Progress for Wisconsin venture capital

Badger Fund of Funds makes an impact


When Badger Fund of Funds was still an idea, Ken Johnson shared with me one of his motivations. He was excited about the chance to build a next generation of home-grown venture capitalists across the state of Wisconsin.

That resonated. During more than two decades as a newspaper reporter, I saw very few venture capitalists based in Wisconsin, and even fewer who moved here from somewhere else. How can we create more startup activity if we don’t have more venture capitalists to organize and manage their part of the equation?

Ken worked as a chemical engineer, then a university technology licensing manager, then pretty much willed himself into venture capital. He became one of the most successful early-stage venture capitalists in the state. And he’s remained one of the most stubborn guys you’ll ever meet. When he gets an idea in his head, no matter how much or how little anyone around him cares, Ken doesn’t let go of it.

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Badger Fund of Funds was no exception.

In early 2014, the state of Wisconsin chose Sun Mountain Kegonsa – a partnership between Ken’s Kegonsa Capital Partners and New Mexico-based Sun Mountain Capital – to receive its $25 million investment in a new venture capital effort.

Ken and his partners began searching for fund managers. Imagine trying to find young potential venture capitalists in a state with fewer than 6 million residents that deploys less than 1% of all the venture capital raised in the U.S. This wasn’t like driving around the dairy state looking for someone who knows how to make cheese.

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When Sun Mountain Kegonsa identified potential VCs, it offered a rigorous training program that tested their ability to succeed in a very difficult endeavor. Ken’s sales pitch went something like this: “Most fail, but if you can get through my training, you can quit your job and go for a year with no salary while you try to raise money for a fund that might or might not be successful and then you might have a shot at being a real venture capitalist.”

So, five years later, how far has Badger Fund of Funds come?

Two Badger Funds — Idea Fund of La Crosse and Winnebago Seed Fund (Neenah) began investing in late 2017. Rock River Capital Partners (Madison) began investing in 2018.

Less than two years in, at the end of 2018, the first three Badger funds had invested more than $7 million in 11 Wisconsin-based companies.

Three more Badger Funds — Bold Coast Capital and Forward Capital Fund (both Milwaukee) and Winnow Fund (Madison) are working to get up and running. There’s a seventh fund in the works that hasn’t yet been identified.

If we include follow-on investments the funds are making into existing portfolio companies, I’d estimate Badger funds are investing about once a month in a Wisconsin company. As the newer funds get up and running, that will likely grow to several investments a month.

About 80% of all venture capital dollars are concentrated in four states — California, Massachusetts, New York and Texas. Neighboring states have put much more capital into startups. Illinois, Indiana and Michigan have all put more than $200 million into venture funds that invest in their startup companies.

So, it will probably take more to get Wisconsin in the game, but we should celebrate our successes. Consider this one: Curate Solutions, a Madison startup with web-sweeping technology, raised $1.65 million late last year in a venture deal that attracted out-of-state venture funds from Ohio and Los Angeles.

The funding round was led by Idea Fund of La Crosse and its managing director. That managing director is Jon Horne, one of Wisconsin’s new home-grown venture capitalists.

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