David Einhorn founder of hedge fund Greenlight Capital, contributed to a second venture fund for his father and brother’s firm. David Einhorn, president of Greenlight Capital, contributed to a second venture fund for his father and brother Daniel Einhorn’s firm.
When David Einhorn was just an analyst in the his family gave him $500,000 start his hedge fund Greenlight Capital. Now that he is a billionaire after a career of doing battle with large corporations, he has returned the favor.
A world away from Wall Street the Einhorn family started a venture capital firm here, which raised a $40 million fund last year.
David Einhorn is the largest investor in the fund, run by his brother, Daniel, and their father, Stephen. The firm, Capital Midwest Fund, also led by another partner, Alvin Vitangcol, aims to tap the Midwestern work ethic and has ambitions of changing the way early-stage investments are run.
“This isn’t Silicon Valley, where you’re almost encouraged to fail a couple times, and your next opportunity is in walking distance,” said Daniel Einhorn, who is 40.
Daniel Einhorn has focused on companies in the biomedical sector. After his daughter, Emma, received a diagnosis of leukemia at age 3, Daniel raised more than $50,000 for cancer research and was honored by the Leukemia & Lymphoma Society in June. Emma, now 7, has been in remission for 19 months.
Family connections have helped the venture capital firm, but not all have proved fruitful. Sheryl Sandberg, the chief operating officer of Facebook, is Einhorn’s cousin. She arranged a meeting this year with one of Capital Midwest’s portfolio companies, LiquidCool Solutions, to discuss using the company’s technology to
Capital Midwest, however, is still a smaller player in the sector. Located in an office building across the street from a strip mall near the edge of the city limits, the company got started years after prominent venture firms in the region and around the country had established themselves. Its fund is about a fourth the size of the industry average, according to Thomson Reuters and the National Venture Capital Association.
But the company has its own views on how to manage investments. Instead of merely serving as an angel investor that provides money but little hands-on support, Capital Midwest pays close attention to a company’s ability to chart a path to generating revenue. And if a company financed by the new fund doesn’t provide the investors an exit within five years — through an acquisition — then Capital Midwest requires the company to buy back its shares.
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