been local to us here in Omaha, which is fantastic," Preston said. "They come in with really ... high energy, engagement point of view. They're really proud of their portfolio companies. And when you're doing something hard, it's always nice to have as many ... cheerleaders on your side."

The Thoraguard is used in recovery from open-heart surgery.

"Afterward, what the surgeons do is after they've completed most of the operation, they'll place these tubes in around your heart and lungs and just help make sure that that fluid is drained appropriately," Preston said. "You don't want that building up in your chest. It's one of the keys to recovery."

The device drains fluid that accumulates and "really helps accelerate the patient's recovery," he said. It is already on the market. "We're in about 40 different hospitals across the country," Preston said, and the device has treated thousands of patients.

Why founders choose the structure

Preston said the debt equity model can be quite useful for a long-run startup facing heavy upfront costs and a cyclical fundraising market.

"And if we're going to be doing it for a while, you know, we want to raise the company on favorable terms that allows us to maintain as much ownership as possible, and avoid taking money when there are less favorable terms," he said.

Debt equity, he said, gives Centese a tool to raise money through the door for certain milestones when the funding market is not quite in its favor. With $1 million remaining and two or three slots open, Nebraska founders now have a deadline-free but finite window to make their case.