Wisconsin startup investments have nearly doubled in five years

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According to a new report provided by the Wisconsin Technology Council, (WTC), there has been an increase in the number of investments in Wisconsin-based start-up businesses. This number has nearly doubled within the past five years.

According to the Wisconsin Portfolio, there are at least 137 Wisconsin-based companies that are in their early stages of development who managed to raise investment capital during the previous year. The year-over-year increase reflects 7%, which also reflects almost twice the amount of deals that were done in 2011. This occurred when 76 different start-up companies were in receipt of early-stage funding.

The state startup funding that took place within the last three years consists of the following:

• 2014 – $346.2 million
• 2015 – $209.5 million
• 2016 – $276.2 million

The numbers that were compiled to formulate the totals were made up of a variety of sources that have been tracked by WTC. The sources included surveys, various business filings, public records as well as the Tech Council Investor Networks.

Deals That Closed and Took Place in 2016

During the year of 2016, the average deal that closed was just over $2 million, which was an increase of 25% from the year of 2015. Of those, the largest include the following:

• $21.5 million, which was raised by Madison-based Propeller Health

• $21.3 million that has been generated by Madison-based Midwestern BioAg

• $15.2 million that was received by New Richmond-based Engineered Propulsion
Systems

• $11.5 million that was raised by Janesville-based SHINE Medical Technologies

• $11 million that was raised by Madison-based Eatstreet

An Entrepreneur’s Conference was recently kicked off that involved a panel discussion of Wisconsin’s venture capital funds. It was there that the new report containing this information was provided according to Tom Still, the president of the WTC.

During previous years, this panel-based discussion conference may not have ever taken place due to the lack of funds available for the start-up business in the state of Wisconsin. So the fact that there is currently a panel-based discussion is a great sign. It suggests that there is a growing trend in start-up funding according to Tom Still, WTC President.

Additional Ongoing Problems

Although Wisconsin has experienced some tremendous success within the past five years concerning the amount of financing that has been raised for start-ups, there are still some nagging issues that are lurking about. Referred to as the “valley of death”, as far as funding start-ups within the state of Wisconsin go, many of the companies still struggle to raise money beyond the additional seed round. It was also noted that there is a hugely disproportionate rate of seed investing relative to investments made during the later funding stages. This has caused a problem for many of the start-ups entering into their growth stages.

Other findings consist of CMFG, which was launched by Cuna Mutual group roughly 18 months ago, Although they have already invested a considerable amount and in early-stage companies on a nationwide basis, none of them were in with Wisconsin.

Additional Reporting and Variances

According to MC Services, there were other reports released about start-up issues as well. However, the report showed variances between what was reported by the WTC. Apparently, in the latest addition of the Moneytree Report, which is a quarterly survey produced by price WaterhouseCoopers in conjunction with the National Venture Capital Association, there has been an increase in only nine months with respect to the amount of start-up capital that has been raised. According to their reports, $67.1 million has been obtained compared to $33.9 million that has been obtained during the previous year. To that in the report suggested that there was an 8% decrease in Wisconsin during the year of 2016. It also reflected that only 21 deals were completed in 2016 totaling $112.8 million, which was a decrease from 33 deals that were completed in 2015, which reported totaled $122.8 million.

According to the WTC, the variance has to do with the reports not including research and development arrangements, business development, loans and government funding that were also a part of the WTC reporting – hence the variation.

Concerns about Future Funding

In any case, there are some additional concerns about some future funding. During the recent discussion panel, future funding possibilities have been revealed. For example, the Ideal Fund has raised $12 million for future investments and currently have several companies going through the due diligence process. Neenah-based Winnebago Seed Fund recently closed an $11 million raise, while the Rock River Fund is now at $25 million, which was raised from 12 to 15 different investors. It will focus its investments on companies that are in their early investment stage who are also in their second or third round of funding.

Additional Projections

It is projected that the state of Wisconsin will experience growth as its tech sector is still a strong interest in a combination of both public initiatives and private investments that continue to have an interest in this growing sector.

There’s also been a goal set to connect universities with other private companies to increase opportunities for each.

The increase in the number of start-up investments made in the state of Wisconsin is likely reflective of the overall growth in venture capital investments overall. Generally speaking there has been an increase in the pace of venture capital investments on a nationwide basis. This may be a contributing factor to the growth of investments made in the state of Wisconsin. For example, $33 billion has been raised within the first quarter of the year which completely surpassed the $30 billion mark that was raised during all of 2013. Of this 6.1 billion has been allocated to the software development sector.

The nationwide growth in start-up investments has been driven by an increase in IPO markets that has taken an interest in venture-backed companies. This, in conjunction with the rise of start-ups in almost every region of the country, resulted in more and more players who have joined the venture-capital game.

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