Take 5 With Kay Koplovitz

Venture investment leader prods Legislature to act

Wisconsin native Kay Koplovitz, chair of the venture capital firm Springboard Enterprises, founder of the USA Network, and chair of Liz Claiborne, Inc., spoke of the transformative value of venture funding during a recent visit to Madison, where she endorsed proposals for state-leveraged venture capital deployment now before the Wisconsin legislature.

Koplovitz was joined by Lauren Flanagan, co-founder and managing partner of Phenomenelle Angels Fund, and by the chief executives of several women-led businesses and Springboard portfolio companies, including Elizabeth Donley of Madison’s Stemina Biomarker and Kelly Fitzsimmons of the Milwaukee-based HarQen, which has raised $2.5 million of the $4 million goal set for its latest funding round.

In this “Take 5” with In Business, Koplovitz offers her insights as to what works and what does not in state-leveraged venture funding, and has a surprisingly benign response to the “Occupy Wall Street” movement. Her venture group fosters investments in high-growth companies led by women entrepreneurs.

IB: Regarding the various venture capital proposals here, are there components that any state-leveraged venture program should ideally have?

Koplovitz: I do think with programs in the fund-of-funds example, the recommendation is to have at least one-third of that fund, that $350 million, invested inside with already existing venture funds in the state. I think it’s important to seed people who are really in the market and who have a proven expertise in the market. Not to try to duplicate that, because I don’t think it’s really necessary, but I think the most efficient thing is to try to go that route.

One of the recommendations is to invest in other pools outside the state in order to attract attention to Wisconsin. It remains to be seen whether that will work, but I do know that the more activity that accumulates in the state, the more activity that goes from angel investing up through venture and follow-on funding, the more that will start to attract attention from venture capital funds from outside the state. Wisconsin needs to do that.

IB: One of the things they are trying to do is keep as much money in Wisconsin as possible, which argues against the controversial certified capital companies (CAPCOs). Sometimes, it’s not so easy as it sounds, so how would you recommend they tailor the programs to accomplish that?

Koplovitz: I’m not an expert on CAPCOs, so it’s hard for me to be specific on that, but the general concept probably hasn’t proven to be the most efficient way to deploy the money. I think what we want to do is invest in funds that are already venture funds in the state, operating with a proven track record, because it will be efficient, the most efficient, to go on that route.

IB: I assume Springboard has invested in other states in which the state government put a lot of thought into leveraging venture capital funds, as Wisconsin is attempting to do.

Koplovitz: Yes, there are several states, and I think it started back with Connecticut, and Connecticut recently renewed their tax credit program for investment. Different states have different reasons, and they focus on different industries. Hawaii, for example, started out with a 100% tax credit for their invested funds for renewable energy, something they feel they needed to have because they are isolated islands. They have reduced that now to 75% and there is talk about 50%, but what they are trying to do is encourage renewable energy development inside the state of Hawaii.

IB: How would you assess appetite for risk, among venture investors, in this economy?

Koplovitz: The venture market is somewhat cool right now. Funds are having some difficulty raising new funds. That’s why I think these state initiatives are so important. When the IPO market is open, funds are gathering more investors and so forth. It was very good during the first half of this year, and it was quite good the last half of last year. So for a year, the IPO market was pretty robust, but it’s becoming a little bit weakened right now. Whether it regains strength, I can’t tell. If it does weaken, that tends to slow down the venture funds, so I would say we’re in a period of time where there might be somewhat of a slowing.

But I would say, for investors in general, it is a good time. Some of our best companies, some of our best IPOs out of Springboard, came out of the more difficult times in the marketplace because they are usually good times for investors. I wouldn’t say it’s a bad time to invest. It may be a more difficult time for venture funds to raise new funds.

IB: You have noted that we’ve had three economic slowdowns in the past decade, a period where venture investment in women-led companies grew from [1.7% to nearly 10%] of total funds invested. How would you assess how women-led companies are doing nationwide?

Koplowitz: I’m talking about high-growth companies, which is a particular segment of the economy, a relatively smaller segment of the economy compared to all companies. I think women-led companies are at least doing better than the national average on the whole. I would say that in terms of the high-growth companies that are in technology, biotech and the life sciences, and digital media, women are doing particularly well in digital media and life sciences.

IB: As an investor, what do you make of the “Occupy Wall Street” movement?

Koplovitz: I think it’s really important for people to have an opportunity to express their frustrations with the economy. They have chosen to focus on Wall Street but there is just a frustration. People from all different walks of life, a lot of educated people, students who are coming out of college and can’t find jobs – millions of people are out looking for jobs or better-paying jobs – so it’s really a frustrating time for people. Personally, I think it’s a good thing that people can peacefully take to the street and express their opinions.