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National investors seek midwestern early-stage tech opportunities

MADISON - Women CEOs of 18 early stage life science companies will gather at the Fluno Center in Madison on September 30th thru October 1st to compete for venture capital at AllThingsLifeSciences 2009. Attendees will include regional and national investors seeking out promising early-stage companies.

“To our knowledge, this is the first such venture capital forum with this focus," said Lauren Flanagan, Managing Director of Phenomenelle Angels Fund.

Similar events will be held in New York City and Silicon Valley.

“This is unique deal flow, not generally seen in Wisconsin,” said Flanagan, who has roots in the San Francisco area and is currently based in Michigan. Flanagan said that the Midwest offers distinctive opportunities for angel and VC investors. “Silicon Valley and NYC don't see many Midwest companies and will be impressed with the talent, generally lower pre-money valuations, and with the non-dilutive financial support that Wisconsin and some other Midwest states provide early stage companies - benefits which can make investment more attractive to coastal investors grown weary of competing for high priced startups.”

Judy Owen, General Partner of Calumet Venture Fund said, "I am so impressed with the quality of women entrepreneurs I have found in the Midwest focusing on Information Technology and Life Sciences.”
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Flanagan and Owen are among investors who are bullish on the Midwest technology start-ups. They believe early-stage companies based in the region are undervalued in comparison to startups on the coasts. Skilled talent is readily available in Wisconsin due to proximity to research universities such as UW-Madison and UW-Milwaukee. State support includes the Act 255 Venture Capital Tax Credits program administered by the Department of Commerce, in which certified funds investing in qualified new business ventures can claim a 25% income tax credit on the investment. The result may be a win-win for investors and entrepreneurs alike.

Single-region investment where money flows from Midwestern investors to Midwestern start-ups, however, may not suffice in the long term as more private equity is available on the coasts than in the Midwest, a point not lost on entrepreneurs seeking to take funding to the next level.

Beth Donley, CEO of Stemina Biomarker Discovery, said, “We are a little more than a third of the way to raising a $3 million round…We hope that at the Springboard events…we will attract the remaining investment need to complete our fundraising [and] make contacts on the coasts for future fund raising and eventual exit through acquisition.”

Echoing the need for cross-regional investment approaches, Suzette Dutch, Managing Partner of Triathlon Medical Ventures, said, “We find the best coastal investments often have competing term sheets as there is significantly more venture money chasing the quality opportunities. For this reason we invest in later stage opportunities there and find that coastal investors prefer investing close to home for early stage opportunities. Being based in the Midwest, we are in place to work hands on very early to shape the investments that have true venture scale return possibilities.”

Since 2001, Springboard Enterprises has presented 18 forums highlighting 383 companies chosen from over 4,000 applicants. Of these 383 companies, 82% have received funding and seven have had IPO's.

Robyn M. Perrin, Ph.D. is a freelance writer and Technology Specialist at the law firm Casimir Jones, S.C. The firm specializes in patent law with emphasis on the life sciences.

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