After multiple false starts on a venture capital bill last session, those connected to the early stage investment industry knew they had to come up with a new plan this time around.
An initial effort in 2011 to set up a venture capital fund for the state went down in flames after allegations that the so-called CAPCO industry would hijack the fund for its own gain. Another attempt to negotiate a bill failed when a bipartisan task force was disbanded by Gov. Scott Walker in favor of a $100 million proposal — an idea that subsequently died when revenue projections in early 2012 showed a looming deficit.
So when revenue projections started looking up ahead of Gov. Scott Walker’s 2013 budget recommendations, former WEA Trust exec and current lobbyist Steve Lyons and others with interests in the bill decided to join up for a unified effort.
“We invited a number of venture and angels and super angels to come and meet, and we had a great meeting Jan. 3 and we talked about working together with a unified voice, a unified message, creating an entity with one (lobby), one vision to make this happen,” Lyons said.
That led to the creation of the Wisconsin Growth Capital Coalition, a trade association determined to see the creation of a venture capital fund in Wisconsin. Lyons estimates the group lobbied at least 60 legislators — meeting with some two or three times — to try and convince them to support a revamped piece of legislation.
Gov. Scott Walker started the ball rolling by putting $25 million in his budget for venture capital, but follow-up legislation from Rep. Mike Kuglitsch, R-New Berlin, and Sen. Alberta Darling, R-River Hills, required a harder push, Lyons said.
“We had folks from all over the state meeting with legislators, we had phone banks set up at all times so people could call their legislators,” Lyons said. “It was really a statewide effort for small companies, angel investors to say, ‘You know, we all agree that we need to grow Wisconsin’s economy and this is going to be a powerful tool to do just that.’”
The bill creates a so-called “fund of funds” that would invest state money in other venture capital funds. Those funds would then be required to invest in Wisconsin startup companies in a specific set of sectors — those that Lyons said have a “small runway” to takeoff for economic success — and the state’s investment would have to be repaid.
Remaining opposition to the bill was largely taken care of by removing the involvement of the Wisconsin Economic Development Corporation in picking a fund manager. Under amendments to the bill, the fund manager would be picked by a committee of three members of the State of Wisconsin Investment Board and two from the Department of Administration.
Despite initial skepticism from legislators, Lyons’ group tried to work on educating lawmakers and clearing up “misinformation” from the previous venture capital debate. That also meant starting from scratch, meeting with editorial boards and trying to change the message from “venture capital” to jobs.
“We changed the discussion away from venture capital, or even the money, but really focused on where the money goes,” Lyons said. “And that’s startup companies, that’s mom and pop shops. They’re companies that have the idea and have the patent and are just hoping and praying that they can go from two jobs to 42 jobs.”
The bill is now on its way to the governor after passing the Senate and getting final approval from the Assembly this week, although some Democrats have worried that the $25 million won’t be enough to impact job growth in Wisconsin. Sen. Julie Lassa, D-Stevens Point, has argued that when the money dries up and legislators don’t see an immediate return on their investment, they could hesitate when the time comes to put more money into a fund of funds.
Lyons says while he understands that trepidation, the bill was structured for a quick impact with short-term return on investment.
“Had we hoped for more money? Absolutely,” Lyons said. “But you know, that’s every case and every piece of legislation, that’s part of the legislative process. We think its a very, very strong step, we think it’s a first step. I think we’re going to be able to come back and say, ‘Look, this money worked. These job creators had an impact on these economies.’”
Although questions linger about where bioscience will come into play down the line and how the investments will end up being executed, Lyons says his group is looking at more ways to advance early stage capital efforts and is around to stay.
