Members of Milwaukee’s startup ecosystem see potential for the city to capture more venture capital dollars in the health care sector.
Speaking at a kick-off event for Startup Milwaukee Week, Venture Investors Chief Financial Officer David Arnstein noted more than $2.8 billion was invested in Midwest health care companies last year, with about $900 million of that in digital health applications. And Midwest health care investments have risen 40 percent in the past five years, he added.
“The Midwest is growing like crazy in health care investing,” he said yesterday. “I think Milwaukee and the Midwest in general has all the ingredients to capture those dollars that are being invested.”
Venture Investors is based in Madison and has more than $275 million in assets under management. Arnstein said the venture capital firm looks for companies that “take the cost out of health care,” particularly those with intellectual property rights.
The fund backed a startup called TAI Diagnostics in 2015, which has a diagnostic test to monitor the health of transplanted organs based on research conducted at the Medical College of Wisconsin.
“Great example of the strong academic institutions in Milwaukee and the region,” he said. “Great scientists, great technology, and we led the round and the company is off and running.”
Venture Investors led a Series A round, and the company went on to raise about $20 million over time. The company’s founders came to Milwaukee from the West Coast, where they sold their previous company for more than $500 million.
“It’s always helpful to have entrepreneurs that have been successful before,” he said. “They know the space well, have been through the ups and downs … As an investor, definitely it’s a little more comfortable to back entrepreneurs that have had strong exits.”
Chris Widmayer is co-founder and CEO of Penrod, a Milwaukee company that provides software development services for life science companies. He believes the city’s startup ecosystem would improve if “we double down on what we’re good at.” As more health tech companies grow and founders take exits, the ecosystem gains expertise as well as more industry-focused capital.
“If we’re great at health care, great at manufacturing, great at other technologies, that’s going to attract people here,” he said. “We’ll become a health care city for technology.”
Amanda Baltz, CEO of Spaulding Medical, emphasized the importance of supporting and working with universities in the state to hire graduates and ensure programs help attract talent.
The Milwaukee-based company has a portable device for tracking heart health in patients. Baltz said the state’s Qualified New Business Venture tax credit program helped attract the company’s last round of investors. The program provides tax credits to investors in certified businesses up to a certain limit.
“I think programs like that are really helpful for entrepreneurs and investors to come up with great solutions,” she said. “So, more of that.”
As more health care investment flows into the Midwest, Arnstein sees Milwaukee “starting to trend” in that direction as well. He noted the city has access to companies like GE Healthcare in the area and Chicago just a few hours south.
“Digital health is an area that Milwaukee could take advantage of,” he said. “Just taking advantage of the cost of living and the quality of life, and getting more involved in the venture capital area will be the ingredient that really takes it to the next level.”
–By Alex Moe