By Tom Still

MADISON — One of the enduring gripes
about Wisconsin’s startup and scale-up climate has been the lack of
enough angel and venture capital.

Perhaps we’ll look back on 2014 as the year Wisconsin finally turned the corner.

least 113 Wisconsin early stage companies raised investment capital in
2014, a 31 percent jump from the prior year, when 86 companies landed
angel or venture dollars.

More than $346 million was raised by those 113 companies, nearly three times more than the 2013 total of about $128 million.

if 2014’s six largest deals in terms of dollars invested are taken out
of the mix, the remaining 107 companies collectively raised more than
$112 million – still approaching the 2013 dollar mark. Those six deals
included SHINE Medical Technologies ($127.4 million), Renaissance
Learning ($40 million); CorvisaCloud ($30 million); Propeller Health
($14.5 million); Comply365 ($12 million) and EatStreet ($10 million).

Read this commentary in the Wisconsin State Journal here.

numbers come from the “Wisconsin Portfolio,” an annual report of the
Wisconsin Technology Council and its Wisconsin Angel Network. The
publication gathers data from public reports, filings, and surveys of
investors to produce a comprehensive look at angel and venture deals in

Was 2014 an investment fluke? Probably not… for many reasons.

  • The
    rise in deals and dollars aligned with the fact that more early stage
    networks and funds were active in 2014 than in prior years. The WAN
    tracks 35 active networks or funds in Wisconsin, up from six in 2005.

  • Many
    of those groups were “serial investors” in 2014. Wisconsin Investment
    Partners – the Madison-based group ranked among the 12 most active angel
    groups in the nation, did more deals in 2014 than in 2013. Others that
    invested in multiple Wisconsin companies last year were Venture
    Investors, Golden Angels Investors, CSA Partners, Gener8tor, Chippewa
    Valley Angel Investors Network, American Family Ventures and NEW Capital

  • Out-of-state investors continued to find
    strong valuations and competitive operating costs in Wisconsin.
    Investors from Illinois, Massachusetts, New York, North Dakota,
    Minnesota, Ohio and California were among those engaged in 2014 deals.

  • Thirty-eight
    Wisconsin companies raised at least $1 million from investors in 2014,
    up from 27 in 2013. That’s a sign deal sizes are growing.

  • The
    entire upper Midwest appears to be a hotbed for early stage deals,
    particularly angel deals. The Angel Resource Institute recently reported
    that the Great Lakes region, which includes Wisconsin, was second in
    the nation in total deals – only behind perennial leader California.

  • Companies
    earning investments were diverse in terms of their sectors, which
    speaks well of Wisconsin’s growing tech expertise. Deals covered digital
    health, consumer products, biotechnology, medical devices, software,
    advanced manufacturing and more.

  • Finally, and perhaps most important, 2015 deal activity appears roughly on par with last year.

course, angel and venture investing is risky … and notoriously
cyclical. Many factors, including government indifference to the tech
sector, could set back the clock.

The budget just passed by the
Wisconsin Legislature and awaiting Gov. Scott Walker’s signature is a
prime example. Left on the cutting room floor was a provision to
increase – for the first time in 10 years – the amount of money that
could be invested in any single company to qualify for early stage tax

The current maximum is $8 million in eligible
investments, which yields total credits of $2 million for investors.
Walker’s proposal would have raised the threshold to $12 million, making
$3 million in credits available to investors in any single company.

provision was knocked out of the budget because lawmakers thought it
was too costly; about $3 million in the first year, $2 million in the
second and about $1 million per year after that. Those estimates
overlooked that early stage companies generate jobs and economic
activity – and tax revenues for the state. Every state dollar invested
in the early stage tax credit program (a record $12.8 million in 2014)
attracts $14 in private investment, according to the Wisconsin Economic
Development Corp.

Wisconsin isn’t California or Massachusetts
when it comes to angel and venture investment, nor will it ever be.
However, it is building a stronger support system for young companies
and investors who know how to find the most promising deals. That
combination can help ensure a cycle with more booms than busts.