WisBusiness: Angel Investing in Wisconsin Jumps in 2005

By Brian E. Clark

MADISON – Angel investing in new Wisconsin start-up companies rose significantly in 2005 over the previous year, rising to more than $19 million, according to a report prepared by NorthStar Economics.

Officials lauded the increase, which they said was due in part to the efforts of the Wisconsin Angel Network — which has been putting groups of investors together – and the passage of Act 255, which gives tax credits to investors.

The legislation, which had bipartisan support, was signed by Gov. Jim Doyle in April 2004 and went into effect last year.

All $3 million allocated for the tax credits was used in 2005 and helped leverage millions more from private investors, according to Lorrie Keating Heinneman, Department of Financial Institutions secretary.

David Ward, who prepared the report, said the number of deals by angel investor groups more than doubled from 2004 to 2005, jumping from nine to 20.

He said the dollar amount of those investments rose 65 percent, increasing to nearly $5.6 million. Though no exact figures are available for individual deals for 2004, he said he believed the $14 million raised in 2005 was a more than 60 percent increase from the previous year.

“This is only a partial picture,” he said. “But the data we’ve gathered shows some big increases, which are vitally important to the health of new companies.

“I think this could be a watershed year for angel investment in Wisconsin,” he said. “People say that we are not risk takers here, but that is changing.”

One of the newest deals was on display at a press conference in the governor’s conference room Wednesday morning.

Representatives from Illinois-based Rosetta Partners of Lake Forest, and Wisconsin Investment Partners of Madison, said they will put $1.6 million into a drug-development start-up called Mithridion. The company won the Governor’s Business Plan Contest last year and earned $20,000.

Trevor Twose, Mithridion’s CEO, said the funding will be used to equip a lab at University Research Park and hire staff to further its work on treating Alzheimer’s disease.

In a statement, Gov. Jim Doyle said he credits Act 255 for helping increase the amount of capital for new, high-growth businesses.

“It’s now clear that tax credits are an important incentive to angel investors,” Doyle said. “By claiming the maximum allowable credits in the program’s first year, angel investors showed strong interest and confidence in Wisconsin’s technology start-ups.”

Commerce Secretary Mary Burke said called the angel investments “octane to the economy” that “fuel the creation of high-paying jobs.”

And Republican Sen. Ted Kanavas called Act 255 “an enormously successful bipartisan effort. People are recognizing that Wisconsin ideas have great value for the private sector.”

Kanavas predicted the Legislature will reinvest in Act 255 and that the $3 million figure would be increased. He called the program an “excellent way to grow our own funding for new companies.”

Kanavas also said that angel investments, which go to companies in their earliest days, are more important than venture capital financing, which comes later.

He also said investment by individual angel investors could be up to 10 times larger than the $14 million figure gathered by NorthStar. That is because many angels often work through their attorneys and do not want their investments to be made public.

Tom Still, president of the Wisconsin Technology Council, compared angel investors to a professional baseball league’s farm system.

“To get to the venture capital level, you need angels to move start-ups along,” he said. “We are still far behind other states in venture capital investment, but angels should help us get there.”