Jul 9, 201911:32 AMInside Wisconsin
with Tom Still
Wisconsin early stage investment trends: Bigger deals, more outside money
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In texting slang, “OPM” is short for “Other People’s Money.” When it comes to early stage investing in Wisconsin these days, it can also serve as an acronym for “Other People’s Money Matters.”
Nearly half of the 121 angel and venture capital deals recorded in Wisconsin during the 2018 calendar year involved investors from other states or nations. Whether the money came from Chicago, Boston, New York, California, or beyond, 49 percent of the deals in which investors were known involved people from outside Wisconsin’s borders.
That’s not a criticism of Wisconsin’s homegrown investors, who continue to place their faith in young companies here. Rather, it’s evidence that money from afar is finding its way into Wisconsin deals with promising technologies, products, and ideas.
Most of the time, that kind of outside validation helps local companies and investors who can benefit from deeper pockets to help carry a company to the next stage.
The trend toward more out-of-state money discovering Wisconsin deals was a trend noted in the 2019 “Wisconsin Portfolio,” a publication produced annually by the Wisconsin Technology Council. The 11th annual report recorded $280.7 million in total investment, a record for Wisconsin, in 121 separate deals.
Total deals were down slightly from 2017, when 127 investments were recorded. The dollar count continued a generally upward five-year trend, however, and reflects increases in both the median and average deal sizes.
Over the five years beginning in 2014, Wisconsin early stage companies have raised $1.216 billion. There were $218.8 million in early stage investments in 2014, $209.5 million in 2015, $276.2 million in 2016, and $231 million in 2017.
Wisconsin’s average deal size in 2018 stood at an all-time high of $2.3 million while the median round size climbed back to more than $600,000. Forty-six Wisconsin companies each raised at least $1 million from investors, up from 35 companies in 2017.
Those deal sizes are growing, in part, because outside investors often represent bigger funds. It is not purely a Wisconsin phenomenon.
For reasons that range from the region’s share of U.S. economic clout to the talent produced by the region’s colleges and universities, and from Silicon Valley fatigue to lower business and living costs, more investors are discovering the Midwest.
Funds such as Drive Capital, 50 South Capital, Lewis and Clark, Allos Ventures, Lightbank Fund, and Revolution Ventures have planted a flag in the Midwest, often exclusively as a region, because they see the potential for deals that make money for them while producing jobs and economic activity.