It’s hard to find someone
who cares more about the economic vibrancy of the Milwaukee area than Tom
Schuster, a seasoned corporate executive and turnaround expert who is now the
managing general partner for the Wisconsin Super Angel Fund.
That doesn’t mean Schuster
is above expressing a little tough love when it’s needed.
Schuster spoke Thursday at
a meeting of the Wisconsin Innovation Network in Wauwatosa, where he outlined
the investment goals for the $9 million fund while pointing out just how hard
it is to raise such a fund in a financial risk environment that may be too
cautious for its own good.
“I can’t tell you how
hard it is to raise money,” Schuster told about 80 listeners. “It’s
not only hard to gather the funds, it’s hard to make a deal.”
Read this commentary in the Milwaukee Journal Sentinel here.
That’s true across
Wisconsin, he said, but especially so in the Milwaukee region, where legacy
companies still dominate and people with money are even more reluctant than
usual to part with it — even if they realize southeastern Wisconsin needs more
entrepreneurs.
“It was absolutely
like pulling teeth from a chicken,” Schuster recalled as he talked about
raising the initial $5 million needed to get the Wisconsin Super Angel Fund
launched nearly two years ago.
The good news: The fund
has since invested in six companies in Milwaukee, Madison and central
Wisconsin, which cover sectors ranging from software to battery technology, and
from machine tools to cranberries.
He’s also optimistic about
ideas he sees in the pipeline — although he’s quick to remind entrepreneurs
that it takes a lot more than a brainy concept to make a business
investment-worthy.
To that end, the Wisconsin
Super Angel Fund is like a number of other early stage funds recently launched
or in the process of organizing. They’re all competing to find their own
funding sources — companies, foundations and high net worth individuals — while
working to minimize risk in deals that may rise to the top of the pile.
For Schuster, the
“de-risking” process starts with entrepreneurs who are willing to put
together a team and be open to creating an outside board of directors. He also
advised emerging companies to apply for the Qualified New Business Venture
program run by the Wisconsin Economic Development Corp., a successful program
that allows investors in vetted companies to qualify for state tax credits.
For the most part,
emerging companies in Wisconsin are open to advice and there’s far more help
available to them today than 10 or even five years ago. That includes a number
of accelerators, incubators and business mentor programs, as well as venues
such as the Wisconsin Governor’s Business Plan Contest, which is open for
entries through Jan. 31 at govsbizplancontest.com.
There are more investors
on the scene, as well. In addition to the Wisconsin Super Angel Fund, recent
additions include:
■BrightStar Wisconsin
Foundation, a venture donation program based in Milwaukee.
■4490 Ventures, a
$30 million information technology fund with money from the State of Wisconsin
Investment Board and the Wisconsin Alumni Research Foundation.
■CSA Partners, a
venture capital fund backed by Milwaukee County Executive Chris Abele.
■Madison HealthX
Ventures, which is expected to make its first investments this year.
Meanwhile, the State of
Wisconsin has invested $25 million in the Badger Fund of Funds, which is
raising its own matching dollars and will seek to partner with at least four
“recipient funds” across Wisconsin.
That process will unfold
throughout 2015 with the first investments expected either late this year or
early in 2016. However, many observers say the fund should grow over time if
lawmakers want to see solid results.
A number of angel networks,
angel funds and venture capital funds continue to work with emerging companies.
Those include the Golden Angels Investors in Milwaukee, Wisconsin Investment
Partners in Madison, Chippewa Valley Angels in Eau Claire, Capital Midwest Fund
in Mequon, Kegonsa Capital in Madison, Venture Investors in Madison, the NEW
Fund in Appleton and Baird Capital, a Chicago fund with offices in Wisconsin
and historic roots in the state.
Perhaps even more
encouraging is that investors outside Wisconsin have found the road map.
Recent investments have
come from Great Oaks Ventures, Drive Capital, Chrysalis Ventures, Arboretum
Ventures, Great Point Partners, Open Prairie Ventures, Chicago Ventures,
LightBank, Hyde Park Ventures, Google Capital and more.
On balance, prospects for
more early stage investments in Wisconsin appear better than they have been in
years — and the tentative deal figures from 2014 support that impression.
The devil lurks in the
term sheet details and the overall investment climate, however, as veterans
such as Schuster can testify. Let’s hope 2015 is the year Wisconsin breaks
through for risk-takers such as him.
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