Wisconsin’s venture capital ecosystem continues to mature in 2019 after the state’s early stage firms raised a record of more than $450 million in venture capital.
Using public reports, filings and surveys, the Wisconsin Technology Council and its Tech Council Investor Networks tracked just north of $454 million invested across 123 companies last year. This is the first time Wisconsin companies surpassed the $400 million mark in a single calendar year.
The largest deals reported were SHINE Medical Technologies ($132 million), NorthStar Medical Radioisotopes ($75 million), Redox ($36.1 million), Fetch Rewards ($25 million), and Fasetto ($20 million).
To an extent, these large funding rounds in 2019 skew the data for the overall growth of Wisconsin’s venture capital ecosystem. However, underlying metrics found in the report reveal last year’s progress in the ecosystem may not be an anomaly.
A five-year rolling average of venture dollars raised in the state still shows a positive trend, increasing by 68 percent since 2015, according to the report. Also noteworthy is that fifty-two companies received first-time funding in 2019, up from 32 in 2018.
“That shows there’s more venture-backed startups being established and grown in the state and that’s promising,” said Matt Cordio, co-founder and president of Skills Pipeline and Startup Milwaukee. “That shows the ecosystem is getting healthier and more robust.”
In 2019, 43 percent of companies (52) raised at least $1 million, which is up from 38 percent in 2018. The data also shows that companies are raising larger sums of capital per round, with median round sizes increasing from $608,000 to $734,000, according to the report.
Another significant trend is the increase in women-owned or led businesses receiving venture dollars, which is now 22 percent compared to 14 percent in 2018. This brings Wisconsin within the national average for funding of women-led or owned businesses, which is between 20 percent to 25 percent.
The two industries in the state that received the most funding continued to be life sciences and information technology, which combined for nearly 66 percent of all deals. Health care, including biotech and IT continued to draw the attention of investors last year, both in number of deals and dollars invested.
Involvement from out-of-state investors continued to play a significant role in funding state companies. Investors from Chicago, Boston, New York and California showed up in about 39 percent of deals in which the investors are known, according to the report.
Wisconsin’s Early Stage Seed tax credit program, which is designed to help companies secure their first $12 million in funding, remained strong in 2019, Daelemans said. However, out of the top 5 funding rounds in 2019, which accounted for $288 million, only $4 million was eligible for tax credits, he added.
“To me, this is a sign the program is doing what it is designed for and it is helping companies cross that funding gap that we talk about a lot,” Daelemans said.
Although data suggests Wisconsin’s venture capital ecosystem has improved in 2019, the state still lags behind other Midwestern states, including those that are considered peer states.
Using PitchBook data, which relies on public documents and private companies to report their funding, Wisconsin had raised $204.8 million in 2019. This number is significantly lower than Wisconsin Tech Council’s report, which is due to the fact that tracking venture capital can be difficult.
However, if we consider PitchBook’s data set, Wisconsin is raising considerably less than Minnesota, which raised $1.2 billion in venture capital in 2019. Last year, Indiana raised $376 million while Michigan raised $771 million in venture capital, according to PitchBook data.
Again, the data does not account for all venture capital raised in each state due to the difficult nature of accurately tracking deals among angel and investor networks.
“Wisconsin is headed in the right direction, but when you look at our peers that have figured out how to build robust startup ecosystems, we still have a lot of work to do,” Cordio said.