Wisconin in Good Position for Attracting Much-Needed Venture Capital

Next week’s Governor’s Summit on Venture Capital comes at a time when investors are
still recovering from the tough knocks of 2000 and 2001, when entrepreneurs are still
hustling like crazy to find start-up money, but when angel and venture investment groups
are still putting down roots in the state.

By:
John Torinus
Milwaukee Journal Sentinel

Because Wisconsin started from a low base of start-up capital, investors here weren’t
burned as severely as those on the coasts. As a result, there is less gloom about moving
ahead.

Don Jones, the telecommunications entrepreneur from Fond du Lac, pulled together an
analysis for a talk at Moraine Park Technical College that illustrates how much Wisconsin
has to do to catch up:

From 1996 to 2001, 80 companies in the state were financed by venture capital out of
21,316 across the nation. That’s 0.38% of the total. In dollars, the six-year total was $560
million here, or 0.2% of the total of $260 billion invested in the country.

The argument can be made that our share should have been 10 times higher, as
Wisconsin can claim about 2% of the U.S. economic activity.

Against that backdrop, though, there is room for optimism.

The venture summit is just one example of the growing climate in the state for start-ups.
Last year, the first summit drew about 300 people, a surprisingly high turnout. This year,
the organizers expect several hundred more.

"There is the beginning of a buzz," said Jeff Rusinow, head of the Silicon Pastures angel
investing group in Milwaukee and a moderator on the topic for the summit. Deal flow is up,
he said, after some hunkering down by investors during the recession and dot-com bust.

Rusinow cites a recent second round of financing for UltraVisual Medical Systems Corp.,
a Madison 3-D medical imaging start-up. It was an "up round," in which the share prices
were higher than in the initial round in late 2000.

Jim Nellen, president of Invest Wisconsin, a group formed to simulate capital formation,
said the venture community is "getting an identity" in the state.

"I’m beginning to sense a real perception of an organized structure coming into play," he
said.

The sense of progress after years in the VC hinterlands has some substance, as these
developments indicate:

Silicon Pastures has done 11 deals for almost $6 million since its founding in October
2000.

Adam Bock, is working for Silicon Pastures and Early Stage Research, a Madison angels
group. This links Milwaukee and Madison start-up activities.

The Fond du Lac Area Economic Development Corp. is starting an angels group. It
mirrors what has happened with groups in Waukesha and La Crosse and brings to seven
the total number of groups.

Silicon Pastures has linked via Rusinow with TechStar, the five-university initiative in the
Milwaukee region aimed at promoting technology transfer to the private sector.

Rusinow is pushing for "a network of networks" to connect the angel investors across the
state.

Bock is seeing 20 to 30 deals a month, even with the economic downturn, proving there is
an ample supply of potential deals in the state.

The promoters of start-up capital in the state are encouraged by the progress but know
much work needs to be done.

"The point is that it has to be a long-term process" that looks past temporary downturns,
Bock said.

For Jones, there is no alternative but to create a more entrepreneurial environment. He
says there is "an imperative of innovation."

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