Sandalphon Capital

# Sandalphon Capital: Midwest-Focused Early-Stage Venture Capital

High-Level Overview

Sandalphon Capital is a Midwest-based venture capital firm that specializes in early-stage investments across Pre-Seed, Seed, and Series A funding rounds.[1][2] Founded on the principle of being a "helpful partner to entrepreneurs," the firm takes its name from Sandalphon, the tallest angel in religious tradition—a symbolic representation of their mission to protect and support nascent startups through their critical growth phases.[2]

The firm's investment philosophy centers on Digital Transformation and Digital Reinvention, targeting B2B SaaS and marketplace business models that either enable incumbents through technology or displace them through enterprise-wide tech-driven innovation.[1][2] Sandalphon operates with a clear geographic mandate: deep roots in Chicago and the Midwest, with intentional focus on underserved markets across the United States, while typically avoiding the Bay Area.[1][2] This contrarian positioning reflects a deliberate strategy to identify opportunities outside traditional venture capital hubs.

Sandalphon's core sectors include Digital Health, Healthcare IT, Insurtech, FinTech, PropTech, and GovTech, with explicit exclusions around crypto, life sciences, biotech, pharmaceuticals, medical devices, and advanced materials.[1][2] The firm has completed 35 investments to date and actively hosts midwest.tech/connect, a virtual summit connecting Midwest-based startups with venture capitalists and angel investors, amplifying their role as ecosystem builders beyond capital deployment.[1]

Origin Story

Sandalphon Capital was founded in May 2016 by Jonathan Ellis, who brought substantial institutional investment experience to the venture space.[4] Prior to establishing Sandalphon, Ellis served as a Senior Vice President in Macquarie's Principal Finance Group, where he sourced, executed, and managed investments across technology, specialty finance, healthcare, and real estate—a diverse portfolio that shaped his later investment thesis.[4]

Ellis's transition from institutional finance to venture capital was gradual; he operated as an active angel investor for several years before formalizing Sandalphon as a dedicated fund.[4] This progression reflects a founder who understood both the mechanics of institutional capital deployment and the nuances of early-stage company building. The firm's evolution has been marked by strategic team expansion, including the addition of Nevin Ramanujan as Partner, who brings healthcare-focused expertise from his prior work at Elevance Health and his co-founding of the Health Equity investment strategy at the Tarrson Impact Fund affiliated with Chicago Booth School of Business.[4]

The founding moment itself was deliberate: Ellis recognized an underserved market opportunity in the Midwest and surrounding regions, where venture capital was less concentrated than coastal hubs but entrepreneurial talent and corporate innovation needs remained substantial. This insight became the firm's foundational thesis.

Core Differentiators

Geographic Arbitrage & Market Focus

Sandalphon's most distinctive characteristic is its intentional geographic positioning. By concentrating on the Midwest and underserved U.S. markets while avoiding the Bay Area, the firm operates in a less saturated competitive environment for deal sourcing.[1][2] This creates dual advantages: lower valuations for entry positions and deeper relationships with regional entrepreneurs who receive less venture attention. The firm's deep Chicago roots provide institutional credibility and network density in a major metropolitan area.

Thematic Clarity & Sector Specificity

Unlike generalist venture firms, Sandalphon maintains explicit investment boundaries. The firm's focus on Digital Transformation and Digital Reinvention within B2B SaaS and marketplaces provides clarity for both founders and limited partners.[2] Equally important are the firm's stated exclusions—no crypto, biotech, or life sciences—which reflect disciplined capital allocation and team expertise concentration rather than fear of missing out.

Founder-Centric Operating Model

The firm's structure emphasizes founder support beyond capital. Jonathan Ellis sits on multiple portfolio company boards, and the team is augmented by "a hand-picked group of industry and tech operator advisors" with domain expertise across sectors.[4] This operating model positions Sandalphon as a hands-on partner rather than a passive capital provider, particularly valuable for early-stage founders navigating their first institutional funding rounds.

