Wisconsin startup investments have nearly doubled in five years

Funds raised up 31%

The number of investments in Wisconsin startups has nearly doubled over the past five years, according to a new report from the Wisconsin Technology Council.

Baker, Arida, Schedler, Kaas, Walker, Trotter and Horne discuss their venture capital funds at the Wisconsin Entrepreneurs’ Conference in Madison.

The Wisconsin Portfolio shows at least 137 Wisconsin early stage companies raised investment capital last year, up 7 percent year-over-year and nearly twice the number of deals as in 2011, when 76 companies received early stage funding. The state’s startups raised $276.2 million in 2016, up 31 percent from $209.5 million in 2015, but down from $346.2 million in 2014.

WTC tracked public reports, filings, surveys and its Tech Council Investor Networks to formulate the totals. The largest deals in 2016 were $21.5 million raised by Madison-based Propeller Health, $21.3 million garnered by Madison-based Midwestern BioAg, $15.2 million that went to New Richmond-based Engineered Propulsion Systems, $11.5 million raised by Janesville-based SHINE Medical Technologies and $11 million pulled in by Madison-based Eatstreet.

The average 2016 deal size was more than $2 million, up 25 percent from 2015.

Tom Still, president of WTC, revealed the new report as he kicked off the organization’s Wisconsin Entrepreneurs’ Conference Tuesday in Madison with a panel discussion about the state’s venture capital funds.

“There was a time in Wisconsin where this panel discussion wouldn’t have taken place, simply because there wouldn’t have been this many new funds in the state,” Still said. “So this is a healthy sign, right off the bat, about what’s going on in Wisconsin.”

Panelists were George Arida of Madison-based 30Ventures, Greg Baker of Madison-based Bascom Ventures, Jonathon Horne of Idea Fund of La Crosse, Brian Kaas of Madison-based CMFG Ventures, Craig Schedler of Milwaukee-based NM Future Ventures, David Trotter of Neenah-based Winnebago Seed Fund and Andy Walker of Madison-based Rock River Capital Partners.

Horne said the Idea Fund, which has raised $12 million, has a number of companies under due diligence and will be announcing its first investments soon.

“My phone has not stopped ringing from entrepreneurs across the state,” said Trotter, who just closed an $11 million raise.

Walker said Rock River’s fund is $25 million from 12 to 15 investors, and will focus its early-stage investments in a company’s second or third rounds.

Idea Fund, Rock River and Winnebago all are part of the Badger Fund of Funds project and must make their investments in Wisconsin companies.

CMFG Ventures, on the other hand, was launched 18 months ago by CUNA Mutual Group and has already invested $45 million in eight early stage companies nationwide, none of which are in Wisconsin, Kaas said.

CMFG and NM Future Ventures, which also has not made any Wisconsin investments yet, are part of a trend toward corporations jumping into the venture capital game.

“Our fund is geography agnostic and right now, our portfolio is primarily on the coasts,” Schedler said. “I spend way too much time on airplanes so I’m very much, like Brian, looking forward to investing in companies closer to home.”

The panelists also addressed the nagging problem of the “valley of death” in funding startups in Wisconsin. While the seed round is relatively easy to raise, many startups struggle to get additional investment beyond that stage.

“There is a real regional strength here in the state. You look at what comes out of UW-Madison, -Milwaukee, the other institutions here—there’s a lot going on,” Arida said. “There’s not a lot of follow-one capital. There has been a disproportionate surge in seed investing relative (to later stage investment).”

“That’s what we’re doing is trying to promote what’s happening and what’s going on here in the state,” Kaas said.

“The one thing Wisconsin does not have, as far as I can tell, is a lack of entrepreneurs,” Horne said. “There’s a total mismatch between the results we’ve gotten and the quality of entrepreneurs on the ground here.”

The WTC early-stage funding report did differ considerably from a report released in January by PricewaterhouseCoopers and CB Insights, which showed venture capital deals decreased by 8 percent in Wisconsin in 2016. That report found Wisconsin companies completed 21 deals for $112.8 million, down from 33 deals at $122.8 million in 2015.

The PwC Money Tree report included only verifiable funding from venture capital backed firms into private companies. It did not include business development or research and development arrangements, loans or government funding.

