TS Early Ventures offers evergreen option

Techstar, the technology transfer entity created through a partnership between Milwaukee Metropolitan Chamber of Commerce and five southeast Wisconsin universities, is offering a chance to invest in start-up technology companies.
One vehicle already launched and seeking investment is Techstar Early Ventures Fund (TSEV). TSEV offers an opportunity to invest in the Techstar management team in what amounts to what is called an evergreen fund. TSEV intends to raise $5 million in investment, which will be used to pay operating costs of the Techstar organization through until companies it takes equity positions in go public and provide additional working capital. At that point and into the future, TSEV investors will receive a payout on all future public offerings of Techstar-assisted start-ups.
"The way the fund is set up is that as we have liquidity events, we will set aside a percentage of those proceeds," Techstar Partner Scott Zielski said. "The remainder of the money will be distributed to the equity holders in TS Early Ventures. You will see money coming back out of the investment. That is how you get what some people call an evergreen fund."
TSEV and a yet-to-be-launched Techstar Venture Fund – a traditional venture capital fund – target qualified investors. But TSEV has a more modest ante level – a minimum $50,000 investment paid over three years. Those who want to invest over time can pay 10% the first and 22.5% each year thereafter, according to Zielski.
"The minimum has not yet been determined for the venture fund, but most likely will be higher than TSEV," Zielski said. "This will be a typical equity investment – you invest the dollars into the start-up company. That cash is going to stay with the fund for seven to10 years. That’s the typical period within which all your liquidity events happen."
Zielski said sales of the TSEV fund took off right from the start.
"Several people invested in the first 30 days," Zielski said.
Apart from wealthy individuals, Zielski has been presenting to institutional investors including privately held and public companies.
"We have hit across the entire spectrum from firms that are looking at it as an investment to companies that look at this as it is good for Milwaukee to do this," Zielski said. "So far in the last month and a half, we have been concentrating on the local players and giving everyone who is local a chance to participate before we look outside the area."
Zielski said it was unlikely the fund would be closed out before the end of the year, but said he was optimistic that Techstar would hit its $5 million nut in the first quarter of 2003.
Dec. 6, 2002 Small Business Times, Milwaukee