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Venture Investors looks to fund 20 companies

Madison, Wis. - 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, TomoTherapy, 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.
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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, Minneapolis.

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."

Comments

Lorrie Heinemann responded 8 years ago: #1

Great to see great press on the good work of Venture Investors!

John D. Watts, P.E. responded 7 years ago: #2

I agree with the testimony that Mr. Neis gave before the Small Business Committee on The Patent Reform Act of 2007 and offer my following experience in support that hopefully, he might pass on to the Senate Hearing on the Act.

RE: H.R. 1908: PATENT REFORM ACT OF Y2000

H.R. 1908, recently passed by the House and soon scheduled for action in the Senate, virtually eliminates an Inventors Right to profit from his invention and to the right of trial by jury as granted by The U. S. Constitution, in that virtually all essential decisions are to be made by the Judge and Patent Office Director, not the jury. A few points are:

Section 3, Right of the first Inventor to file: Elimination of the “first to invent” stipulation, makes it impossible for anyone to prove their invention that lacks funds to own and operate a secret R & D facility, because others necessarily called upon by the inventor to build and or test his invention, can sell the information to well financed others who then “file first” and steal the invention. Amid the torrent of false oaths now pervading the courts, the new 102(a)(1)(B) revision, tends to insure a steal of all valuable inventions made by small entities.

Section 5, Right of the Inventor to Obtain Damages: This amendment makes it certain that large companies will routinely infringe patents of small entities. Their legal advisors will tell them: “Don’t ever take a license from the inventor or a small company because: (1) They will probably not find out you are infringing, but If they do; (2) You can keep them in court until they go broke; or (3) Even if the small entity should win an infringement suit, you pay no more than the reasonable royalty you would have paid had you licensed, because the bar for enhanced damages is now so high, it will never happen.” Even if a small business should win an infringement suit, it must pay costs of the lawsuit and pay half of net proceeds to the contingency attorney, leaving the small business perhaps a fourth of “a reasonable royalty” that it should have received under license. With such a new law in effect, the odds for recovery are so slim that it will not be possible to get an attorney to take a case on contingency, so small business patents will be worthless because they can’t be enforced.

Section 6, Post-Grant Procedures and other Quality Enhancements: This amendment places a never-ending unbearable burden of both time and cost on a small business that is typically struggling to build a business on the invention. A large competitor or group of large competitors can file a never ending stream of “prior art” anonymously so as to scare the small entity enough to not file otherwise reasonable infringement suits. Post Grant Revues will become the weapon of choice to run a small entity out of business, just as sure as H.R. 1908 was written by large corporations.

Section 10, Entity Status: This amendment classifies an inventor, who has assigned five or more inventions to employers as a large entity, even if penniless, should he apply for a patent to exploit on his own, increasing his costs.

Amendment relating to Venue: This amendment now makes the inventor expend even further time and cost, to reduce costs of the infringing large company.

Lifting the bar for patentability, substitutes bias for facts whereas, “Grahams Tenants”, (particularly a long-felt-need) should be made statutory law and system patents should be denied. These two simple provisions would accomplish the stated legislative objective of protecting large companies from “Trolls”, who buy up patents for one cent on the dollar from inventors too poor to market them and then sue large companies which should be stopped, but preventing a small entity from profiting from a patent will scuttle the economic dynamo our founders energized for all citizens, because the vast majority of new products have been invented by small businesses.

John D. Watts, P.E. 512-418-8668 8301 Gutherie, Austin TX 78750-7852

PS: I have been granted over fifty patents, some of which sold in the $billions. My inventions were used on: Drilling Rigs to stop oil well blowouts that were polluting the Gulf of Mexico; the NPR Nuclear Reactor that made the plutonium that helped win the Cold War; cryogenic loading lines of the Saturn V Complex that launched the moon rockets; and countless other applications. The USPTO search tool doesn’t turn up many of my patents for some reason, but I will furnish the list should you want it.

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