• WisBusiness

Investment deals getting bigger in Wisconsin, panelist says
6/7/2018

The size of investment deals in Wisconsin is on the rise, according to one of the latest investors to join the ranks of the Badger Fund of Funds regional partners.

Ross Leinweber of Milwaukee’s Bold Coast Capital joined fellow investors yesterday in Madison for a panel discussion during the second day of the Wisconsin Entrepreneurs Conference, put on by the Wisconsin Technology Council.

According to a recent column from Tech Council President Tom Still, Leinweber is hoping to raise up to $15 million -- slightly more than the first recipient fund from the Badger Fund of Funds, The Idea Fund of La Crosse, which has raised $13 million.

“Deal sizes are relatively just growing,” Leinweber said, noting that Milwaukee presents a more mature market than elsewhere in the state, so having a slightly larger capital base than other funds makes sense.

“We certainly want to be structured, and deploy capital in a programmatic way. But you also want to be cognizant of what the market is telling you, and the market is telling you that deal sizes are slightly bigger, so we’re going to try and hit the sweet spot,” he said.

The Badger Fund of Funds was started in 2014 with a $25 million buy-in from the state of Wisconsin. The idea is the fund would support smaller regional funds led by young investors.

The minds behind the Badger Fund are Ken Johnson, partner in the Badger Fund of Funds and a seasoned investor for Fitchburg-based Kegonsa Capital Partners; and Brian Birk of New Mexico-based Sun Mountain Capital.

Others panelists included: Jonathan Horne of the Idea Fund of La Crosse; Andy Walker of Rock River Capital Partners; David Trotter of the Winnebago Seed Fund; and Richelle Martin of the Winnow Fund -- the latest recipient fund to pop up.

Investors spoke on the importance of keeping their eyes open for opportunities in any industry.

Horne says one advantage of keeping the fund at $13 million is that both the fund and the entrepreneur can be satisfied with selling the startup for $25 to $50 million, adding “you can do that in any industry.”

Rather than trying to focus on one particular sector like artificial intelligence technology, he says “we want to be industry agnostic on this… Our partners want diversification.”

Horne added: “Wisconsin has some historic strengths, but you can make money in any industry, especially when you can do real niche plays that you can do with a fund like this.”

The Winnow Fund will invest in ideas coming out of Wisconsin campuses, and Martin says she’ll have an eye toward companies working in web-based products, life sciences and engineering.

“But again, we’re not going to focus too much on these limited things,” she said. “The goal isn’t to focus just on a specific sector… Really the goal is just to focus on what we think is going to be the best investment.”

Walker, a specialist in data science and engineering, runs Rock River Capital Partners, which invests in later stage companies than the other funds.

He said when the fund was first being formed, he and others realized “we’ve got to choose between one of two things -- we can either be industry agnostic and geography specific, or geography agnostic and industry specific.”

He pointed to Madison’s HealthX Ventures as an example of the latter.

“They have a very specific focus, and they go anywhere and they’re very good at that… We’re going to do the opposite,” he said. “I think you can take this geographic approach -- just the size of the geography changes with the size of the fund.”

Rock River Capital Partners is aiming to raise a $15 million fund; the Winnebago Seed Fund has raised $11 million; and the Winnow Fund has yet to announce fundraising goals.
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