Hefty embarks on new life as venture capitalist
By Charles Rathmann, of SBT
Since retiring as chief executive officer of Cobalt Corp. in December, Thomas Hefty has been traveling and laying plans for a very active retirement.
"I plan to teach a little, practice law a little and work on venture capital," Hefty said, bemoaning the number of business cards he will need to carry.
One of the cards will bear the name of Milwaukee law firm Reinhart Boerner Van Deuren, where Hefty will work in the company’s corporate, health care, government relations and insurance practice group.
On the venture capital front, Hefty plans to "facilitate some venture capital and invest a little money of my own."
Hefty has the resources to expend. According to US Securities Exchange Commission documents, he is walking away from Cobalt with about $400,000 in vested stock options. Additionally, he filed to sell $1.23 million in Cobalt shares last August.
Hefty, long an advocate for a more aggressive business environment in Wisconsin, said the willingness of creditors to take risks on small companies has a critical impact on the state’s economy.
Wisconsin lags when it comes to new business startups, and the number of large companies based here is lower than that of many comparable states. Those two facts are related, according to Hefty.
"Where do big companies come from? They start as small companies," Hefty said, pointing to some Wisconsin financial giants that originated as innovative niche players and still call the state home. Mortgage Guarantee Insurance Corp. (MGIC), CUNA Mutual Mortgage Corp. and others, Hefty said, identified an unmet need of the customer and created products – indeed, entire industries – to respond to those needs.
"Large companies are often not nimble enough to do that," Hefty said. "A large company might not see the value in a $5 million niche."
Bankers in Wisconsin can have as hard a time seeing opportunity as corporate chiefs, according to Hefty.
"Banks here are much more conservative than other parts of the country," Hefty said. "In some markets, it is nothing for someone to have a bankruptcy on their record. In Wisconsin, it’s like the kiss of death."
Fear of failure breeds fear of risk. However, Hefty said, the market is ripe for venture capital, indicating that many deals that would be funded by banks in other markets require the help of a venture capitalist in Wisconsin.
Hefty has a few chips to bring to the venture capital table. According to filings last year, Hefty owned 26,250 shares in Cobalt and 18,200 shares in Cobalt spin-off American Medical Security Group, Inc. , and in August of last year alone, he liquidated $1,233,000 worth of Cobalt stock and exercised options to buy them back for $290,223.
While some venture capital groups working in the Milwaukee area, including Silicon Pastures and Techstar Early Ventures, focus on technology, Hefty plans to focus on the financial and insurance services industries.
"I figure it makes the most sense to invest in something you know a little bit about," Hefty said.
May 2, 2003 Small Business Times, Milwaukee