Growth Spurt for Venture Capital?

A venture capital initiative in Wisconsin may be funded by a combination of a CAPCO program and fund of funds program.

In the venture capital arena, Wisconsin has long been a laggard.

Despite some growth in its venture capital pool during the last 25 years, Wisconsin still ranked just 25th among all states in 2010, with $234 million under management, according to the National Venture Capital Association’s Yearbook 2011.

Wisconsin ranks 20th in population, U.S. Census Bureau data shows.

The state’s dearth of venture capital has stifled the growth of many young companies, said John Neis, a managing director of Madison’s Venture Investors, one of Wisconsin’s most active venture capital firms.

“We have so many companies that stall out in their development process or raise inadequate capital and put themselves at a competitive disadvantage because they can’t go as quickly as their competitors can,” Neis said.

That may be about to change.

Along with a significant state-sponsored initiative, at least six groups are in various stages of fundraising that appear ready to deploy some of their capital in the state.

Wisconsin lawmakers may introduce a bill as soon as this week that would initiate $400 million of venture capital investments over time — half for early-stage companies and half for later, growth-stage companies, said state Sen. Randy Hopper (R-Fond du Lac), chairman of the Senate Committee on Economic Development.

“We’re likely to introduce another tool in delivering on the governor’s promise to create 250,000 jobs in this state. This is really going to give us the ability to help those early-stage companies grow in our state,” Hopper said.

Hopper declined to provide more details, such as how the investment would be funded.

A memo written in January by Jason Culotta, Gov. Scott Walker’s economic development adviser, suggested the venture capital initiative might use a combination of a certified capital companies program and a fund of funds program. A CAPCO program would tend to distribute the money more quickly; a fund of funds program would take longer but would more likely lure out-of-state venture capital firms to invest here.

Private sector

The state effort isn’t the only game in town.

A new crop of venture capital investors — some experienced financiers looking to raise additional funds and some new entrants — is building mass, according to numerous sources, many of whom did not want to be identified.

Venture Investors, Madison, is raising a new fund that sources say will likely be $150 million or more. Neis, of Venture Investors, declined to comment.

Among other funds known to be forming are four that sources say are raising anywhere from $15 million to $100 million:

–Wisconsin Early Stage Fund, Milwaukee, is being formed by Dan Steininger and John Torinus, of BizStarts Milwaukee, and Tom Schuster.

–Capital Midwest Fund, Wauwatosa, is run by Stephen Einhorn, Teresa Esser, Daniel Einhorn and Alvin Vitangcol.

–Calumet Venture Fund, Madison, is run by Guild .com founder Toni Sikes, Judy Owen and Tim A. Williams.

–Rose Ventures has offices in Madison and Boston and is connected with Stan Rose, a biologist who was chief executive officer of the former NimbleGen Systems.

Others also are providing more capital.

Geo Investors Funds is managed by Global Infrastructure Asset Management LLC and has offices in Madison and Chicago. It is looking to provide debt financing for the build-out and commercialization of targeted renewable energy projects.

Tom Shannon headed Prodesse Inc., a Waukesha biotech company bought by Gen-Probe Inc. of San Diego in late 2009 for a price that has risen to $70 million.

A major Prodesse stakeholder, Shannon is putting some of the proceeds into other start-ups, including Shamrock Energy Corp., an Oshkosh company using nanomaterials to develop better ways to store and use energy. Shamrock, the first-ever spinoff from the University of Wisconsin-Oshkosh, said in February it had raised $580,000 from angel investors.

Investors are interested in the Midwest “because of all the research dollars at academic institutions and the lack of venture capital money chasing those innovations,” said Bryan Renk, executive director of BioForward, Wisconsin’s biotech industry trade association.

Wisconsin companies raised $122.2 million of venture capital in 2010, which ranked 21st among all states, according to the National Venture Capital Association’s yearbook. Much of that was pulled in by two companies, though. Virent Energy Systems Inc. raised $46.42 million and Cellular Dynamics International Inc. raised $40.6 million.

With additional venture capital in Wisconsin, entrepreneurs would have more places to turn for financing and investors would have more opportunities for co-investing in the state and with out-of-state investors, said Tom Still, president of the Wisconsin Technology Council in Madison.

“Once all is said and done, Wisconsin will have a much healthier entrepreneurial climate from top to bottom,” he said. “And that should translate into more jobs.”


Under a CAPCO program, the state gives tax credits to insurance companies in exchange for cash. The state hires private companies to invest those funds in qualifying businesses.


Under fund of funds programs, the state hires a manager to deploy capital to established venture funds. Other states have done this through their state pension funds by creating a public-private partnership funded by taxpayer guarantees. Another approach is to create a partnership in which the state offers investor tax credits to encourage investment and the private sector raises the funding.

View original article.