WisBusiness: New investing network seeks to boost state’s tech portfolio

By Brian E. Clark

MADISON – Pledging to “connect the dots” between so-called “angel” investors and fledgling start-up companies, Gov. Jim Doyle launched the Wisconsin Angel Network at the state capitol Tuesday afternoon.

Flanked by entrepreneurs and legislators who have pushed his “Grow Wisconsin” agenda, Doyle said Wisconsin has a well-deserved reputation for scientific breakthroughs. But he said the state needs to do more to create high-tech businesses that can turn those discoveries into products and produce high-paying, knowledge-based jobs.

“This program will help link business people with angel investors who are willing to risk capital,” Doyle said. “Angels are missing in Wisconsin and we need more of them to make our economy grow and prosper.”

The effort will be directed by Joe Kremer and run through the independent, non-profit Wisconsin Technology Council. The network will have a $200,000 annual budget, funded by the state and SBC’s Excelerator Technology Grants program. Kremer is the co-founder and former chief financial officer of a Madison-based high-tech company.

Joe Hildebrandt, a partner at the Foley & Lardner law firm in Madison, lauded the creation of the Wisconsin Angel Network.

“It’s a start, just like Act 255, which provides tax credits for angel investors,” said Hildebrandt, whose practice includes work with angel investors and start-ups. Act 255 will give angels who invest in early stage technology companies a 25 percent tax credit over two years.

“This new effort sends the right message that the state is interested in helping entrepreneurs,” Hildebrandt said. “And that should lead to more businesses, taxes and jobs.”

Doyle cited the state’s business plan competition for start-ups – now in its second year – and the recently unveiled Wisconsin Enterprise Network to help new companies as examples of efforts to nurture new enterprise in the state.

“The creation of the Wisconsin Angel Network will help round out the state’s portfolio for tech-based economic development. This portfolio embodies my “Grow Wisconsin” goals as well as the goals of the Tech Council,” Doyle said.

Lorrie Keating Heinemann, who heads the Department of Financial Institutions, said new enterprises that need from $250,000 to $1 million to go from an idea to a business could use help from angel investors – well-heeled investors who can risk early funding. Angels often put their money into a business after an entrepreneur has exhausted his or her own funding.

Tom Still, president of the Wisconsin Technology Council, said angel investors put up $18 billion nationally in 2003. Most of those deals were done on the East and West coasts.

Though figures are sketchy in Wisconsin – because of what Still described as the “loan wolf” nature of angels – he said he believes they invested a minimum of $2 million in Wisconsin in 2002. He said that figure could easily be $40 million, however.

Through the efforts of the Wisconsin Angel Network, he said he’d like to see investments increase by at least five-fold.

“We have high net-worth people in Wisconsin and we have companies that are set to take off,” he said. “Thanks to the business plan contest and other efforts like this, we hope to convince more of them there are good deals to be made in Wisconsin.”

Doyle said the Wisconsin Angel Network will:

  1. Provide needed resources for angel networks, including organizational and administrative services, research, facilitation, and educational and networking programs.
  2. Enhance deal flow by facilitating the syndication of deals among angel groups and early stage venture capital firms.
  3. Provide professional guidelines for angels screening deals and for investors seeking to create diversified, strong portfolios that minimize risk.
  4. Provide criteria for entrepreneurs through the Wisconsin Entrepreneurs Network (WEN) to ensure entities understand the criteria they must meet in order to seek angel seed dollars.
  5. Build the capacity of angel and/or seed dollars available by increasing the number of angel networks and angel investors throughout the state and connecting them to investment opportunities.
  6. Establish metrics to strengthen data on angel investing activity, to assess best practices and to encourage participation. WAN will identify current angel activity in the state and measure improvements based on number of deals, dollars invested, jobs created, and average wages per job.

“WAN is an entry port for angels — and high-net worth individuals who may be thinking of becoming angels — to become engaged with home-grown entrepreneurs, especially in high-growth sectors of the economy,” Doyle said.

The creation of WAN meshes with other state and private initiatives, such as:

  • The Governor’s Business Plan Contest, which enhances “deal flow” by attracting solid, tech-based business plans and engaging them in a process that involves judging and mentoring. The deadline for entering that contest is 5 p.m., Jan. 31. Go to www.govsbizplancontest.com for more information.
  • The Wisconsin Innovation Network (WIN), which is the membership subsidiary of the Tech Council, provides educational and networking opportunities for entrepreneurs, investors and service providers.
  • The Wisconsin Entrepreneurs Conference gives entrepreneurs a two-day “boot camp” in the essentials of starting and running their businesses.
  • More long-term educational opportunities are provided through the Wisconsin Entrepreneurs Network, which has been organized through the Department of Commerce’s Bureau of Entrepreneurship. In fact, the Bureau itself is a relatively new creation.
  • The Wisconsin Life Sciences and Venture Conference allows emerging companies from the life science arena to make their “pitch” to investors.