By Tom Still

MADISON – Inside the sparkling new offices of Nordic
Consulting, a firm that has grown from a handful of health information
technology experts to 400 employees and more than 90 customers, three venture
capitalists from Boston sat down recently to talk about what they’re seeing in

So far, they said, it’s been worth the trips.

The investors – from Summit Partners and HLM Venture
Partners – have put money and expertise into Nordic, which consults with health
care providers who use Epic Systems software. Because they’re already in town,
those same investors sometimes scout other emerging companies in Wisconsin,
particularly those in health information technology and medical devices.

“Since we’ve invested in Nordic, I’ve probably looked at a
dozen companies in Madison and Milwaukee,” said Yumin Choi, a partner in HLM

Peter Grua, also a partner in HLM Ventures, noted that
Madison today “is similar to where Nashville was 25 years ago” in terms of its
healthcare startup culture. In Nashville, the success of two major companies in
pioneering a nationwide shift from inpatient to outpatient care helped spawn
spinoffs that continue to drive that city’s economy.

“It’s very likely the same events can happen (in Madison),”
Grua said.

Events such as the recent investor forum at Nordic are not
the only examples of venture capitalists from the East and West coasts – and
beyond – finding their way to Wisconsin these days.

Google Capital invested $40 million in Renaissance Learning,
the educational software company based in Wisconsin Rapids, in February and the
company was sold to a private equity firm within a month for $1.1 billion –
more than twice its acquisition price only three years ago.

Investors from Illinois, Minnesota and New York are
increasingly showing up in deals in Wisconsin, especially around software
companies and a variety of digital products.

TechCrunch, a news site focused on information technology
companies, recently carried a story headlined: “For Tech Investors, the Midwest
is Flyover Country No More,” with a reference to Madison and “a slew of
acquisitions and public offerings from Wisconsin.”

So, what’s happening to capture the attention of investors
who previously couldn’t find Wisconsin on a map? There’s no single answer, of
course, but several factors are helping to raise the profile.

– Long known for biotechnology innovation, the
state has also developed clusters around health IT, medical devices and
imaging, human resources management, software and more. For investors, that
means more tires to kick when they’re looking to buy.

– Wisconsin’s angel investor corps has grown from
a group that could have met in a telephone booth in the late 1990s to more than
20 groups today, with more forming. The state’s investor tax credit law and the
creation of the Wisconsin Angel Network to help share information about deals
have both helped.

– As with almost any business, access to talent is
vital to tech investors. World-class computer science and electrical
engineering schools at the UW-Madison and other colleges are a part of that
picture, as well as the availability of former Epic and Sonic Foundry employees
who leave and wind up working for young companies.

– New technology incubators and accelerators are
part of the state’s pipeline of young companies, not just in Madison and
Milwaukee but in the Chippewa Valley, the Fox Valley and beyond.

– The state of Wisconsin’s $25 million commitment
to a “Badger Fund of Funds” that will eventually attract twice that much in
private investment has signaled that policymakers are willing to invest in
emerging sectors of the economy.

– Overall business costs in Wisconsin can be lower
than they are in other parts of the country, particularly the East and West
coast hubs where most venture capitalists are located. That can lead to deals
that cost less over time.

The investment numbers have yet to tell the story, but
investors from outside Wisconsin are window-shopping much more routinely these
days. The trick is to keep producing the kind of innovative companies that
compel them to stop and buy.