Wisconsin has a historic new fund for investing in entrepreneurs, and two-thirds of it will be administered by venture capital funds based in Madison.
The Wisconsin Investment Fund, announced Wednesday by Gov. Tony Evers and the Wisconsin Economic Development Corporation (WEDC), will bring $100 million, split evenly between private and public dollars to startup businesses statewide, with a focus on “diverse businesses” and “companies located in underserved areas of investment.”
“The Wisconsin Investment Fund will be the biggest public-private investment in Wisconsin startups and entrepreneurs in our state’s history,” Evers said at a press conference Wednesday, May 29 at Madison’s Forward BIOLABS, a nonprofit co-working laboratory facility designed to help science businesses get started.
Half of the initial investment will come from the federal dollars awarded to the state through the U.S. Treasury’s State Small Business Credit Initiative. The other half will be raised by the six venture capital firms the state selected to administer the first round of funds, which must match the public investment they receive dollar for dollar.
Of the five venture capital firms selected so far, three have headquarters in Madison. In total, they’ll receive $33 million of the $50 million public investment.
HealthX Ventures, based in Madison, will get $15 million. The fund “invests in innovative companies making healthcare safer, more efficient, and more affordable by delivering easy-to-use, cost-effective, and scalable solutions to the market,” according to a press release from the governor’s office.
“Wisconsin has a strong healthcare ecosystem, and this fund will provide great opportunities for health-related startups in Wisconsin seeking to build off of it,” HealthX Ventures founder and managing director Mark Bakken said in the press release.
Mark Bakken is founder and managing director of Madison-based HealthX Ventures, which will administer $30 million of the Wisconsin Investment Fund, a new $100 million public-private investment fund.
NVNG Investment Advisors, which has headquarters in Madison and Milwaukee, will receive $6 million. The fund is “dedicated to making Wisconsin’s startup ecosystem globally competitive.”
And Venture Investors Health Fund, based in Madison and Milwaukee, will receive $12 million. The fund “focuses on commercializing early-stage healthcare innovations developed in the world-class research universities of the U.S. Midwest,” including medical devices and therapeutic, digital health and diagnostic products.
Also administering funds are the Idea Fund of La Crosse, which will receive $5 million, and Serra Ventures, based in Champaign, Illinois, which will receive $7 million.
The Idea Fund invests in pre-revenue and early-stage technology companies in Wisconsin, Minnesota and Iowa, with a focus on “software startups serving diverse markets.” Serra Ventures invests in “early-stage, emerging, and growth-stage” technology companies, including projects “offering novel solutions for the world’s biggest problems in agriculture and food.” Though Serra Ventures invests in businesses across the U.S., it will invest these new dollars exclusively in Wisconsin.
WEDC is still in negotiations with a sixth, unnamed firm, which will administer the remaining $5 million.
WEDC predicts that the initial investment will generate at least $500 million in impact. “The Wisconsin Investment Fund is literally planting a flag in the ground and saying we want to support entrepreneurs who want to start here, who want to grow here, and most importantly, who want to stay here,” WEDC secretary and CEO Missy Hughes said at the press conference.
The first $100 million is “only the beginning,” Evers said, noting that the state anticipates the fund will “grow exponentially” and that private dollars will eventually outnumber public dollars 10 to one. That’s because returns on the state’s investment, earned when fund managers sell shares of the companies they’ve invested in, will be reinvested in the fund to “generate more capital and fund even more promising Wisconsin companies,” according to a press release from the governor’s office.
“As the businesses that receive these investments start to grow, the value of the fund will grow with them, and this will create new opportunities to help even more businesses expand,” Evers said.
The new fund follows the creation of the Badger Fund of Funds in 2013, which put $25 million of state money aside for venture capital investment.
Focus on diverse businesses, biohealth
The federal program that provided the $50 million requires that the investments target diverse and underserved businesses. Investments will likely include companies in technology, healthcare, agriculture and manufacturing sectors, and at least $27 million will go to businesses working in the state’s growing biohealth sector, according to a press release.
“This is an exciting opportunity for entrepreneurs across Wisconsin who maybe didn’t fit into the already-existing investment streams,” said Heather Wentler, co-founder and executive director of Doyenne Group, a Madison-based nonprofit dedicated to supporting women entrepreneurs. “More investment dollars in our state is just a win for entrepreneurs and startups across our state.”
One of the first businesses to receive investments through the fund is Cardamom Health, a Madison startup providing information technology services for the healthcare industry.
“Access to capital is critical,” CEO Vivek Swaminathan said at the press conference, explaining that he’s sometimes had to delay important decisions until “we can finally afford to make them, instead of when it’s really right for our business.”
Carly Hochstein and Juan Pablo Gomez Postigo work at Sprocket Security, a Madison-based cybersecurity startup.
The new funds will allow Cardamom to hire and train employees, and to improve and expand its services. “If we can do all of that, we can grow our business and ultimately make a greater impact,” , said Swaminathan, who did not state how much the company received. “We take this investment … very seriously, and we’re committed to make this a win for everyone.”
The biohealth focus is of particular interest to Lisa Johnson, CEO of biohealth industry advocacy group BioForward. Her group spearheaded last year’s successful effort to get the federal government to designate Wisconsin as a “Regional Technology Hub” for personalized medicine and bioheath technology. She’s now waiting to hear whether the U.S. Economic Development Agency also awards funds to advance those industries in Wisconsin, which could put as much as $75 million behind the projects the team proposed in its application.
The investment fund is “a big deal” for those working on that effort, she said. “This really assists and gives further credibility to our proposal for the tech hub, that the state of Wisconsin and also the federal government … is making an investment into Wisconsin and early-stage companies.
“It’s just so exciting just to see this like all coming together in Wisconsin.”
The fact that the public funds have to be matched by private dollars will convince investors to take a bit more risk, said Daniel Guerra Jr., CEO of Madison-based Altus Inc., which runs accelerator programs and a venture studio for entrepreneurs.
“Wisconsin is a really well-off state, it’s just that we’ve got Midwestern caution,” Guerra said. “What (the fund) is going to help do is pull that money off the bleachers and deploy it into entrepreneurs to really build our economy.”
