Chicago, Northern Wisconsin Investors Raising $30M For New VC Funds

Investors from Chicago and northern Wisconsin detailed plans on Tuesday for two proposed venture funds that would pump about $30 million into startups in Wisconsin and around the Midwest, if all goes according to plan.

John Philosophos, a Chicago-based partner with New York-based Great Oaks Venture Capital, said he is trying to raise $20 million to $25 million for Three Oaks Venture Fund, a new fund that would invest in tech startups in Wisconsin and the upper Midwest.

Meanwhile, Carl Ruedebusch, a northern Wisconsin business owner and investor with Northwoods Angels, is attempting to raise $6 million for Northwoods Venture Fund. It would invest in a variety of startups located north of Wisconsin’s Highway 29—an area corresponding with the mostly rural northern half of the state.

The investors discussed their plans during a panel discussion at the Wisconsin Entrepreneurs’ Conference in Madison, an annual event hosted by the Wisconsin Technology Council.

If Three Oaks and Northwoods Venture Fund come to fruition, they would be the latest additions to Wisconsin’s growing suite of options for startup capital. Although it still lacks the big VC groups more commonly found on the coasts, Wisconsin has picked up momentum over the last few years with the launch of new angel and venture funds such as 4490 Ventures, CSA Partners, HealthX Ventures, the Wisconsin Super Angel Fund, WISC Partners, and BrightStar Wisconsin Foundation.

The managers of Three Oaks and Northwoods Venture Fund are still out fundraising, but here’s what they’ve shared so far about their plans:

—Three Oaks Venture Fund: It will invest primarily in companies doing work in mobile technology, big data, and other types of software-based businesses. It will do some seed-stage deals, but will mostly focus on Series A rounds, Philosophos said. That’s because he sees an “acute Series A crunch” in Wisconsin and its neighboring states.

Philosophos believes that there are plenty of promising companies in the Midwest, and the deals are likely to be on more investor-friendly terms than the coasts. That’s a result of several factors, including fewer VCs jostling for deals and a lower cost of doing business. “We think there is opportunity in the Midwest,” Philosophos said.

Philosophos has been a Great Oaks partner since 2012, helping oversee the fund’s investments in the Midwest. Those include Madison-based MdotLabs, later acquired by ComScore.

Philosophos is putting some of his own money into Three Oaks and will serve as the new fund’s general partner. Members of the Great Oaks team, including founder Andy Boszhardt, will help out as advisors. (He and Boszhardt are Wisconsin natives.) But the two funds will be separate entities with separate pots of money, Philosophos said.

“This is an attempt to leverage the resources of Great Oaks, but build a Midwest-centric practice,” he said.

—Northwoods Venture Fund: It intends to make small initial investments of $40,000 to $200,000 in each company, Ruedebusch said. It won’t focus on any particular industry, but will look for startups that not only show potential for a lucrative return, but also a strong probability of creating jobs in northern Wisconsin, he said. “I know that’s not normally a venture fund thing,” he added.

Ruedebusch wears many hats. He runs Ruedebusch Development & Construction and RDC National, an economic development and commercial real estate firm. He’s chair of the Vilas County Economic Development Corp. And he’s also an investor with Northwoods Angels, an “ad hoc group of investors” in northern Wisconsin, whose investments include BlueTipz.

Now, Ruedebusch and other investors in northern Wisconsin are trying to create a more formal venture fund—a “natural evolution” of their efforts to support entrepreneurship, he said.

Some of the money could come from the new Badger Fund of Funds program, he said.

The plan is to launch the Northwoods Venture Fund by the end of the year.

Trending on Xconomy