Early-Stage Investment in WI Dipped in 2015, But Some Positive Signs
Venture capital funds and angel investors pumped $209.5 million into young Wisconsin-based startups in 2015. While that’s down from $346.2 million in 2014, that year’s total was pumped up by a single outlier, says Bram Daelemans, director of the Wisconsin Angel Network.
A more positive development was the number of early-stage companies that raised investment capital in 2015: at least 128, Daelemans says, up from 113 the previous year.
These figures and many more can be found in the Wisconsin Portfolio, a yearly report compiled by the angel network, which is part of the Wisconsin Technology Council. The publication, which was released on Thursday, gathers information from public reports, filings, and investor surveys. Together, these data points produce a more thorough look at angel and VC deals in Wisconsin compared to some national studies.
Wisconsin’s step back from a boffo year in 2014 runs counter to the national trend. According to the end-of-year MoneyTree report—which is prepared by PricewaterhouseCoopers and the National Venture Capital Association, and based on data from Thomson Reuters—venture capital groups invested $58.8 billion in 2015, an $8 billion increase over the prior year. Last year saw the second highest amount of VC dollars invested into U.S. businesses in the past 20 years.
Daelemans says that when you factor out the largest investment into a Wisconsin-based company made in 2014—a $127.4 million round for Shine Medical Technologies—that year’s total is only 4 percent larger than 2015’s. Still, even when that Shine deal is excluded, the average investment for 2014 was more than $1.9 million, as compared with $1.6 million for 2015. (When Shine is counted, 2014’s average climbs to more than $3 million, showing just how much of an outlier that deal was.)
According to the Wisconsin Portfolio report, the six biggest investments into Wisconsin-based startups made in 2015 were, in descending order: NeuWave Medical ($25.3 million), EatStreet ($15 million), Flugen ($12 million), Networked Insights ($8.8 million), Fetch Rewards ($8.5 million), and TAI Diagnostics ($8.3 million).
Forty-six early-stage companies raised $1 million or more in 2015, Daelemans says. That’s up from 38 in 2014 and 27 in 2013, he says.
And more than half of the companies who landed investments last year were not raising their first round of capital. Daelemans says that shows that startups are having success with their initial rounds, then coming back for more money.
The report also spotlights the Badger Fund of Funds, a state initiative more than five years in the making that’s aimed at injecting more venture capital into startups here. In May, the fund launched its first two “recipient” funds, whose managers are based in La Crosse and Neenah.
When Ken Johnson, a Badger Fund partner, explained the concept during a presentation last fall, he referenced the Ewing Marion Kauffman Foundation’s state rankings for startup activity, where you’ll find Wisconsin at the bottom of the list.
Asked how to reconcile that ignominious distinction with some of the positive findings in the report released Thursday—such as the number of early-stage companies that raised at least $1 million last year—Daelemans points out that some states at or near the top of the Kauffman rankings, like Montana and Wyoming, are hardly thought of as hotbeds for startups.
“You won’t hear me say that we are doing enough or that we should ignore our ranking,” Daelemans says. “The fact that Montana is ranked first is an indication that we cannot use just one index, but have to look at the overall picture.”
Daelemans says that so far in 2016, he’s tracked 48 investments into early-stage companies, and the deals are worth a combined $150 million. According to the report, the eight largest deals this year have involved: Connecture, Shine, Smart Choice MRI, Ionic, Healthfinch, Understory, Forward Health Group, and Pegasus Sustainability Solutions.