Wisconsin’s startup ecosystem leaders are calling Governor Tony Evers’ proposal for a $100 million venture capital fund a bold but necessary step for economic recovery and the prosperity of the state’s entrepreneurial ecosystem.
Evers released details of his economic plan Sunday which included a new $100 million venture capital fund to foster growth among Wisconsin-based startups as well as $200 million to assist small business impacted by the coronavirus pandemic.
The proposed “Wisconsin Fund” is a fund of funds model, meaning the fund will invest in a minimum of four established recipient funds, which will in turn make investments in Wisconsin-based companies.
Under the proposal, Wisconsin would become an investor alongside private investors, who must match the $100 million state investment with $200 million in collective investments of their own.
Individual investments could be made with a 1-to-1 private/state match, but the overall fund matching requirement over time would be 2-to-1, private to public, according to a press release.
The Wisconsin Fund would make an investment of no more than $25 million in each fund – the idea of multiple recipient funds is to spread risk while supporting multiple fund managers who have varying expertise and the ability to reach different communities, said Tom Still, Wisconsin Technology Council president.
Securing capital for new businesses has long been a challenge for Wisconsin, which is why a fund of this size is critical for entrepreneurial growth in the state. Early-stage companies may be able to raise a first round of funding from family, friends or angel investors, but it’s the next stage of funding that has historically served as a barrier for startups, Still said.
“The promise of this fund is that it will continue a maturation process for young companies as they move along to truly become revenue producing, profitable and job creating,” Still said.
Evers’ proposal calls for the Wisconsin Economic Development Corp. to establish an oversight board for the new fund. At least 20% of the individual companies receiving an investment from a recipient fund must be women-led or minority-led and rooted in underserved communities, an aspect of Wisconsin’s model that is unique among other state-backed funds in the country, said Missy Hughes, WEDC secretary and chief executive officer.
“The taxpayers would agree that now is the time to be bold,” Hughes said. “Now is the time to think about what it’s going to take for Wisconsin to have a full and strong recovery and a recovery that includes all of our communities and all of the vulnerable people that have been impacted by the pandemic.”
Another major aspect of the Wisconsin Fund is that it will be evergreen, meaning proceeds could be re-invested in perpetuity. If Evers’ budget proposal is approved by the Wisconsin Legislature, the same evergreen clause will be extended to the Badger Fund of Funds, a $25 million state-backed fund created in 2010 to support Wisconsin-based startups.
Evers’ proposal has been met with support from Wisconsin’s broader startup ecosystem, including the Wisconsin Startup Coalition, an organization whose mission is to advocate for policies that advance growth in Wisconsin’s startup ecosystem.
“It is critical to build a vibrant innovation ecosystem in Wisconsin to ensure the long-term health of the state’s economy,” said Matt Cordio, co-founder of the Wisconsin Startup Coalition. “A venture capital fund of funds program will stimulate net new job growth, add to our state’s tax base and enhance the economic vitality of the state. It’s a smart investment to make now to ensure Wisconsin emerges stronger from the COVID-19 pandemic.”