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- Since its inception, Venture Investors
has emphasized the "entrepreneur-in-residence" model that was popularized on the coasts, and it now has amassed enough capital to invest in 20 additional early-stage businesses.
The Madison-based venture capital firm announced it has raised $69 million from mostly Wisconsin sources for its new Venture Investor Early Stage Fund IV Limited Partnership, and already is in discussions with several prospective partners.
"We have a number of companies that we're talking to," said John Neis, co-founder of Venture Investors. "We're going to fund about 20 companies over time."
Neis said the new fund would not represent a fundamental change in Venture Investors' strategy, which has been to target young start-ups firms at the point of commercialization. Among the maturing companies that received support from Venture Investors during their formative stages are Third Wave Technologies
, and Deltanoid Pharmaceuticals
"When they are first setting up operations outside of campus, we're willing to be the catalyst in that company's formation," Neis said.
Closing the gap
For several years, Wisconsin elected officials have lamented the gap between research spun out of the University of Wisconsin-Madison
and available venture funding to support it.
Now, several state sources have stepped forward to help Venture Investors plug that gap, including American Family Insurance
, MGE Energy
, the Wisconsin Alumni Research Foundation
, the State of Wisconsin Investment Board
(SWIB), and WEA Insurance
, all based in Madison; Robert W. Baird
and Northwestern Mutual Life
, Milwaukee; Sentry Insurance
, Stevens Point; and Thrivent Financial for Lutherans
Monica Jaehnig, portfolio manager for SWIB, said the board accepts the contention that sophisticated technology is being developed here, but not enough capital is available for commercialization. She said SWIB, which also has committed money to a new fund being developed by the Milwaukee venture capital firm Mason Wells
, is impressed by the progress being made by Venture Investor portfolio companies like TomoTherapy and NimbleGen
"There should be some room for us to get some wins out of this," she said of SWIB's support of Venture Investors. "Venture capital is hands-on, nitty gritty work. You can't do this stuff from the coasts."
While Mason Wells has been more narrowly focused on biomedical investing, Venture Investors has built a broader portfolio that includes the life sciences, information technology, engineering, and energy.
Nationally, the average first round venture capital deal is in the $5 million to $6 million range, and Neis said the experience of Venture Investors is "not far off from that" in terms of the size of the syndicates that it has formed.
In the past, Neis said the firm has tried to advance technologies that represented great opportunities, but for whatever reason their scientific founders were not in a position to commercialize it. "We're willing to roll up our sleeves in those situations," he said. "We're looking for technology solutions for real world problems. We're not funding basic research, we're funding commercialization."
Neis said companies in Venture Investors portfolio are encouraged to seek Small Business Innovation Research (SBIR) and other government grants as long as the money is sought for their core research.
Although the bulk of Venture Investors' investments have gone to companies spun out of the University of Wisconsin-Madison, Neis indicated the new fund would not ignore other regions.
"We view this as a Midwestern fund for a seven-state region in the Midwest, but two-thirds of our deals have been in Wisconsin," he noted. "We've done deals in Milwaukee over the years, and we'll continue to do so.
"We've done a lot in Madison because of the scale of the UW."