It’s a grand vision: As many as 12 venture capital funds
investing a combined $100 million into more than 100 companies across various
industries, technologies and locations in Wisconsin.
Ken Johnson, one of the state’s most successful venture
capitalists, devised the Badger Fund of Funds to
make that vision a reality. Seeded with $25 million in state dollars, the fund
is raising additional private money and hopes to begin operating in the first
quarter of 2015, Johnson said.
Read this story in the Milwaukee Journal Sentinel here.
Along with making money and creating jobs, Johnson wants to
develop a new generation of venture fund managers, and he believes that the
strategy of making modest investments in many small companies can succeed.
The success of a modest investment in Idle
Free Systems Inc. provides a snapshot of how his strategy
Idle Free’s technology helps truckers eliminate idling to
power heaters, air-conditioning units and televisions they use in their cabs
when parked. The technology was developed by former
over-the-road trucker and Watertown native Robert Jordan, who taught
himself electrical engineering and built prototypes in his garage.
Johnson’s Fitchburg-based Kegonsa
Capital Partners agreed to invest in the technology, and
required Jordan to bring on an experienced chief executive officer and an
independent board of directors.
Although it is based in Madison, all but five of Idle Free’s
25 employees work in Watertown. The company, built from the ground up without
any university research, created better technology and competed against bigger
companies with more resources, said Robert Hopton, chief executive officer.
“We grew significantly and ultimately got enough on the
radar screen that a major industry player like Phillips & Temro saw the
benefit of including us in their overall portfolio,” Hopton said.
Johnson said his Kegonsa Capital Partners made more than
three times its money on the sale. Walter Dewey, a Madison investor who also
put money in the company, said he was pleased with his returns.
“If I could do 50 of these, the Badger Fund of Funds
would walk on water,” Johnson said.
A concerted effort
It is required by the state to raise $5 million, but is
aiming to raise another $25 million for Badger fund.
Sun Mountain Kegonsa will seek out a diverse group of young
managers to run the individual funds. They would be required to raise matching
money, devise durable investment strategies and stick to them.
“When I get done, I want all the fund managers to be
the average age of the Google fund managers,” Johnson said. He
estimates that age to be about 35.
The fund managers will use Johnson’s “money for
minnows” strategy, making relatively small investments of several hundred
thousand dollars, rather than several million, in each portfolio company.
That strategy was rejected a decade ago when Johnson applied
to be part of a State of Wisconsin Investment Board program that put $200 million into funds that were
encouraged to invest in Wisconsin companies.
“They didn’t give me any money; they told me my process
was wrong,” Johnson said.
As with any other venture capital investments, as many as
80% of the Badger funds’ 100-plus portfolio companies probably will fail, he
That goes with the territory, Johnson said. In his view, the
people from those companies are “not a lost resource, they’re a reusable
And the companies like Idle Free that survive and prosper
will generate jobs and help fuel a more vibrant, high-growth culture in the
The returns from investments in companies like Idle Free can
go on to spawn more investments in start-up companies, said Dan Blake, director
of the Wisconsin Angels Network.
The idea of the Badger Fund of Funds appeals to many outside
the state’s largest population centers, who have long argued that there should
be more concerted efforts to fuel start-up activity across the entire state.
“To the extent that this is a statewide fund with
pockets and pools of money set up to serve the entire state, we’re big on that,
we like the idea,” said Bill Rubin, executive director of the St. Croix
Economic Development Corp., based in Hudson.
Idle Free’s success was driven by trucker Jordan’s passion
for the technology and solving problems and Hopton’s ability to define the
market and make money, said Nick Jackson, a partner at The Mendota Group, Madison, who served as
Kegonsa’s representative on the company’s board.
That’s a model that has potential to strengthen many
start-ups across the state, Jackson said.
Jackson believes that Johnson has the right combination of
skill and experience to lead the effort.
“I don’t know anyone else in Wisconsin who’s made more
money for their investors,” he said.
Brian Birk, managing partner at Sun Mountain Capital Partners, will
discuss the Badger Fund of Funds at aWisconsin Innovation Network lunch on Tuesday at the Sheraton Hotel in Madison. Cost
is $35 for non-WIN members. To register, go to www.wisconsintechnologycouncil.com.