[Updated 11/6/14, 11:08 a.m. See below.] Wisconsin’s most active angel investor group could get even busier, thanks to an influx of new members.
Madison-based Wisconsin Investment Partners (WIP) added 18 new members in the past few months, primarily via a recruitment dinner held in the summer, co-manager Andy Shrago says.
“We thought we’d be doing well if we brought in five to 10” new members, Shrago tells Xconomy. “It went very well.”
WIP, which was founded in 2000 with 20 members, also recently subtracted a few members from its rolls, mainly people who haven’t invested with the group in a while, in some cases because they’ve retired and moved out of state. All told, the network now counts about 80 members, with a core group of about 30 making frequent investments, Shrago says. Its investors come from a variety of backgrounds, including doctors, lawyers, and software and biotech entrepreneurs.
WIP is among Wisconsin’s largest angel networks. The biggest, according to Wisconsin Angel Network director Dan Blake, is Golden Angels Investors. That Milwaukee-area group has roughly 100 members in Wisconsin and Illinois, founder and director Tim Keane says.
In the past couple of years, WIP has been recognized by the Halo Report as one of the most active angel investing groups in the Midwest and even the nation. WIP has invested $23 million over its 14-year history. Last year, its members invested $3.1 million in four new portfolio companies and 15 follow-on funding rounds. So far in 2014, WIP members have invested $3.2 million via five new investments and 15 follow-on rounds, Shrago says. “We have two more new investments we hope to close this year,” he adds.
WIP’s fresh blood can only be good news for Wisconsin startups thirsty for capital, especially as two prominent Milwaukee angel networks seem to be less active here. (More on that later.)
“They’ve really led the charge for angel group activity in the state, along with a couple groups in Milwaukee,” Blake says of WIP. “I think the recent growth is a testament to their ongoing operational fortitude and some of the great opportunities that they’re seeing not only in Madison, but across the state.”
Healthtech is an increasingly important investment theme for WIP members, Shrago says, driven by the push to lower healthcare costs partly through software and better data analytics, and the residual effects of electronic health records software provider Epic Systems being located in the Madison area. WIP’s healthtech investments include Madison-based Forward Health Group and Aver Informatics, which recently announced plans to relocate from Green Bay, WI, to Columbus, OH.
“Madison’s been known for a long time as a good biotech hub, and it still is,” Shrago says. “But it’s also been pretty strong in IT. Now we’re seeing the convergence of IT and healthcare. And so we’re seeing a lot of health IT plays that are really of interest.”
Meanwhile, two Milwaukee-area angel groups that have traditionally been seen as leading capital sources in Wisconsin—Golden Angels and Silicon Pastures—seem to be doing fewer deals here, at least according to publicly available data.
In 2012, Golden Angels reported three deals in Wisconsin—AquaMost, Dynamis Software, and PerBlue—and last year it reported none, according to the latest data from the annual Wisconsin Portfolio produced by the Wisconsin Technology Council and its Wisconsin Angel Network. To be fair, angel groups aren’t required to report their deals to the Wisconsin Angel Network, which also culls investment data from other sources, like SEC filings, Blake says. Some of the deals listed in the report were made by undisclosed investors, so Golden Angels might have made investments here last year but chose not to announce them. And the Wisconsin Portfolio doesn’t track Golden Angels members’ investments outside of the state, which include San Francisco-based edtech startup UClass; Pasadena, CA-based Stir, which makes a kinetic desk; and Gaithersburg, MD-based genome mapping company OpGen. [This paragraph was updated to include more background on how the Wisconsin Portfolio is produced.]
Keane declined to share stats on Golden Angels’ deal flow, but says in an e-mail that “there’s more good activity than there’s been in years. Angels are very interested in helping entrepreneurs through coaching and investing.”
The Wisconsin Portfolio listed seven Wisconsin investments by Silicon Pastures in 2012 and only one in 2013. Silicon Pastures managing director Teresa Esser declined to share membership or deal statistics, but the network’s members have invested in companies in Wisconsin and outside the state, including Minnesota and North Dakota. One of the network’s portfolio companies, Milwaukee-based data center provider Red Anvil, was recently acquired by Cosentry for an undisclosed price. [This paragraph was updated to reflect the fact that Wisconsin Portfolio data comes from multiple sources, not necessarily directly from the angel groups.]
“We are an active group and have done a number of deals, which have not been disclosed,” Esser says in an e-mail message. “We have eight meetings per year, and we look at at least two companies per meeting.”
The Wisconsin Angel Network counts about 20 angel groups in the state, with an average of 45 members each, Blake says. His group has been working lately to encourage more angel investing, especially in areas outside of the state’s two largest cities, Milwaukee and Madison. The Wisconsin Angel Network held an event earlier this year in the southwestern Wisconsin city of Platteville to drum up interest in angel investing, and it’s planning another one in Green Bay, Blake says.
“We make sure people have a good sense of, if this is something people are interested in, how to go about getting involved,” Blake says. “We continue to press for that type of activity.”
The efforts of Blake’s organization come as new angel and venture capital funds are popping up in Wisconsin. In the past two years, they include 4490 Ventures, the $30 million Madison-based fund backed by the Wisconsin Alumni Research Foundation and the State of Wisconsin Investment Board; Milwaukee-based CSA Partners, a fund established through a $10 million investment by Chris Abele, who also serves as Milwaukee’s elected county executive; the Wisconsin Super Angel Fund in Milwaukee; the nonprofit BrightStar Wisconsin Foundation; and the state-backed Badger Fund of Funds.
The funding environment is “definitely getting better” in Wisconsin, despite the generally conservative nature of investors here, WIP’s Shrago says.
“I’m quite bullish on everything that’s going on here,” Shrago says. “When we look back in five to 10 years,” people will see “quite a strong ecosystem in this early-stage space. The next step is having a handful of big exits to bring in a lot of money and create serial entrepreneurs. We’ve got a few of those, but I think we’re going to have a lot more five years from now.”