Wisconsin 2013 VC Activity Drops, Shifts to Software from Biotech

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dollars invested but more deals in 2013 is in part a reflection of the makeup of the deals, which were heavily weighted toward software and tech companies that typically have lower startup costs, said Andy Shrago, co-manager of Wisconsin Investment Partners in Madison, an angel investment group that was part of two deals on MoneyTree’s 2013 list. Twelve of the 18 companies last year were software-related.

That tracks with the national trend last year, with software and Internet-related companies scooping up $18.1 billion, or almost 62 percent of the $29.4 billion total VC investments.

Meanwhile, only two of the Wisconsin deals last year were in life sciences, a traditional Badger State strength that has seen less deal flow in recent years, Shrago said.

“There’s a very strong shift away from biotech and life sciences,” Shrago said. “[VCs] have just really turned their noses up at a lot of that stuff.”

He attributed the disinterest in life sciences deals to perceived regulatory risks, startup costs, and the long time horizon for a return on the investment.

Blake is optimistic about 2014 investment activity in Wisconsin because of the appearance of several new venture funds in the state. Those include 4490 Ventures, a $30 million fund focused on information technology that was announced last year; a state-backed $25 million VC “fund of funds” approved last year; BrightStar Wisconsin Foundation, which recently received Internal Revenue Service approval to operate as a nonprofit that will invest in startups; and the closing of a fifth fund totaling $80 million by Madison-based VC Venture Investors.

“There’s a lot of new fund activity that’s going to come online in 2014 that will likely lead to an uptick in some state investments,” Blake said. “We’re hopeful for a better 2014 in relation to this metric.”

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