By Tom Still
WAUWATOSA – BrightStar Wisconsin Foundation isn’t your
father’s venture capital fund. Self-described as a “venture philanthropy”
group, BrightStar is a non-profit organization that makes investments in
emerging companies without any expectation the fund’s donors will turn a
profit.
In fact, if BrightStar makes money on any of its six
investments thus far in Wisconsin, it will pump it back into other emerging
companies in the form of future investments.
The creation of BrightStar in late 2013 is the latest
example of innovation in a sector that historically invests in innovation –
angel and venture capital. As Wisconsin works to increase the number of startup
companies in the state, funds and networks such as BrightStar will be a big
part of making it happen.
Read this column in the Wisconsin State Journal here.
In addition to its non-profit, job creation mission,
BrightStar’s model is based on co-investing with other funds or networks. With
an average investment of $100,000 so far, BrightStar is not taking the lead on
any deal – at least, not yet, according to portfolio manager Todd Sobotka. That
means BrightStar is focusing on deals already vetted by other investors,
whether in Wisconsin or beyond.
“Co-investing is core to what we do,” Sobotka told a recent
meeting of the Wisconsin Innovation Network in Wauwatosa.
BrightStar’s investment in Fishidy, a fishing social media
company, built upon an investment in the Madison-based firm by Hyde Park Angels
in Chicago and Central Illinois Angels in Peoria. It’s just one example of how
Wisconsin investors are increasingly looking outside the state for syndication
partners, especially in deals that may require more money.
The Wisconsin Technology Council and its Wisconsin Angel
Network annually chart the state’s angel and venture deals. In 2012 and 2013,
160 such deals involved startups that raised a few thousand dollars to
companies that attracted tens of millions of dollars. Nearly 70 of those 160
deals involved at least one investor from outside Wisconsin, and sometimes
outside the country.
There are only a handful of venture capital funds in
Wisconsin, but all of them co-invest with others beyond Badger state lines.
Calumet Venture Fund has five portfolio companies with three
out-of-state investors – Hummer Winblad and Zetta Ventures in California’s
Silicon Valley, and Baird Capital in Chicago.
Kegonsa Capital recently partnered with Sun Mountain
Capital, a fund-of-funds based in New Mexico, to win a state contract to manage
$25 million to be matched by private venture dollars. The contract was approved
May 6 by the Legislature’s Joint Finance Committee.
When the Wisconsin Alumni Research Foundation and the State
of Wisconsin Investment Board financed the $30-million 4490 Fund, the first
step was hiring a manager with Silicon Valley experience to help shop homegrown
deals on the coasts.
Funds such as New York-based Great Oaks Ventures have
regular feet on the ground – and four investments – in Wisconsin. Ohio-based
Drive Capital, started by investors with Silicon Valley ties, is poised to
invest here. Other recent out-of-state investments have come from Chrysalis
Ventures, Arboretum Ventures, Great Point Partners, Open Prairie Ventures, HLM
Ventures, Summit Partners and more.
Oh, yes, a little group called Google Capital recently
invested $40 million in Renaissance Learning, a Wisconsin Rapids firm that
quickly sold for $1.1 billion.
A number of these funds and others from outside the state
have attended early stage events in Wisconsin over time, such as the June 3-4
Wisconsin Entrepreneurs’ Conference in Madison.
Venture Investors LLC, the state’s largest venture capital
fund, has co-invested with more than 80 VCs over the course of its five funds.
The list includes 12 California funds (five at least twice), 11 East Coast
funds (four at least twice), four Texas funds, five international funds, eight
corporate funds and many Midwest funds.
“Since there are some few firms in the state, we have no
choice but to syndicate with firms outside the state,” said managing director
John Neis, who leads the firm’s healthcare practice.
Does the trend toward co-investing mean Wisconsin
entrepreneurs can expect to see investors from coast-to-coast clamoring to bet
money on their success? That’s not automatically so, based on national figures.
Less than one in 10 business startups in the United States land angel financing
– and less than one in 10 of that subset wind up in a venture capital fund’s
portfolio.
Imposing statistics aside, it’s encouraging that
non-Wisconsin investors are looking at deals in Wisconsin, and investors here
seeking them out. Dollars from outside Wisconsin spend just as well, and
sometimes better, than those that can be found within its borders.
;
