The Santa Fe firm that co-manages Wisconsin’s Badger Fund of Funds specializes in regional investment programs.
From Mexico City to Utah, Sun Mountain Capital has established the fund of funds model and found success in advancing entrepreneurial activity.
Even in Wisconsin cities like Neenah and La Crosse, Sun Mountain has been able to find strong fund managers and raise significant capital to be invested in startups.
But in Milwaukee, it’s crickets.
“Milwaukee is a critical part of Wisconsin,” said Brian Birk, managing partner at Sun Capital. “It’s the largest city, and in some respects it’s the economic hub. When we look at the map, there’s one big gap.”
Birk and Dan Brooks, an associate at Sun Mountain, have been back and forth to Milwaukee trying to establish relationships and find the right person to lead one or two Milwaukee-based venture capital funds for the Badger Fund of Funds. But there’s a reluctance here to commit to the project, Birk said.
“There have been examples of success stories of venture-backed companies in Madison and so the idea of venture capital investment is less foreign in Madison than it is in Milwaukee,” he said.
Milwaukee has an active and growing startup community, but Birk said its success will be limited without an enduring investment model.
“Milwaukee really has come on to the scene and has this activity and interest level—it’s palpable,” he said. “(But) you can’t have a successful entrepreneurial ecosystem without venture capital.”
Utah’s venture capital scene is an example of what Wisconsin could aspire to, Birk said. There, the topic of conversation at cocktail parties is not the Packers—it’s the successful investments attendees have made in venture capital.
“Utah has gone from basically being very average in its rankings to being one of the top 10 venture markets in the United States,” he said.
Sun Mountain, which is partnering with Fitchburg-based Kegonsa Capital Partners to manage the Badger Fund of Funds, plans to have all of the regional funds established by the end of 2018. The state of Wisconsin awarded $25 million in 2013 to establish the Badger Fund of Funds, which raised another $10 million from the private sector and agreed to create six to eight venture capital firms across the state. So far, it has established the Idea Fund of La Crosse, Winnebago Seed Fund LP in Neenah and Rock River Capital Partners Fund I, which is based in Madison.
The ideal fund manager is someone with relevant experience and capabilities who has experience in fund management or angel investing, or has a helpful skillset like sales and marketing. Managers also must be passionate about assuring the funds succeed, Birk said.
“If you look at the raw materials and potential that’s here, we’ve got a long way to go,” Birk said. “This doesn’t just happen overnight—it’s generations. It’s like a 15- or 20-year deal, and that’s hard for a lot of states and politicians to understand. It should be an essential part of any good economic plan for the state.”