The Biggest Wisconsin Venture Round of the Decade… Didn’t Happen
Details surrounding a $127.4 million funding round, which groups that track venture capital investments have said Janesville, WI-based Shine Medical Technologies raised in 2014, were misconstrued in the years after the round was announced, according to people familiar with the deal.
The Wisconsin Technology Council said as recently as last year that Shine’s 2014 funding round was far and away the largest investment in an early stage company headquartered in Wisconsin since 2009. The putative deal was also integral in pushing 2014 above other years in terms of total VC funding raised by Badger State businesses. But that has changed, after the Wisconsin Technology Council edited its records of historical funding totals in a report released this month; as a result, the 2014 total now falls more in line with the state’s funding hauls in recent years.
First, a bit of background on what led up to the recent change. For the past eight years, the Wisconsin Technology Council has published a report known as the Wisconsin Portfolio, which highlights the previous year’s largest venture capital investments in companies based in the state.
According to the 2015 Wisconsin Portfolio, the biggest deal from the previous year was a $127.4 million round raised by Shine Medical Technologies. Shine is building its business around domestic production of a crucial medical radioisotope using particle accelerator technology.
Back in October 2014, the New York-based investment firm Deerfield Management announced it “entered into an agreement” with Shine that called for Deerfield to provide Shine with up to $125 million in debt and equity financing. (Several news outlets, including Xconomy, published articles about the deal at the time.)
Shine’s putative $127.4 million financing round accounted for more than one-third of the $346.2 million in venture funding that Wisconsin-based companies collectively raised in 2014, according to the 2015 Wisconsin Portfolio. The 2016 and 2017 versions of the report also list the state’s 2014 VC total as being $346.2 million.
But an executive at Shine now says the company did not raise a $127.4 million funding round in 2014, which runs counter to data that PitchBook and other organizations that monitor VC activity have on file.
Katrina Pitas, vice president of business development at Shine, said Deerfield did not end up investing any money in Shine under the terms of the agreement announced in October 2014.
“We had high-level alignment on a term sheet with Deerfield in 2014,” Pitas said. “We weren’t ultimately able to make that deal work for our shareholders and Deerfield at that time.”
Pitas said that all of the information in Deerfield’s 2014 press release saying it would invest up to $125 million in Shine is accurate.
Pitas said that Deerfield is an investor in Shine. However, she would not say how much money Deerfield has put into Shine, nor would she say whether any investment Deerfield made in Shine came before or after the two sides’ October 2014 announcement. She also declined to comment when asked if any terms of the term sheet were legally binding.
It’s still not clear what happened after Deerfield’s October 2014 announcement. Another one of Deerfield’s portfolio companies is Madison, WI-based Phoenix, which like Shine was founded by Greg Piefer. Evan Sengbusch, Phoenix’s vice president of business development, said in an interview in October that Deerfield “had been evaluating Shine as an investment opportunity. Ultimately, they did not choose to invest in Shine.”
Deerfield did not return multiple messages seeking comment and additional details.
While the 2015, 2016, and 2017 Wisconsin Portfolio reports said the state’s 2014 venture funding total was $346.2 million, the latest version of the report, which came out last week, lists a lower figure for 2014: $218.8 million. That figure is exactly $127.4 million less than the one reported for 2014 in the previous three Wisconsin Portfolios. (The latest report notes below the $218.8 million figure that “an adjustment was made to the 2014 numbers to more accurately reflect investments that year,” without mentioning Shine or any specific company.)
Before the Wisconsin Technology Council made the switch, it noted in its published materials that Shine’s putative 2014 financing and Wisconsin’s funding total that year were both by far the largest reported in any Wisconsin Portfolio, which has been published annually since 2011. (The second largest deal listed in any of the reports is a $52 million round that Brookfield, WI-based Connecture raised in 2016.)
In response to Xconomy’s inquiries, Bram Daelemans, who directs the Wisconsin Technology Council’s investor networks, said he would “likely remove [Shine’s $127.4 million round] from the funding total for 2014 in future portfolios,” because he could not “find any information on that round either, besides the announcement.”