Milwaukee angel investor Jeff Rusinow details his returns

Gives advice to investors, entrepreneurs at conference

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Jeff Rusinow figures he has reviewed more than 2,000 startup decks and met for hundreds of coffees with Wisconsin entrepreneurs over the past 19 years.

Rusinow founded Milwaukee’s first angel network, Silicon Pastures, in 2000. At the Wisconsin Entrepreneurs’ Conference put on by the Wisconsin Technology Council in Milwaukee this week, he revealed for the first time the returns he got on his angel investments in Wisconsin companies.

Rusinow made 45 angel investments, most of which were in Wisconsin companies. Eight of those companies were sold or went public, providing him with a return on his investment. Rusinow calculated his all-in internal rate of return was about 37%.

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But there are peaks and valleys to investing in startups, he said.

“While I’ve had the eight exits and have had obviously some successes, of those eight exits one was a successful … IPO, three of them were sales to Fortune 500 companies. And that’s the good news,” Rusinow said. “There is some not good news, though. I hit a low point earlier, toward the end of last year, where two startups I am very involved in, one of them I was on the board, one I was chairman of the board, I had put $1 million in each of those. Both of those went bankrupt in December.”

Those bankruptcies were Grafton-based Aurora Spectral Technologies LLC and Middleton-based Death’s Door Spirits.

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Rusinow’s successful exits were:

  • UltraVisual/Emageon: 4X return. Madison-based UltraVisual Medical Systems Corp., a web-enabled medical imaging software founded in 2000, was acquired by Emageon Inc. in 2003. The company went public in 2005.

“It was fantastic, but guess what? It took longer to develop than we had planned,” Rusinow said. “We had to go out and get some more funding at not a great valuation. …when we merged, the calculations were based on revenue so…it wasn’t great in terms of how it worked out and what we got.”

  • BuySeasons: 15X. New Berlin-based costume e-retailer BuySeasons Inc. was acquired by Liberty Media Corp. for $55 million in 2006.

“I was chairman of the board,” Rusinow said. “A lot of fun teeing that up, lot of fun working with a Fortune 500 company in negotiations. It was a great ride.”

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  • Nerites: 2X. The Madison-based developer of adhesive biomaterials used for suturing in health care was acquired for $20 million by Kensey Nash Corp. in 2011.
  • Prodesse: 3.5X. Waukesha-based biotech firm Prodesse, which made diagnostic kits for respiratory illness, was sold to Gen-Probe Inc. for $60 million in 2009.

“I came in late on that deal. The angels actually did much better than 3-and-a-half,” Rusinow said.

  • ModernMed: 4X. The Waukesha-based concierge medicine provider was sold to DaVita for more than $20 million in 2012.

Rusinow was chairman of the board and approached DaVita to initiate the sale, he said.

  • RevolutionEHR: 4X. The Madison-based electronic health record software company received a $40 million investment from private equity firm RevOptix in 2014.

RevolutionEHR made a simple software play in optometry, Rusinow said. Instead of a clipboard, the company moved eye doctors’ charts to iPads.

  • Fishidy: 1.5X. The Madison-based fishing spot finder app was acquired by Raymarine last year.

“We had hundreds and hundreds of thousands of people who liked the app, but we were only able to convert about 3% to premiums (subscribers),” Rusinow said. “That became a challenge, but eventually we sold and we all got out. My 1.5, if it hadn’t been for the fact that I was on the board negotiating for stock options, that would have been more of a 1.1.”

  • Asthmapolis/Propeller Health: 9X. Madison-based internet of things startup Propller Health, which makes sensors that attach to inhalers to track usage on a companion mobile app, was acquired by ResMed for $225 million in January.

The deal closed about a month after the Death’s Door and Aurora Spectral bankruptcies, he said.

Rusinow said he’s encouraged by the progress Wisconsin’s startup and investing communities have made over the past 20 years. When he started Silicon Pastures, there was only one other angel group in the state and there were no accelerators or other assistance organizations. There also wasn’t any corporate or university involvement in the space.

“There’s a lot going on, there’s a lot to feel good about, and if you are an entrepreneur looking for funding, it’s out there. You’ve got to do the work, you’ve got to set yourself up, but I think for the most part it’s really exciting,” he said.

Rusinow advised investors to lean in and be actively involved in their portfolio companies, and to abide by the tried and true angel rule that at least one in 10 investments should bring a 10x return or greater.

“For this to work, the majority of the deals that I’ve seen in Wisconsin, the pre-money valuation has to be between $1 (million) and $2 million,” he said. “If you start getting into 2, 2.5, 3, 4, 5, you’re inviting some trouble because things always take longer, things get flattened out. Time is not your friend with a startup. Time is not your friend if you have a burn rate and you’re burning cash.”

He also gave advice to entrepreneurs seeking funding.

“If you are an entrepreneur and you’re looking for pre-revenue capital, understand the dynamics are there’s only so many angles out there and when you pitch them, you’ve got to really have it together,” Rusinow said.

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