11 Sep Venture investment executive Dan Broderick joins St. Louis venture fund
Milwaukee, Wis. – Wisconsin venture investor Daniel Broderick is leaving Broadwell Ventures, the venture investment firm spun out of Mason Wells earlier this year, to become the fourth partner in Prolog Ventures, a St. Louis-based venture capital firm.
As a result of Broderick’s departure, Broadwell Ventures will be disbanded, leaving one less Wisconsin-based venture investment firm to pick up where various angel investment networks and individual angel investors leave off.
Broderick, however, refused to paint a gloomy picture for Wisconsin venture investment, noting that Prolog Ventures already has two portfolio companies here and will be on the hunt for more. If so, it would intensify a trend of outside investment groups investing in, and sometimes establishing offices, in Wisconsin.
Prolog Ventures has about $100 million under management and is in the process of establishing a third fund with a $120 million target.
“Wisconsin can look at this as though it is not losing anything,” said Broderick, a former director of technology commercialization for the Mayo Clinic in Rochester, Minn. “The state is gaining access to a larger [outside] fund.”
Broderick said his decision was a choice between staying in Wisconsin and working with two Wisconsin-based financial service groups that had proposed raising a fund between the low tens of millions to the mid tens of millions of dollars, and going to Prolog, a larger fund with an 80-year track record.
His efforts to raise money for Broadwell were dealt a blow in July when the State of Wisconsin Investment Board withdrew an earlier commitment. Originally, SWIB had committed $50 million to Broadwell and Venture Investors, both early-stage investment funds. In announcing the withdrawal, SWIB cited concerns about the depth of Broadwell Ventures’ management team.
Broderick did not mention SWIB in listing his reasons for joining Prolog Ventures, focusing instead on Prolog’s innovation and effectiveness. Broderick has known Greg Johnson, managing director of Prolog, for about 15 years. In 2002, they co-founded the Mid-America Healthcare Investor Network, an association of 50 venture capital firms that focuses on life science investment opportunities in the Midwest region.
“Greg was one of the first people I called to serve as a sounding board,” noted Broderick, who also serves on the board of the National Venture Capital Association and is a trustee for the Medical College of Wisconsin and the University of Wisconsin-Milwaukee Research Foundation.
Broderick said the financial-service groups he’s talked to might be willing to work with other investments organizations, including Prolog, so his decision may not actually result in leaving venture money on the table.
“I’ve spent a lot of time developing relationships in Wisconsin with the entrepreneurial community here, and I’m not going to let that go to waste,” he said. “This will be an area that we will mine heavily.”
Future is Prolog
Prolog Ventures, established in 2001, has supported more than 20 start-up companies in traditional healthcare, as well as related areas like nutrition, wellness, and plant science.
The fund cited Broderick’s industry experience and deal-flow connections, noting that he has been involved in the creation, financing, and growth of more than 20 venture-backed companies in Prolog’s areas of interest.
Brian Clevinger, founder and managing director of Prolog, said landing Broderick is a “stroke of extraordinary good luck” for the fund because of the difficulty investment funds have in finding quality, compatible partners.
“We consider him [Broderick] to be one of the big stars of venture capital, particularly in the Midwest,” Clevinger said. “The ability to add someone like him to our fund… people forget that these funds are a 10-year commitment. They tend to last longer than some marriages.”
Clevinger said he could understand how the news would be taken as a blow to Wisconsin, but noted that Broderick has excellent connections in Wisconsin and neighboring states that could lead to additional Prolog investments here.
“Dan is not simply going to join us and not pay any attention to Wisconsin,” Clevinger said.
Prolog’s portfolio companies include Zystor Therapeutics, a biotechnology firm which moved from St. Louis to Milwaukee as a condition of receiving $8.5 million from Mason Wells, which led a syndicate of seven venture funds that also includes Prolog and SWIB. Prolog’s portfolio also includes the Madison-based EraGen Biosciences, which develops products used by clinical laboratories and medical researchers in the molecular diagnostics market.
Zystor, which is developing enzyme replacement therapies for rare genetic disorders known as Lysosomal Storage Diseases, is seeking an additional $15 million in venture capital to fund clinical trials that would begin early next year. The company already has conducted successful animal tests for the treatment of Pompe Disease, a genetic disorder caused by a deficiency in the enzyme needed to break down glycogen.
Clevinger and Broderick serve on the board of ZyStor, which will remain in Milwaukee.
When the formation of Broadwell Ventures was announced in May, Wisconsin biotechnology officials praised the move because it was billed as the creation of a venture fund specifically for early-stage medical device, biotechnology, and pharmaceutical companies.
How do they view Broderick’s departure? Jim Leonhart, executive vice president of the Wisconsin Biotechnology and Medical Device Association, has received a commitment from Broderick to complete his tenure as past president of the association. Leonhart said Broderick still could play a valuable role in connecting more Wisconsin biotechnology companies to outside investors.
“Dan has worked hard to understand Wisconsin’s environment, so that’s a plus,” Leonhart said. “He intends to continue working in Wisconsin, and I think that will happen.”
Mary Burke, secretary of the Wisconsin Department of Commerce and a board member of the Wisconsin Technology Council, declined to comment on Broderick’s decision. Traveling with Gov. Jim Doyle’s trade mission to Japan, Burke said in a statement that Wisconsin can stimulate venture investment by providing additional funding for the Act 255 program, which provides tax credits for both angel and venture investments.
Doyle’s 2007-09 state budget proposal called for the expansion of Act 255 tax credits. The proposal hangs in the balance as Assembly Republicans and Senate Democrats attempt to work out their differences and pass a state budget.
“An expansion of these credits would enable us to form additional partnerships with venture capital firms and grow Wisconsin’s technology base,” Burke said.
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