While small, Wisconsin venture capital community is growing


Andrew Walker, Ross Leinweber, Jonathon Horne, Richelle Martin, Dan Brooks and David Trotter discuss the Badger Fund of Funds with Tom Still at the Wisconsin Entrepreneurs’ Conference in June.

Larger, later-stage venture capital investments are all the rage these days on the East and West coasts, with startups in Silicon Valley seeing megadeals topping $100 million. While entrepreneurs in Wisconsin raise more modest funding rounds, the momentum in the venture capital community has been growing.

According to a Venture Monitor report by Pitchbook and the National Venture Capital Association, Wisconsin saw 22 venture capital deals in the second quarter totaling $101.8 million. That’s up from 2017’s second quarter, when there were just nine venture capital deals in Wisconsin.

Andrew Walker, Ross Leinweber, Jonathon Horne, Richelle Martin, Dan Brooks and David Trotter discuss the Badger Fund of Funds with Tom Still at the Wisconsin Entrepreneurs’ Conference in June.

Still, the Great Lakes region accounted for just 7.9 percent of U.S. deals in the second quarter, and 3.4 percent of deal value, the Venture Monitor report said.

According to the Wisconsin Technology Council, which tracks SEC filings, public reports and tax data and surveys investors, fewer Wisconsin startups (127 of them) raised investment capital in 2017 and total funding decreased to $231 million from $276 million in 2016, but it was still the second-highest annual total ever in Wisconsin.

In the first portion of 2018, WTC had tracked 32 Wisconsin deals totaling about $51 million, which is behind the pace of 2017 as of June. But WTC president Tom Still is optimistic.

“I believe the word is spreading that Wisconsin has the good ideas, the talent to carry them out and the cost of doing business that helps pay for everything in the long run,” he said.

At the same time, the number of Wisconsin venture capital funds awaiting deployment has been growing. Five fund managers involved in the Badger Fund of Funds program have been closing their venture capital funds and beginning to invest them in startups across the state.

In March, Jonathon Horne’s Idea Fund of La Crosse, a $13 million Badger Fund of Fund that closed in July 2017, made its first investment in Madison startup Curate Solutions Inc.

In May, Richelle Martin launched Madison-based BFOF The Winnow Fund with the aim of raising $8 million to $10 million specifically for investing in college student entrepreneurs in Wisconsin. The same month, Ross Leinweber launched Milwaukee-based BFOF Bold Coast Capital Fund I L.P. with the goal of raising $12 million to $15 million to invest in Wisconsin startups.

In June, George Arida began raising an independent $15 million Madison-based fund, 30Ventures Fund I L.P., according to an SEC filing.

Also in June, Andrew Walker and Christopher Eckstrom reached the $21.2 million mark on their BFOF, Madison-based Rock River Capital Partners, with plans to close the $25 million fund by summer’s end.

In July, Neenah-based, $11 million BFOF Winnebago Seed Fund was the lead investor in a $750,000 funding round by Milwaukee startup Socialeads. Winnebago in August made its second investment in Milwaukee-based Sift Medical Data on a round of up to $1.1 million.

“When we launched what was then called the Wisconsin Angel Network in 2004, there were probably a half dozen angel funds or networks in Wisconsin. Today there are more like three dozen,” Still said.

And corporate venture investors have also been active.

In late August, Foxconn Technology Group announced it has formed a Milwaukee-based $100 million corporate venture capital fund along with equal investors Advocate Aurora Health, Johnson Controls International plc and Northwestern Mutual Life Insurance Co. The Wisconn Valley Venture Fund plans to invest in technology startups relevant to its investors’ sectors globally.

Milwaukee-based Northwestern Mutual has also been deploying its $5 million Cream City Venture Capital Fund, with investments this year in Milwaukee startups Socialeads, Lumanu, Wantable and Bright Cellars. And Advocate Aurora is poised to begin deploying its own $5 million Milwaukee-focused fund, InvestMKE.

Seeing the increasing activity, John Neis of Madison-based Venture Investors LLC led a recent effort to relaunch the dormant Wisconsin Venture Capital Association.

“I think it’s indicative of the fact that there are a growing number of funds with dollars to deploy, so you’ve got more active dealmakers in the market,” Neis said.

A combination of factors has driven the increased venture capital activity in the state, including the growing interest in the startup community and the entrepreneurial success stories that encourage others to take the leap, he said.

Neis is currently raising one of the largest venture capital funds in the state, the $100 million Venture Investors Health 6 L.P., according to a May SEC filing.

While Wisconsin’s venture capital community is growing, it still has a ways to go compared to states like California and New York, he said.

“It’s moving in the right direction. Most of the funds in the state are still very small,” he said. “There’s been the megadeal trend that has been occurring out at the coasts. We’re not seeing any of that here.

“We face a continuing challenge of not enough capital available. It’s great to see more dealmakers, it’s great to see more deals attracting money and moving forward.”

“I don’t think anyone is looking for venture capital to suddenly flee from the coasts in a headlong rush to the Midwest, but there are signs there’s more interest here and a growing amount of capital,” Still said.

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Molly Dill, former BizTimes Milwaukee managing editor.

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