Ecosystem Building & Community Infrastructure

Sandalphon's hosting of midwest.tech/connect represents a strategic investment in ecosystem development. By creating infrastructure that connects Midwest startups with venture capital and angel investors, the firm builds brand visibility, deal flow, and regional credibility simultaneously.[1][2] This positions the firm as a thought leader and connector within the Midwest tech ecosystem.

Check Size Alignment with Stage

The firm's typical check sizes—$100-250k for Pre-Seed, $500k-$1m for Seed, and $1-2m for Series A—are calibrated to early-stage company needs and reflect realistic ownership targets.[2] The flexibility to deploy larger amounts via LP co-investment provides optionality for follow-on rounds without overcommitting capital.

Role in the Broader Tech Landscape

Sandalphon Capital operates at the intersection of two significant macro trends: the geographic decentralization of venture capital and the rise of enterprise software and digital transformation as enduring investment themes.

The venture capital industry has historically concentrated capital and decision-making power in a handful of coastal metros. Sandalphon's Midwest focus reflects and accelerates a broader market correction, where founders outside traditional hubs gain access to institutional capital without relocating. This democratization of venture access has material implications: it enables regional talent pools to build companies locally, supports corporate innovation initiatives in non-coastal Fortune 500 headquarters, and creates competitive pressure on coastal-focused firms to expand geographic reach.

The firm's thematic focus on Digital Transformation and Digital Reinvention aligns with a durable market reality: enterprise software adoption remains incomplete, legacy systems continue to constrain organizational efficiency, and the total addressable market for B2B SaaS and marketplace solutions remains vast. Unlike trend-chasing themes (AI, blockchain, etc.), Sandalphon's core thesis addresses fundamental business problems that persist across economic cycles.

The firm's sector concentration—particularly in Healthcare IT, Insurtech, and FinTech—targets industries with high regulatory barriers to entry, substantial incumbent switching costs, and significant digital transformation backlogs. These characteristics create defensible market positions for well-executed startups and reduce the winner-take-all dynamics that plague consumer-focused venture investments.

Sandalphon's ecosystem-building activities through midwest.tech/connect contribute to regional venture infrastructure maturation. As the Midwest develops deeper venture capital networks, more institutional capital will likely flow to the region, creating positive feedback loops for founders and investors alike.

Quick Take & Future Outlook

Sandalphon Capital has positioned itself as a disciplined, regionally-focused venture firm at a moment when geographic diversification of capital is accelerating. The firm's combination of thematic clarity, founder-centric operations, and ecosystem building creates a defensible niche within the venture landscape.

Looking forward, several dynamics will shape Sandalphon's trajectory. First, the continued maturation of Midwest venture infrastructure will validate the firm's early positioning and likely attract additional capital to the region, potentially enabling larger fund sizes and follow-on investment capacity. Second, the durability of Digital Transformation as an investment theme—particularly in enterprise software and marketplace models—suggests the firm's core thesis will remain relevant across multiple market cycles.

The firm's healthcare focus, led by Nevin Ramanujan's expertise, positions it well for the ongoing consolidation and digitization of healthcare delivery and insurance systems. This sector offers substantial tailwinds from regulatory pressure, demographic shifts, and incumbent inefficiency.

However, Sandalphon faces the perpetual venture challenge: maintaining investment discipline while scaling capital deployment. As the firm grows and potentially raises larger funds, the risk of thesis drift—expanding into adjacent sectors or geographies—will test management's conviction. The firm's explicit exclusions (crypto, biotech, advanced materials) suggest strong conviction, but future capital raises may pressure these boundaries.

Ultimately, Sandalphon Capital represents a broader market shift toward venture capital as a regional, thematic, and operationally-engaged discipline rather than a coastal, generalist, capital-deployment function. If this trend continues—and current market dynamics suggest it will—Sandalphon's early positioning in the Midwest will prove prescient, and the firm's influence on regional entrepreneurship and innovation will expand accordingly.