22 Nov Out-of-state VCs offer advice on biotech investments
Madison, Wis. — After two days of demostrating Wisconsin’s breakthroughs in biotechnology, the Wisconsin Life Sciences and Venture Conference closed last Wednesday with a discussion of what the state must do to attract business.
A panel of out-of-state investors praised the strides Wisconsin has made in research, but explained without capital they won’t be able to go further.
Tom Still, moderator of the panel and president of the Wisconsin Technology Council, said the panel was convened to move past the tradition of “town hall” meetings that are common in the Wisconsin climate, where local experts get together to discuss things that are already known.
“In Wisconsin people sometimes have their nose too close to the windowpane to see the horizon, and there are people from beyond who can help in that regard,” Still said. “It’s to test the waters and see potential stumbling blocks.”
Still began by asking the panelists how Wisconsin measures up to the rest of the country in market trends. Panelist Peter Shagory of the Chicago-based investment firm Baird Venture Partners said that from a venture perspective, a successful technology plan can be broken up into three aspects: technology, management, and capital.
Shagory said it typically takes two of the three to be successful, and while Wisconsin manages to stand “toe-to-toe” with research areas around the country, it lacks the capital and management base to get all three. He said that entrepreneurs look for companies that are experienced, and without the right experience backing the technology a company can’t obtain the funding it needs and remains “static.”
“There’s a difference between exceptional science experience and the type of business experience for a venture-backed company,” Shagory said.
Carter Dunkin from Missouri-based Advantage Capital Partners agreed that despite Wisconsin’s technology output, it has several related problems. He cautioned that this output creates a false sense of security among the administration at the university and state. With a track record of success it is easy to believe programs don’t need as much funding the next year, so the budgets can be slashed.
Without this funding, the research has less potential to grow and investors lose their reason to join in. “If you have adequate capital, entrepreneurs will come,” Dunkin said, “They like challenges … [but] they don’t want to scratch and claw to get that capital.”
The problem of not having enough capital creates further problems for Wisconsin, especially when the companies are trying to make things attractive to out-of-state investors. Craig England of England and Associates, an investment group based in Washington D.C., said that Wisconsin is unattractive to some east-coast investors because it lacks a major airport and investors don’t like to change planes.
After the panel’s observations on the flaws in Wisconsin’s framework, Pam Christenson of the Department of Commerce shared the efforts that the state has taken to put itself back on track.
She called attention to the recent passage of Act 255 by the state Legislature, which has helped create the Bureau of Entrepreneurship. The bureau will offer grants to growing companies and promote the creation of entrepreneurial aid centers across the state.
While the Bureau of Entrepreneurship will help add management to the state, other “angel activities” will be put together to place the third aspect for venture success. These activities include offering tax credits to businesses that move into the state, closer ties with alumni groups such as the Wisconsin Alumni Research Foundation, and an increased focus on early-stage seed funding.
“There’s always more that the state can do, but from an outside perspective I’m impressed by what the state has accomplished in a fairly short period of time,” Shagory said.
Les Chappell is a staff writer for WTN and can be reached at email@example.com.