Badger State entrepreneurs — especially those with ideas for creating health-care or agriculture-related software companies — shouldn’t be shy about looking south to Chicago for funding and networking, a pair of Windy City investment pros said Tuesday.
“Madison is connected to Chicago and Chicago connects Madison to the rest of the Midwest,” Jeff Carter, a co-founder of Chicago’s Hyde Park Angels to a Wisconsin Innovation Network gathering.
“So even though you may hate the Bears, you still have to come through Chicago to connect to the rest of the world,” said Carter, who is also a market commentator for CNBC, Bloomberg radio, Fox and other media outlets .
“You can’t be ethnocentric about place. You have to understand how networks roll and use that to your advantage,” said Carter, who earned his MBA from the University of Chicago in 2007 and started the city’s first angel financing group. It now has 110 deep-pocket members, has invested in 22 companies and “put about $16 million to work so far.”
Some startups in the Badger State have already gotten the message. Tom Still, president of the Wisconsin Technology Council, said the recently released “Wisconsin Portfolio,” which tracked this state’s early stage investments in 2012, reported that almost half the 74 deals in the Badger State involved at least one international or out-of-state investor.
“It’s clear that investors outside our borders are ‘discovering’ Wisconsin,” he said.
Vanessa Rollings, managing director of Sandbox Industries – a venture capital firm that also runs an accelerator foundry – said her company runs $500 million in funds that invest primarily in food and agriculture and health care – both Wisconsin strengths.
“What we try to do in our funds is bridge large corporations who want innovation and might struggle doing that internally with entrepreneurs,” she said. “With our health care fund we have the Blue Cross Blue Shield plans who want innovation very definitely, so they have partnered with us to find technology that will help their business run at a lower cost, deliver better health care outcomes and give them a return on their investment.”
She said her company’s startup foundry has a team of dedicated resources “that we use to build our own companies. At the foundry, we mainly do consumer tech companies.”
She said they don’t do outside investments at the foundry. Instead, they create about 1,000 ideas a year on their own, then drill down on 50 to 100 of them, test about 10 and hope they get two to four good companies a year out of the process.
Her firm also does accelerators and helped found Accelerate Chicago, which morphed into Techstars Chicago. Techstars provides seed funding from more than 75 top VC firms and angel investors who become vested in the success of startups, plus intense mentorship from hundreds of the best entrepreneurs in the world.
She said her company is especially excited about Health Box, a 16-week healthcare accelerator program that it launched last year in Chicago. “It went so well that we ran one in Boston and one in London,” she said, noting that Sandbox will run four more health care accelerators around the country this year.
Carter said Hyde Park Angels invests all over the Midwest. His said his group met with last week with a startup from Madison dubbed “Fishidy,” which makes interactive fishing maps.
“If you are a fisherman, you should download the app to your phone,” he said. “It’s a real cool company and while I don’t know if we will do a deal with them, when they present at a big meeting like that, we try to do a term sheet. So we are in due diligence with them right now. They are great entrepreneurs.”
If the two sides can reach agreement, it would be Hyde Park’s first investment in Wisconsin. But Carter said his group just did one with a company from Michigan called “Farmlogs,” which makes farm management software.
“When we started Hyde Park Angels, people asked me if we were going to be Silicon Valley Chicago,” he said.
“But I told them we were going to invest in what the Midwest is good at: healthcare, ag, B-to-B businesses, transportation, logistics and it happens to be the center of risk management for the entire world. So it’s really good at financial services.”
And he said he expects former Epic employees to spin out medical software companies in the future.
“Madison has always been a very entrepreneurial town, so I think the culture is right for entrepreneurs,” he said. “No one has the market cornered on good ideas. There are smart people here, and once they focus on a problem, they can develop something around it. And you’ve got one of the top research universities in the country here.”
Both Carter and Rollings praised the recent passage of legislation to fund Wisconsin’s new state-leveraged early stage capital program that will raise $80 million to be invested in startups. The bill passed with overwhelming bipartisan support and is now on Gov. Scott Walker’s desk.
— By Brian E. Clark
For WisBusiness.com
