A key portion of the Wisconsin Growth Capital Coalition’s recently released report on growing angel and venture capital in Wisconsin will be taken up by the Legislature in the next 45 days. The special session on jobs was announced Wednesday by Gov. Scott Walker.
The coalition’s recommended changes to existing investor tax credits, which have served to spark a five-fold increase in angel investments since 2005, were highlighted on a list of items to be considered during the special session.
The coalition report, released Sept. 15, was designed to serve as a roadmap for the Legislature in crafting policy to leverage and catalyze investment in Wisconsin early stage companies.
In 2005, a bipartisan effort led to the signing of Wisconsin Act 255. This program, now called Accelerate Wisconsin, along with the creation of the Wisconsin Angel Network, has helped enhance early stage investing in Wisconsin.
“The passage of Act 255 created a national model for developing, promoting and leveraging early stage investment capital,” said Tom Still, president of the Wisconsin Technology Council. “Numerous states have since created more competitive versions of Wisconsin’s program, including the Big Ten Conference states of Minnesota and Nebraska.”
To ensure the competiveness of the Accelerate Wisconsin program the coalition recommended that the investor tax credits be made refundable if the investment is held for more than three years. This enhancement to the law will attract angel capital from out-of-state. Current law essentially limits the program to only Wisconsin investors.
The Wisconsin Growth Capital Coalition was formed in 2009 to advocate for enhancements to Wisconsin’s investor tax credits. Earlier this year, the coalition was reactivated through the Wisconsin Technology Council and its Wisconsin Angel Network to provide policymakers with non-partisan advice on proposed venture capital legislation. The coalition has 58 members.
“The coalition recognized that a sustainable venture capital program can only be built on the strong foundation provided by the vibrant deal-flow from Wisconsin’s active angel networks,” noted Zach Brandon, director of the Wisconsin Angel Network. “This legislative change is important to maintain that strong foundation.”
The report does not endorse any specific legislation, but offers specific recommendations based on findings of best practices in Wisconsin and beyond. In addition to the refundable tax credit change the coalition recommended:
- The creation of a “master” fund-of-funds that would invest in 14 to 20 venture capital funds over time. The creation of a $350-million, state-leveraged, privately managed fund-of-funds would spur private co-investment at home and beyond. These recipient funds will raise an additional $350 million to $1.05 billion in aggregate and commit to offices, staff and investments in Wisconsin.
- The rapid deployment of some portion of the fund by utilizing indigenous Wisconsin funds with existing structures, network connections and deal-flow pipelines. Investor networks and funds report there are deals on the table today that could be closed within six months of enactment.
- The creation of Wisconsin Angel Acceleration Funds, which would establish angel “sidecar” or co-investment funds that would be used to match “super-angel,” angel network and fund investments. Because angel networks and funds are close to the action in Wisconsin, they would be able to invest money quickly through existing deal-flow pipelines. This would also enhance deal flow for venture funds later in the capital continuum.
An online version of the 36-page report is available at http://www.wisconsintechnologycouncil.com/publications/venture_capital/
The Wisconsin Technology Council is the independent, non-partisan science and technology adviser to the governor and the Legislature. Its Wisconsin Angel Network fuels the growth of early stage capital in Wisconsin by operating as an umbrella organization providing services and resources to the early stage investing and entrepreneurial communities.