The State of Wisconsin Investment Board has approved an $80 million allocation to a new venture capital “Catalyst Portfolio,” which SWIB believes will help its staff connect both venture capitalists and companies in Wisconsin and the Midwest with national top-tier venture firms.
“Changes in the venture capital environment have created investment opportunities for the State of Wisconsin Investment Board and a chance for SWIB to help connect local venture capitalists and viable local companies with premier venture capital groups,” SWIB officials noted in a news release.
The release noted SWIB should benefit from the investment opportunities that having access to these top tier funds provides. “SWIB’s knowledge of the local venture community should also open doors to capital sources for local companies seeking funds. SWIB plans to leverage these new VC relationships to promote regional venture capital opportunities. As a local investor, SWIB also expects to benefit from a more robust regional venture capital environment.”
SWIB and other pension funds have access to the nation’s top venture capital funds for the first time because these firms are experiencing fund raising challenges as the 2008 financial crisis produced liquidity issues with endowments and foundations, historically active venture capital investors.
This changing market environment has created a supply and demand imbalance between the capital available to fund start-ups and the number of early stage opportunities. SWIB believes this inefficiency will create an environment for good investment returns for funds deployed in the next several years.
“Wisconsin’s start-up environment creates a unique investment opportunity due to the quality and quantity of technology in the state and a lack of investment capital,” said Chris Prestigiacomo, manager of SWIB’s Catalyst Portfolio.
“Relationships are critical to building syndicates that can support the growth of companies, especially in these times when the number of investors is shrinking. We are excited about the new relationships this effort could bring to the table,” noted John Neis, managing director of Venture Investors, one of the leading venture capital firms in the Midwest.
SWIB will hire a consultant in early 2011 to help with a search for a fund manager. The Catalyst Portfolio is expected to be in operation by the second quarter of 2011.
Tom Still, president of the Wisconsin Technology Council, said he was encouraged by SWIB’s $80 million allocation to the Catalyst Portfolio. Leaders of SWIB first previewed the idea in late 2010 during a Wisconsin Innovation Network meeting in Madison.
“This stands to introduce some of the nation’s top-tier venture firms to investment possibilities in Wisconsin,” Still said. “It will be important not only for our emerging companies, but for existing investors who are looking for major co-investors in well-vetted deals.”
The Tech Council’s policy papers have historically argued for more creative ways to boost Wisconsin’s access to venture capital, whether from coastal sources or homegrown firms. The Wisconsin Prosperity Strategy, a report developed for the Wisconsin Economic Summit by a number of groups including the Tech Council, has urged similar steps.
Click here to read a September 2010 white paper by SWIB on venture capital opportunities in Wisconsin and the Midwest.