Heinemann: BrightStar takes philanthropic approach to bolster startups
It's extremely difficult for most early stage companies to raise money.
But an unusual new philanthropy, dubbed the BrightStar Foundation of Wisconsin, is hoping to add millions of donated capital to the mix to help nascent companies grow and create jobs in the Badger State. The Milwaukee-based foundation was incorporated in July, received non-profit status in November and opened a Madison office after that.
Lorrie Heinemann, BrightStar vice president, said the foundation's eight founders saw a "really dire need here for venture capital to go into early stage companies."
Heinemann, who headed the Department of Financial Institutions during the Doyle administration, has extensive experience in investing. Among other endeavors, she founded the Wisconsin Angel Network and Wisconsin Capital Partners, is a board member of the Wisconsin Technology Council and recently worked for the Lubar and Co. private investment firm in Milwaukee.
She said she took the new post because it combines her "passion for philanthropy and hopefully my ability to help raise capital here in the state that will go to Wisconsin businesses."
She said the BrightStar founders are wealthy men and women who have started and sold companies. Heinemann said they all "felt that they could make a difference by creating BrightStar, allowing people to donate into the foundation and then turning around investing into Wisconsin companies that create jobs."
Contributions to the foundation are tax-deductible. All earnings from portfolio companies would be re-invested to feed more job creation and economic growth, she said.
The group has already pledged more than $7 million and hope to raise another $60 million over the next few years. The launch of BrightStar follows the passage this year of a $25 million venture capital bill and a $30 million venture capital fund created by the Wisconsin Alumni Research Foundation and the State of Wisconsin Investment Board.
She said the group hopes to bolster the state's lackluster investment track record in new companies.
Wisconsin's early-stage investments jumped more than 6 percent last year to $162.3 million. But a recent report from the Madison-based Wisconsin Angel Network ranked the state in the middle for VC investments.
Heinemann acknowledged that BrightStar is an investment group of a different sort.
"Yes, they are donating their money," she said. "This is a great group of people who are passionate about Wisconsin and they want to make a difference. They want to see the kids that we are spending a lot of time and effort educating at our fine institutions from K-12 through college have the opportunity to receive capital here to build companies and create jobs here in Wisconsin."
She said BrightStar will work in tandem with angel investor and VC groups.
"Absolutely, we intend to co-invest alongside other investors," she said. But, she added, BrightStar donors don't necessarily want to get involved as deeply as some angel investors.
"Once they donate their money to the foundation, our team takes over and becomes the investment team to invest in companies," she said. "And as those companies exit, the proceeds come back into the foundation and creates a permanent endowment that will continue to invest in more companies as we move forward."
She said the founders have "deep connections around the U.S." and will seek to raise money from outside Wisconsin.
“They are not hesitating to tap into those connections to bring capital back to this state," she said. "You will see that there are very loyal people who grew up in Wisconsin and are successful in the equity and investing world. They are willing to come back and invest in Wisconsin companies as long as they meet their investment criteria."
The founders are Mark Burish, chairman of Sonic Foundry; Michael Drescher, co-founder and CEO of Milwaukee’s Okanjo Partners; Susan Shannon Engeleiter, president and CEO of Minnesota-based Data Recognition; Jeff Harris, investor and director of Somna Therapeutics; George Mosher, former owner of Milwaukee’s National Business Furniture; Jeff Rusinow, founder of Silicon Pastures, Milwaukee’s first angel network; Mike Shannon, managing director of the Denver-based private equity firm KSL Capital Partners LLC; and Tom Shannon, a veteran early-stage investor who was CEO of Waukesha-based Prodesse.
-- By Brian E. Clark