David Guinther likes to say that WISC Partners is “smart money on steroids.”
“We’re not just coming in as experienced people with the ability to help venturists pose better questions,” said Guinther, a founding general partner of WISC Partners, a new, Madison-based strategic operating capital fund. He spoke Tuesday at a Wisconsin Innovation Network luncheon at Madison’s Sheraton Inn about his company, which is targeting young Wisconsin IT and healthcare firms.
“We’re actually there between all those board meetings … doing whatever is possible to reach the outcomes we think are there. For us, this is not a spectator sport. We’re out there on the field,” he said.
Guinther, a Milwaukee native and UW-Madison graduate, is a veteran entrepreneur who worked nearly three decades in California’s Silicon Valley and has been involved with a dozen startups. He moved back to Wisconsin several years ago to raise his children.
He described WISC Partners as the “next generation of venture capital,” a fund that is targeting the so-called “sweet spot” between angel investors and traditional venture capitalists. Other partners in the group are also former Wisconsin residents who did well in Silicon Valley.
“We’re more akin to a private equity in terms of the degree of post-investment and engagement that we bring to bear,” he said, noting that the WISC Partner’s first fund is for a “modest” $25 million that would invest in eight to 12 young companies.
“We think we can make a nice contribution to the ecosystem here,” he said. “I went west as a young man and came back a little less young. But I brought with me some experiences that I think can be very helpful as we try to do something very special here in our state.”
He said WISC Partners has already linked up with Imbed, a Madison-based firm that makes microfilm bandages that do not have to be changed as often as conventional bandages. While the company waits for FDA approval, it has begun working with animal-care firms and the U.S. Defense Department.
In the five years that Guinther has been back in Wisconsin, he said the startup landscape has changed for the better with a lot of start-up activity. He said the success of Epic Systems and Exact Sciences means that talented Wisconsin university graduates are sticking around, working for local companies and then launching their own startups.
Guinther said his firm wants to invest in young companies that have “proof of concept pieces already in place that gives us something to work with” rather than a venture that merely has a promising concept.
Ideally, he said, the investment candidate would have a product that is in the market “so we can better assess product/market fit,” an executive team that has gone through a few cycles, has customers and has managed budgets.
Guinther also said Wisconsin residents who invest in WISC Partners can benefit from tax credits through the Act 255 program enacted by the Legislature.
Investors from California – even if they once lived in the Badger State – cannot qualify. He quipped that they gave up that option when they moved west to enjoy dining in their vineyards in the middle of February.
Guinther said he and his partners had no interest in starting a venture fund. Rather, they were looking for a problem that they could solve. He praised angel groups in the state and said there is venture capital for groups that reach that stage.
“What we found, though, was this gap between angel rounds and venture rounds,” he mused. “Who is funding these angel-funded companies and ensuring that they have a good path forward? I became aware of some companies that had met all their milestones they’d committed to with their angel groups, but still did not have a clear funding path going forward.
“So we coined the phrase ‘stranded on an achieved milestone’ to explain who these companies were,” he said. “We think there is an interesting opportunity here for those companies that have shown they know how to execute 12 to 18 months past an angel round to help them grow and accelerate further to either a full venture round or some other kind of exit.”
— By Brian E. Clark