Jun 13, 201711:19 AMInside Wisconsin
with Tom Still
Early stage investments in Wisconsin up — but plenty of room for more
(page 1 of 2)
It was symbolic of changing times in the state’s early-stage investment world that seven managers of new funds took the stage to open the 15th annual Wisconsin Entrepreneurs’ Conference.
The next day as the conference closed, about 30 investors got together to talk about companies they are helping to finance — and to pitch their colleagues on why they should consider putting dollars into the deals, too.
The early stage investing scene in Wisconsin is getting more robust, although Wisconsin remains in no danger of overtaking California, Massachusetts, or New York as a venture capital hub.
In fact, if Wisconsin were to match a typical year’s angel and venture capital activity in Michigan, Utah, or Colorado, that alone would be an accomplishment.
The latest “Wisconsin Portfolio,” an annual report by the Wisconsin Technology Council, provides statistical evidence of what many observers of the early stage economy already suspected. There are more deals taking place in Wisconsin as more promising, high-growth companies are launched.
The Wisconsin Portfolio showed that investments in early-stage companies — startups and other companies in their early years — have nearly doubled over five years, from 74 in 2012 to 137 in 2016.
At least 137 Wisconsin companies raised investment capital last year, up 7% from 2015. Those same companies raised a total of $276.2 million. The five largest deals exceeded $10 million each; 53 companies raised $1 million or more (up from 46 in 2015); and the average deal size was $2 million, up from $1.6 million in the previous year.
The 25% jump in average deal size was one of several indicators that companies raised money far beyond the “friends, family, and founders” stage in 2016.
Wisconsin has been a strong angel capital state since 2005, when Wisconsin’s Qualified New Business Venture program and its affiliated tax credits for investors was enacted. That program has since been emulated in dozens of states.
Until recently, angel investors claimed most of the credits because they were doing the hard work of finding young companies that needed early cash. In 2016, about half of the state credits went to angels and half to venture capital firms, which indicated many of those young companies have matured enough to attract what investors call “Series A” money.
For 39% of early-stage companies that secured funding in 2016, it was their first time doing so. For 61% of emerging companies that raised money last year, it was at least their second time at the dance.