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WisBiz People: Angel Network's Kremer Connects Ideas with Money

This is a new edition of WisBiz People, a column from WisBusiness Editor Brian Clark. If you know someone with a good business story to tell, write to clark@wisbusiness.com with your idea.

By Brian E. Clark

Joe Kremer runs a match-making service, of sorts.

In his job as head of the recently created Wisconsin Angel Network, Kremer introduces entrepreneurs to "angels" - investors with deep pockets who are interested in backing what are often risky start-up enterprises.

"If they click, they click," says Kremer with a twinkle in his eye. "If not, well at least weíve gotten them together."

An entrepreneur himself who has been down in the trenches with several of his own start-ups, Kremer, 34, began his job in December.

A native of De Pere (near Green Bay), he earned an MBA in finance from UW- Madison and graduated from the Weinert Applied Ventures and Entrepreneurship program. He also has been a consultant. In addition, he has government experience, working on Wisconsin's Act 255, which gives angels who invest in early stage companies a 25 percent tax break over two years. The bill became law in 2004.

The Wisconsin Angel Network is a project of the Wisconsin Technology Council and was championed by its president, Tom Still. WAN is being funded to the tune of $400,000 for two years through the Department of Commerce and several other state agencies, plus a grant by SBC.

Still says linking groups of angels is important because they are often "lone wolves" who operate with little coordination.

"By having better communication, a group in one part of the state might see a deal it likes somewhere else," he says. "If this works as we hope, there will be a pipeline of deals created."

Still has high praise for Kremer.

"We had a rigorous hiring process and Joe was clearly the top choice. Heís been through this and he really impressed our advisory council."

When Gov. Jim Doyle announced the creation of WAN in December, he said he hoped the organization would "connect the dots" between financiers and emerging companies.

Kremer, who says he views WAN as its own kind of start-up, will be the dot-connector. Among other things, he will help organize and create angel networks, coordinate communication between angel groups and ultimately, track how many deals they finance.

Late last week he was on his way to Janesville to meet with a group of investors who were thinking of starting an angel network of their own.

Joe Hildebrandt, a partner in the Madison law office of Foley & Lardner, calls Kremer an "excellent choice" to head WAN.

"Heís got the right educational background, but perhaps more importantly, heís gotten his hands dirty working with start-ups and investors," adds Hildebrandt, who is chairman of his firmís national Emerging Companies/Venture Capital Group.

Though deals have and continue to be made, Hildebrandt says Wisconsin has not been a hotbed of organized angel investing. Certainly not like on the coasts, he adds.

"Because of our history and tradition, we havenít had sufficient angel investment, especially from accredited angels," Hildebrandt says.

Accredited angels must have a net worth of $1 million, annual incomes of $200,000 and pass other financial qualifications. They make investments in exchange for equity in a company.

"A lot of individual investors on their own have stumbled across business opportunities in a haphazard manner by knowing an attorney or an accountant who knew of a project," Hildebrandt says.

Now, with WAN and its recently launched website - http://wisconsinangelnetwork.com - angel networks will be able to learn of start-ups and communicate with each other more easily.

"There are a tremendous number of companies with huge potential that have not received funding because the founders didnít know where to go for funding and investors didnít know how to seek them out," he says.

Hildebrandt says WAN will fill an important gap in Wisconsin.

"Up to now, there hasnít been any place where this kind of information was recorded or noted," he says. "People havenít had any good way to know of potential deals."

Even though investing in start-ups can be a gamble, Hildebrandt says the environment may be right for people with deep pockets to give it a try.

"Traditionally, people from here havenít done a lot of this," he said. "But over the last five years, theyíve seen that putting all their money in the stock market is not an appropriate way to diversify. Emerging companies could be one option."

Carl Gulbrandsen, managing director of the Wisconsin Alumni Research Foundation, says WAN should be helpful in helping commercialize research coming out of UW-Madison.

"WAN is a great idea and Joe is a good pick to run it," he says. "Heís already wearing out the tires on his car traveling around the state to meet people. Heís young, has been through this himself and he brings a lot of energy to the job."

Gulbrandsen says he believes there is plenty of money sitting on the sidelines in the Badger State.

"People would be surprised how much wealth there is," he says. "And I think many of those people would like to make the high-tech and biotech sectors grow here.

"Emerging companies have been starved for financial resources," he says. "Wisconsin has been a leader in inventions, but lagged in start- ups. If WAN can put the right people together to make deals happen, it will be a wonderful thing."

Lorrie Keating Heinemann, another WAN champion, says she hopes Kremer and WAN can get the deal pipeline flowing quickly.

"We need to make the early financial connections," she says. "Venture capitalists come in at a later stage. But it is the in the very beginning that start-ups need money and that is where angel networks can be so important."

As for Kremer, Heinemann says WAN is lucky to get him.

"Heís a product of the Weinert Center and brings good background from his own business experience to the job," she says.

Kremer was raring to go when he finished his MBA. He first attempted to open a cafť in downtown Madison, then tried exporting trash compactors to Europe.

"Unfortunately, a company with a big footprint came in and stepped on me, so the cafť didnít work out," he says. "And the compactor deal had licensing problems."

But Kremer wasnít discouraged. He and former business partner Nasser Kutkut, who holds a Ph.D. from UW-Madison in power electronics, came up with a business plan to market a technology that prolonged the life of batteries.

The company, which still exists, is called Power Designers. It makes three products centered on improving the performance of industrial lead-acid batteries.

"They are super dirty, super boring and super untechnical," Kremer says. "We brought technology to them."

Unfortunately, when Kremer and Kutkut were trying to get their company off the ground, the dotcom boom was in its heyday and financiers were most interested in talking to software start-ups.

Kremer was with the company for nearly five years and made numerous trips to the West Coast to raise money. On few trips, he was successful.

He also put in too many 100-hour weeks. But he scraped up investments to help the company grow to more than 20 workers before it lost ground and was reduced to four employees when he left.

"We made some mistakes, but 9/11 wiped out a bunch of markets for us," he says. "People retrenched.

"Our products were high on the technology curve and it took awhile for customers to get their arms around the concepts, even though we provided a lot of value.

"But after 911, no one wanted to try anything different, it seemed," he says. "Now, fortunately, the market is coming back."

In 2002, Kremer made three business projections for the company and two of them did not include him.

"The money spoke," said Kremer, who remains friends with Kutkut.

"Joe and I go back a long ways," said Kutkut. "Heís got a lot of vision. He wants to help entrepreneurs get going. WAN is a great fit for him. In fact, I think he was thinking of creating something like this on his own."

Kremer says the start-up experience taught him more than could have ever learned in a classroom.

"When we started out, we were begging for money," he said. "We talked to lawyers, accountants, friends, relatives, anybody we thought could help us.

"It wasnít easy to find out who angels were," he said. "I had to talk my way in a lot of doors to make my pitch. It was a rough go, especially because we werenít making a glamour product."

If Kremer can make WAN work the way he hopes it will, he says other entrepreneurs wonít have beat themselves up to find potential investors the way he did.

"I want to make it easier for people who are doing what I was," he says. "You still have to have a product and a good business plan, but we will open doors.

"If a network like WAN is helping make the introductions, that can save a lot of wasted time and energy."

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