THU AM News: Market conditions leading to less favorable deals for entrepreneurs, investors; Cybersecurity firm looking to raise $3M

— Shifting market conditions are leading to startup acquisition deals that are less favorable for entrepreneurs and investors. 

Speaking yesterday during the Wisconsin Technology Council’s Early Stage Symposium in Madison, Health eFilings CEO Robert Hopton described the current startup landscape as “very much a buyer’s market.” He noted this trend has accelerated in the past six months or so. 

“It’s not a U.S. phenomenon, it’s not a Midwest phenomenon … regardless of what part, what region of the world and so forth, in terms of how quickly the market’s changed,” he said. “And not to the advantage of the seller/entrepreneur.” 

Ron Bote, a director and accountant with WipFli in Madison, agreed that a number of factors have led to a more challenging environment “from the seller’s perspective, in regards to being able to maintain the value.” He highlighted high inflation and rising interest rates, supply chain disruptions and other ripple effects from the COVID-19 pandemic. 

“These are all lending to some really significant challenges to companies, especially young technology companies,” he said yesterday. “We see a lot of impact to the [venture capital] funding community. We see a lot of operational market losses.” 

Panelists at the Wisconsin Tech Council event in Madison also discussed how startup companies should handle a “down round.” This occurs when a private company that needs additional capital offers additional shares for sale at a price that’s lower than what was offered in an earlier financing round, according to an overview from investment resource Investopedia. 

Jenni Le, an associate with Venture Investors, recommended startup leaders “take a temperature check on morale” among employees. 

“When you take a down round, the price per share is going to be lower than your last round,” she explained. “And so for your employees that have equity in the company, that’s going to hurt that sweat equity that they’ve been generating for all that time they’ve been working with you.” 

And if existing investors are hesitant to take part in that round, Le warned that can send a negative message to potential new investors. 

But despite the challenging environment, Hopton argued that blaming a “down round” on market conditions alone is an excuse. He urged entrepreneurs in attendance who find themselves in that position to consider how they got there, and figure out how to fix it. 

“You’re there in that situation for a particular reason, and it’s not because of the market,” he said. “It might be a contributing factor, but that’s an excuse, not the reason.” 

— CyberNINES, a cybersecurity company based in Madison, is looking to raise $3 million from up to six different investors to support sales expansion efforts. 

Todd Streicher, the company’s vice president of business strategy, made the pitch yesterday to a crowd of fellow entrepreneurs, potential investors and others during the Early Stage Symposium. 

“CyberNINES needs to expand quickly with hiring and training assessors, acquiring companies and putting dollars into marketing and software development,” he said. 

He said the company’s sales efforts began in 2020, with a focus on Department of Defense suppliers. The business provides cybersecurity compliance services to companies aimed at preventing intellectual property theft, ransomware and other breaches. 

Streicher explained the federal agency rolled out new cybersecurity compliance regulations after learning in 2016 that China had “reverse-engineered one of our most expensive and prized weapons, the F-35 Joint Strike Fighter, by hacking the DOD supply base.” 

While the DOD’s mandate came soon after that discovery, Streicher said companies have been slow to respond due to the cost and complexity associated with compliance. To address that lag, CyberNINES is developing its platform to help companies achieve compliance by the time the new regulations take effect in 2023. Those that don’t would lose their contracts with the agency, he said. 

“This is a big deal, because companies are not prepared … CyberNINES solves the problem quickly and affordably with a compliance software solution and a readiness journey program,” he said. “We’ve identified the standardized, repeatable process to get these companies compliant and protect their business.” 

See more on the business: 

— Madison-based FluGen has released new data showing a potential flu vaccine “substantially enhanced” antibodies against multiple viruses. 

The clinical-stage company recently published these findings in the Journal of Infectious Diseases. The study included participants aged 18-49 years who were randomized to get two doses of the vaccine or a placebo with 28 days in between. 

Researchers found the vaccine was “well-tolerated at all dose levels and may provide substantial protection” against infection by viral strains that don’t match the current available vaccines. 

Study author and co-founder Yoshihiro Kawaoka, who heads up the Influenza Research Institute at UW-Madison, says these strains are “a serious public health problem.” One strain called H3N2 has been especially elusive for vaccines in recent years, he explained in the release. 

“These data suggest that the intranasal M2SR vaccine evaluated in the study may provide significant advantages over existing injected influenza vaccines,” he said. 

M2SR stands for M2 Deleted Single Replication Live Virus Vaccine. The company says it’s been shown to provide “unprecedented efficacy against infection and illness” and generates an immune response for at least six months. 

See a story on the company from earlier this year: 

See the release:–serum-antibodies-against-drifted-influenza-strains-301669472.html 

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— Generac has announced its founder, Robert Kern, has died at the age of 96. 

According to a release from the Waukesha-based manufacturer, Kern launched the business in 1959 with just five employees in the village of Wales in Waukesha County. Kern sold the company in 2006 before it went public in 2010, the release shows. 

Generac President and CEO Aaron Jagdfeld says Kern’s “forward-thinking vision” laid the foundation for the company. 

“He was a true entrepreneur in every sense of the word as his work ethic, tenacity, and innovative spirit are the embodiment and the defining characteristics that live on in our Company today,” Jagdfeld said in a statement. 

See the release:


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# Unbanked rate drops in Milwaukee area, Wisconsin and nationally



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– Downer Avenue BID names new executive director


– Generac founder Robert Kern dies at 96

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– Krones acquires Kenosha County specialty equipment manufacturer


– Commercial printer scores huge post-bankruptcy win with Avon catalogs


– City of Racine votes in favor of both overturning Wisconsin’s abortion ban and legalizing marijuana


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– Former Shopko parking lot could be converted to affordable housing


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