01 Dec Visions with Lorrie Keating Heinemann: Tap brokers to promote capital formation
Editor’s note: This is Part I of a two-part interview with Wisconsin DFI Secretary Lorrie Keating Heinemann. Part II will focus on the nation’s financial crisis.
Madison, Wis. – Lorrie Keating Heinemann likes to point out that the state Department of Financial Institutions and the Department of Commerce have sort of a dual motto: Innovate, connect, and capitalize.
That is precisely what she and others in the Doyle Administration hope to do with a proposal to set aside a portion of each securities fee paid to DPI by investment brokers. The proposal – the newest version is still in its formative stages – has been presented in the past as a way to connect companies to capital and vice versa.
Thanks to programs like the Act 255 investment tax credit program, Wisconsin has raised the level of angel investing for early-stage ventures, but officials would like to see more venture capital deployed here to help later-stage firms.
Since about 87 percent of the roughly 100,000 people that are registered to sell securities here do not actually reside in Wisconsin, state officials might be able to find some outside help.
Heinemann would like to see $15 per securities license applied to building the state’s capital community.
“It’s growing but we can help accelerate it,” she said. “Just like angel money can help accelerate a business, we can help accelerate it by focusing money, and maybe it’s $10 to $15 bucks per license, on access-to-capital initiatives.”
Wisconsin Venture Fund
Heinemann thinks the state can build on what has been accomplished on the angel investment front through the Wisconsin Angel Network with a Wisconsin Venture Fund. Much like the angel network, the proposed venture fund would operate as a public-private partnership to ensure that the people who are in the private equity business can be connected into the state. It would focus on education, networking, and measuring metrics, and funds could be used by groups like the Wisconsin Technology Council and the Wisconsin Biotechnology and Medical Device Association for programs that connect investors and entrepreneurs.
DFI and Commerce would not only like to see a venture fund network to build upon professional venture capital, but connect corporate strategic investors – the Johnson & Johnsons and the Pfizers – with Wisconsin entrepreneurs.
“I really see the opportunity to take the securities fee and invest it in access-to-capital initiatives,” she said.
Heinemann, a former investment advisor and broker, said the fee increase would not be onerous based on her experience in the industry.
If the state is successful at taking those additional fees and expanding access to capital, brokers also stand to benefit by having more business opportunities, she said. Building the capital community will help accelerate the growth of companies, which will then be acquired and help create wealthy investors who become brokerage clients, she said.
A few might even grow to the point where they launch an initial public offering, “which is a beautiful thing because the brokers are the ones who distribute the IPO,” she noted.
Heinemann also would like to have one person focused on developing the venture capital network, much like Wisconsin Angel Network director Joe Kremer concentrates on the angel side. That person should not be part of state government, she added, and would be better placed in the Wisconsin Technology Council organization and work in partnership with other technology organizations.
“He [Kremer] is the face of angel investing in the state,” Heinemann said. “He’s brought in many other resources. I think we can do it in venture capital as well.”
During Heinemann’s tenure as secretary of DFI, the state has accomplished things – most notably, the proliferation of angel investment networks – that one would associate with a Department of Commerce secretary.
Wisconsin had less than $10 million in angel investments in 2004, the year Act 255 was launched, and the year before the Wisconsin Angel Network kicked off. Last year, the state registered more than $147 million in early-stage investing, and Heinemann credited Act 255 and various state departments for putting Wisconsin on the map as a good place for angel investors to find deals, work collaboratively, and invest.
She has been proud to work with the Wisconsin Technology Council, which co-founded the angel network, because the state has had angels “come out of the woodwork and start passing out business cards.”
As for DFI, she said it has been a champion of entrepreneurship as well as angel investing, but she is quick to note that it has energetic partners like new Commerce Secretary Dick Leinenkugel.
“We [DFI] understand the securities laws, we register all the companies, but we all play a part in helping our entrepreneurial ecosystem move forward,” she said of her colleagues in the Doyle Administration. “Commerce is a key leader with the incentives and the different packages to create incentives for different types of businesses.”