By Tom Still

MADISON, Wis. – It was symbolic of changing times in the state’s early stage investment world that seven managers of new funds took the stage to open the 15th annual Wisconsin Entrepreneurs’ Conference.

The next day as the conference closed, about 30 investors got together to talk about companies they are helping to finance – and to pitch their colleagues on why they should consider putting dollars into the deals, too.

The early stage investing scene in Wisconsin is getting more robust, although Wisconsin remains in no danger of overtaking California, Massachusetts or New York as a venture capital hub.

In fact, if Wisconsin were to match a typical year’s angel and venture capital activity in Michigan, Utah or Colorado, that alone would be an accomplishment.

The latest “Wisconsin Portfolio,” an annual report by the Wisconsin Technology Council, provides statistical evidence of what many observers of the early stage economy already suspected. There are more deals taking place in Wisconsin as more promising, high-growth companies are launched.

The Wisconsin Portfolio showed that investments in early stage companies – startups and other companies in their early years – have nearly doubled over five years, from 74 in 2012 to 137 in 2016.

At least 137 Wisconsin companies raised investment capital last year, up 7 percent from 2015. Those same companies raised a total of $276.2 million. The five largest deals exceeded $10 million each; 53 companies raised $1 million or more (up from 46 in 2015); and the average deal size was $2 million, up from $1.6 million in the previous year.

The 25 percent jump in average deal size was one of several indicators that companies raised money far beyond the “friends, family and founders” stage in 2016.

Wisconsin has been a strong angel capital state since 2005, when Wisconsin’s Qualified New Business Venture program and its affiliated tax credits for investors was enacted. That program has since been emulated in dozens of states.

Until recently, angel investors claimed most of the credits because they were doing the hard work of finding young companies that needed early cash. In 2016, about half of the state credits went to angels and half to venture capital firms, which indicated many of those young companies have matured enough to attract what investors call “Series A” money.

For 39 percent of early stage companies that secured funding in 2016, it was their first time doing so. For 61 percent of emerging companies that raised money last year, it was at least their second time at the dance.

Beyond the report, which was based on public data, announced deals and a survey of investors, there is plenty of anecdotal evidence that Wisconsin is no longer a flyover state when it comes to investment capital.

The seven funds represented in the opening session of the conference have all come on the scene within the past year: The Idea Fund of La Crosse, the Winnebago Seed Fund, Rock River Capital Partners, Bascom Ventures, CMFG Ventures, NM Future Ventures and 30Ventures. They vary in fund size, scope and sectors of interest, but each manager reported seeing higher-quality companies emerging in Wisconsin and the Upper Midwest.

In late 2004, the Tech Council became the home for what was then called the Wisconsin Angel Network. It had six members. Today, the Tech Council Investor Networks tracks more than 40 networks or funds in Wisconsin.

Along with most of the nation, Wisconsin is still an also-ran when it comes to venture capital.

During a conference discussion on the idea of a “corporate fund of funds” for Wisconsin, John Neis of Madison-based Venture Investors noted than 82 percent of all venture capital under management can be found in three states: California, Massachusetts and New York. The challenge, agreed Neis and Dan Einhorn of Milwaukee-based Capital Midwest Fund, is to become a leader among states that lie within the coasts.

In Michigan, for example, the 2008 creation of a private corporate “fund of funds” to attract outside VCs has elevated that state from flyover status to top 10 in many categories.

More young companies in Wisconsin are finding angel and venture capital than ever before. Increasingly, out-of-state investors are finding Wisconsin. In a competitive national landscape, however, there’s still a lot of room for growth.