The number of investments in Wisconsin startups has nearly doubled over the past five years, according to a new report from the Wisconsin Technology Council.

Baker, Arida, Schedler, Kaas, Walker, Trotter and Horne discuss their venture capital funds at the Wisconsin Entrepreneurs’ Conference in Madison.

The Wisconsin Portfolio shows at least 137 Wisconsin early stage companies raised investment capital last year, up 7 percent year-over-year and nearly twice the number of deals as in 2011, when 76 companies received early stage funding. The state’s startups raised $276.2 million in 2016, up 31 percent from $209.5 million in 2015, but down from $346.2 million in 2014.

WTC tracked public reports, filings, surveys and its Tech Council Investor Networks to formulate the totals. The largest deals in 2016 were $21.5 million raised by Madison-based Propeller Health, $21.3 million garnered by Madison-based Midwestern BioAg, $15.2 million that went to New Richmond-based Engineered Propulsion Systems, $11.5 million raised by Janesville-based SHINE Medical Technologies and $11 million pulled in by Madison-based Eatstreet.

The average 2016 deal size was more than $2 million, up 25 percent from 2015.

Tom Still, president of WTC, revealed the new report as he kicked off the organization’s Wisconsin Entrepreneurs’ Conference Tuesday in Madison with a panel discussion about the state’s venture capital funds.

“There was a time in Wisconsin where this panel discussion wouldn’t have taken place, simply because there wouldn’t have been this many new funds in the state,” Still said. “So this is a healthy sign, right off the bat, about what’s going on in Wisconsin.”

Panelists were George Arida of Madison-based 30Ventures, Greg Baker of Madison-based Bascom Ventures, Jonathon Horne of Idea Fund of La Crosse, Brian Kaas of Madison-based CMFG Ventures, Craig Schedler of Milwaukee-based NM Future Ventures, David Trotter of Neenah-based Winnebago Seed Fund and Andy Walker of Madison-based Rock River Capital Partners.

Horne said the Idea Fund, which has raised $12 million, has a number of companies under due diligence and will be announcing its first investments soon.

“My phone has not stopped ringing from entrepreneurs across the state,” said Trotter, who just closed an $11 million raise.

Walker said Rock River’s fund is $25 million from 12 to 15 investors, and will focus its early-stage investments in a company’s second or third rounds.

Idea Fund, Rock River and Winnebago all are part of the Badger Fund of Funds project and must make their investments in Wisconsin companies.

CMFG Ventures, on the other hand, was launched 18 months ago by CUNA Mutual Group and has already invested $45 million in eight early stage companies nationwide, none of which are in Wisconsin, Kaas said.

CMFG and NM Future Ventures, which also has not made any Wisconsin investments yet, are part of a trend toward corporations jumping into the venture capital game.

“Our fund is geography agnostic and right now, our portfolio is primarily on the coasts,” Schedler said. “I spend way too much time on airplanes so I’m very much, like Brian, looking forward to investing in companies closer to home.”

The panelists also addressed the nagging problem of the “valley of death” in funding startups in Wisconsin. While the seed round is relatively easy to raise, many startups struggle to get additional investment beyond that stage.

“There is a real regional strength here in the state. You look at what comes out of UW-Madison, -Milwaukee, the other institutions here—there’s a lot going on,” Arida said. “There’s not a lot of follow-one capital. There has been a disproportionate surge in seed investing relative (to later stage investment).”

“That’s what we’re doing is trying to promote what’s happening and what’s going on here in the state,” Kaas said.

“The one thing Wisconsin does not have, as far as I can tell, is a lack of entrepreneurs,” Horne said. “There’s a total mismatch between the results we’ve gotten and the quality of entrepreneurs on the ground here.”

The WTC early-stage funding report did differ considerably from a report released in January by PricewaterhouseCoopers and CB Insights, which showed venture capital deals decreased by 8 percent in Wisconsin in 2016. That report found Wisconsin companies completed 21 deals for $112.8 million, down from 33 deals at $122.8 million in 2015.

The PwC Money Tree report included only verifiable funding from venture capital backed firms into private companies. It did not include business development or research and development arrangements, loans or government funding.

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