By Tom Still
MADISON – American Family Insurance leader Jack Salzwedel is the first to admit major companies aren’t always quick on their feet when it comes to innovation. In fact, as he told a business-savvy crowd Thursday, a lack of nimbleness was crimping American Family’s bottom line in the mid-2000s.
Today, the Fortune 500 company is a testament to how “BigCos” can creatively disrupt themselves – and help a lot of emerging firms in the process.
Salzwedel spoke during the closing session at the annual Wisconsin Early Stage Symposium, an annual event that connects angel and venture capitalists with young companies. A record number of attendees saw scores of emerging companies and investors over two days.
Known as “AmFamJack” because of his social media footprint, Salzwedel described the company’s evolution from humble roots in 1927 to one of the nation’s leading insurers. By the mid-to-late 2000s, he noted, revenues had flattened, in part because of the recession but also because American Family “needed to innovate again.”
Through strategic acquisitions and other ways to fit “new streams into the mainstream,” Salzwedel said, revenues for the extended enterprise have grown each year since 2011.
Among those strategies was the addition of AmFam Ventures, one of the first corporate venture funds to be created within the U.S. insurance industry. It launched in 2013 as a $50-million fund to invest in early stage companies and now has board authorization to grow to $250 million, Salzwedel said. It primarily invests in big data, insurance innovation and parts of the “Internet of Things,” such as connected homes and cars.
The company is also among the prime supporters of StartingBlock Madison, an accelerator to be built on the city’s near East Side. Its “Dream Bank” location on Capitol Square is often used by entrepreneurs and the company has also co-invested with others, such as Microsoft Ventures.
Unfortunately for Wisconsin, it’s not a common story.
While there are some other examples of legacy companies choosing to invest in emerging companies, especially those in their own backyards, it is not yet a trend.
Examples include the new CMFG Fund at CUNA Mutual, Direct Supply’s investments in related health-care companies and selected investments by Logistics Health Inc. and Kimberly Clark. While other BigCos may be investing in early stage companies, they’re mostly quiet about it.
The investment climate in Madison for early stage companies is relatively strong, as a number of investors noted during the Early Stage Symposium. The same is not true in Milwaukee, where much of the early stage money is clustered at the angel network or small fund end of the spectrum. Most national venture investors in have yet to find their way to Milwaukee.
One approach that could help is for more BigCos in Milwaukee to take the lead in forming what is commonly called a “fund of funds,” a vehicle for pooling capital and investing in emerging firms.
One model in a comparable Midwest city is Cintrifuse. Established by the business community in Cincinnati, Ohio, Cintrifuse is a non-profit organization that has created a syndicate fund to invest in venture funds that have an interest in backing young companies in the region and beyond. It has nearly 30 corporate, foundation and academic investors, including Proctor & Gamble, Kroger and Western & Southern.
It grew out of business community leadership and a sense that Cincinnati’s future rested not only with legacy companies, but with new companies that might arise close to home.
Milwaukee has that cadre of major companies. It has experienced investors in the angel and small fund end of the spectrum. Increasingly, it has the right technical talent and ideas. What’s needed is a shared sense of urgency about reinvesting in the city and the region. Perhaps corporate leaders such as Jack Salzwedel or those in Cincinnati will emerge in Milwaukee, too.