Last year’s lower total for early-stage investment isn’t a surprise as the state returns to a more typical level of venture capital activity, Wisconsin investors say.
The Wisconsin Technology Council reports early-stage businesses in the state last year raised about $490 million through 107 deals, well below the two previous years.
In 2021 — recognized as a standout year for investment — the state had a total of $869 million raised across 140 deals. By 2022, that had fallen to $640 million and 107 deals. While last year’s number of deals was unchanged over the year, total investment was about $150 million lower.
Speaking yesterday at a Tech Council luncheon in Madison, Venture Investors Health Fund Managing Director David Arnstein said he’s “not surprised” by the group’s findings for 2023, which are captured in this year’s edition of the Wisconsin Portfolio.
“It matches the national trends,” he said, arguing “we have to get used to more normalized cycles, and the data if you go back to [2019 and 2020,] it’s kind of falling in line with what you see from 2023 and 2024.”
Last year’s total was slightly higher than the totals from 2019 and 2020, which saw $454 million and $484 million in early-stage financing, respectively.
Arnstein’s perspective was shared by HealthX Ventures Principal Shabaka Gibson and Golden Angels Investors Associate Director Mary Hannes. But Gibson yesterday pointed to the “promise of a little bit more growth to come,” noting high interest rates have constrained capital markets.
“As that liquidity starts to loosen up, I think there’s going to be more deals,” he said.
Hannes said the two years preceding 2023 were “pretty exciting” and Brookfield-based Golden Angels Investors members were very active during that period.
“We saw the same kind of pattern … and I think the other thing playing into it is — and I know my counterparts here I’m sure are feeling this — is not a lot of activity on the exit side of the equation,” she said, referring to when owners or investors in a startup sell their ownership or stock in the company.
Joe Kremer, director of the Tech Council’s Investor Networks, yesterday noted the top 10 largest deals always play a big role in driving the state’s VC totals. Of last year’s $490 million total, $360 million came from the top 10 deals for the year, with $156 million of that coming from a private equity deal for VBA Software in Germantown, the top deal for 2023.
For 2021 and 2022, the top 10 deals amounted to $588 million and $473 million, respectively.
Kremer touted the role of health care information and IT in general, noting those categories combined made up more than 55% of the total dollars for 2023.
“So really, Wisconsin has a really robust IT, early-stage company startup infrastructure,” he said.
He also noted southeastern Wisconsin, anchored by Milwaukee, secured the most dollars “for the first time in a number of years” with $236 million raised. Madison, which typically leads the state, had the most startup companies last year but raised less with a $180 million total.
