In the first installment of this series, we introduced the managers of four of Wisconsin’s newest venture funds and angel investor networks: Winnow Fund, Gateway Capital Partners, ComMUnity Venture Capital and Tundra Angels Investor Network. In this installment, we’re diving a little deeper into the groups themselves, including their structure, deal focus and investment philosophies.
Badger Fund of Funds
The Badger Fund was established in 2013 to help increase the amount of venture capital flowing in Wisconsin, which at the time had one of the lowest rates of startup investment per capita in the country. The State of Wisconsin allocated $25 million, and from there the Badger Fund raised an additional $10 million from the private sector, with the goal of creating a portfolio of smaller, more focused funds throughout the state.
The Badger Fund of Funds is managed by a partnership between New Mexico’s Sun Mountain Capital and Madison’s Kegonsa Capital Partners. Under the direction of Ken Johnson, Kegonsa’s managing director, the fund set out not only to create several new venture capital funds, but to also train a younger generation of fund managers.
“One of the goals of the Badger Fund of Funds was to get people that would raise multiple funds rather than just raising one fund and retiring, because a lot of times venture funds are started by people that are already at the end of their career,” says the Winnow Fund’s Managing Director, Richelle Martin. “We’re creating more of a profession where I’m going to be doing this for the next however many years. I want to bring on younger people when I get to fund three so that we can pass on that knowledge, and so that we continue to have people who are working in that earlier stage segment.”
The Winnow Fund and Gateway Capital Partners are the newest additions to the Badger Fund of Funds portfolio. The other three funds, all of which have already closed on their first round of investments, are Rock River Capital Partners and the Idea Fund of LaCrosse, both founded in 2016 (with $23.5 million and $13 million in promised investments, respectively); and the Winnebago Seed Fund (founded in 2017 with $11 million in promised investments). The Badger Fund of Funds matches the private investments made in each of these funds, all of which take a “Money for Minnows” approach focused on spreading out capital among smaller pre-revenue, seed-stage startups across a range of industries and technologies.
Gateway Capital Partners
Gateway Capital Partners and the Winnow Fund are still in the process of securing commitments from both individual and institutional investors. Both Martin and Dana Guthrie, Gateway’s managing partner, will be focused on sourcing deals that will then be approved by an investment committee.
Guthrie sees Gateway’s mission as filling a gap in pre-revenue investment in the Milwaukee area. She points out that of the $300 million in venture capital invested in Wisconsin in 2018, less than 10% of that went to Milwaukee County.
“What Gateway has the ability to do is bring a more equitable distribution of the capital to the Milwaukee area,” says Guthrie. “I think Milwaukee County sees something like $57 per capita in venture capital dollars, with Wisconsin already ranking lower per capita than its peers. So there’s a big opportunity to have an impact on the largest metropolitan area.”
With an industry-agnostic approach, Gateway plans to invest in Milwaukee-area startups looking for initial investments of around $400,000 for the first 15-18 months.
Whereas Gateway has a geographic focus, the Winnow Fund plans to focus on startups emerging from Wisconsin’s college and university campuses.
Martin points out that although there are already organizations like the Wisconsin Alumni Research Foundation and WiSys to help commercialize innovations developed in campus labs, those resources focus mainly on patentable discoveries, and aren’t applicable to product or startup ideas that emerge from dorm rooms or class projects.
“My criteria do not require that a company be affiliated with the university,” she says. “My deal flow focus, though, is on universities because I think it’s an overlooked area of opportunity for investment. And we don’t want to compete with tech transfer offices. We want to be complementary.”
So far Martin has raised roughly $8.5 million, split between the Badger Fund and about 40 institutional and individual investors.
After the fund closes to investors, Winnow will be looking for companies with an exit timeline of three to five years and $3 million to $5 million in paid capital.
ComMUnity Venture Capital
ComMUnity Venture Capital, the partnership between Marquette University and private funders, is currently three years into its first 10-year, $4 million fund. Its limited partnership of two dozen investors is made up primarily of university alumni and parents. As the majority of the general partnership, the university will also receive the majority of the fund’s profits.
“We’re a small fund,” says Mark Fitzgerald, part of ComMUnity’s general partnership. “This was a brand-new idea. What’s critically important is not fund one, it’s fund 15. This has to become an integral part of the Marquette ecosystem. We’re conservative because we want to make sure that the investments we are making have a good chance of succeeding.”
The fund’s current portfolio is diverse, ranging from medical technology to food processing and consumer products. These are mainly alumni-associated startups, but Fitzgerald hopes to also make several smaller investments in ideas from students and faculty ideas over the next few years.
“We’ll invest in alumni, students and faculty,” he says. “Other than that, I don’t want to restrict because I want to make sure that everybody within the Marquette community understands that they’re not going to be excluded. We’re looking for great businesses.”
In Green Bay, Matthew Kee is also on the hunt for great businesses. In his role with the Greater Green Bay Chamber, he is helping build northeast Wisconsin’s startup ecosystem and growing the region’s venture capital capacity. Through the newly formed Tundra Angels, he can connect the two.
Like the state’s other angel investor networks—including Wisconsin Investment Partners, Golden Angels Investors and Alchemy Angel Investors—Tundra Angels connects startups directly with individual investors.
Because Tundra Angels is focused on providing capital to high-growth, scalable tech startups, Kee is focused on recruiting investors with tech backgrounds. But he’s also making a concerted effort to engage a new generation of investors. Tundra Angels currently has 15, about half of whom are new to angel investing.
“It’s a young and vibrant group. The average age of our members is mid-40s, which is which is pretty exciting,” Kee says.
Tundra Angels members commit to investing at least $25,000. Kee brought in four companies for the group’s first pitch meeting and is now doing further due diligence and setting up one-on-one meetings with interested investors for a few of the startups included.
Next in the series: what these emerging investors see as the challenges and opportunities for Wisconsin’s venture capital and startup communities, how they’re working together and their advice for interested investors and startup founders.