— Investment activity this year is being restrained by low levels of available capital, but plenty of funding opportunities exist for determined entrepreneurs.
That’s according to a panel of investors who spoke yesterday during the Early Stage Symposium in Madison, an annual event held by the Wisconsin Technology Council.
John Neis, managing director of Madison’s Venture Investors, highlighted a “lack of liquidity” in capital markets during his remarks. He explained the ecosystem is heavily influenced by limited partners “at the top of the food chain” who invest in venture capital funds.
These investors are typically making new fund commitments while “harvesting” returns from earlier investments, he said, but they have had “net-negative cash flow for two years running” due to fewer mergers and acquisitions occurring, and other factors.
“Which is unusual … and in the meantime, all the companies out there that had previously been funded, instead of exiting they’re possibly needing one more round of financing,” he said.
Neis added he’s hearing from other fund managers that they’re doing fewer deals and allocating reserves to existing portfolios.
These and other factors have led to a decline in capital availability, he noted. And at the same time, the number of new companies actively seeking investment is higher than it was just a few years ago.
“So it’s all these mouths to feed, so the available capital that’s out there is being spread across a lot more companies,” he said. “All of that has contributed to a really tight environment.”
Meanwhile, gener8tor Partner Maggie Brickerman said the trends of lower valuations, fewer deals and smaller deal volume are clear in Series A investments and beyond. Series A typically follows an earlier seed funding round and represents a more significant investment in the business.
But at the same time, she said “there’s really strong deal volume” at earlier stages of financing.
“It’s just actually fewer companies, so it’s more concentrated in a unique set of companies in the early stage,” she said.
That trend may be reflected in the latest tally of 2023 early-stage investments from the Tech Council. The group’s total for the year so far includes 45 deals accounting for more than $417 million in funding.
While that’s well below the standout years of 2021 and 2022 — in which Wiscosin saw $869 million and $640 million, respectively — it’s near the total for year-end 2020, which was nearly $484 million. But that total was spread across 114 deals, more than double the number seen so far this year.
In the more competitive fundraising environment, Brickerman underlined the importance of getting some early revenue with a strong growth rate — anything to illustrate to investors the potential trajectory of the business based on hard data.
She also said having a “credible” lead investor is crucial for startup founders, as other VC firms will be more likely to “piggyback” into a funding round for a company that’s already been vetted.
Still, Katie Schmitz of Ziegler in Milwaukee added lead investors usually don’t like to “fly solo.” Schmitz is head of principal investing and fund management for the firm.
“If you’ve got a long list of [strategic investors] that can go alongside that lead, that’s an ideal scenario for someone stepping into a lead position,” she said.
And Neis argued entrepreneurs shouldn’t count themselves out just because overall funding activity is down this year, urging attendees to be diligent in seeking investment.
“The numbers are down across the board for every sector, there’s no question about it,” he said. “But good companies are getting funded. Good companies can find capital.”
— Republican and Democratic voters in Wisconsin have sharply diverging views about the strength of the national economy, according to the latest Marquette University Law School Poll.
The poll results, released yesterday, show 3% of respondents say the U.S. economy is excellent while 24% say it’s good, 36% say not so good, and 37% say it’s poor.
But when broken down into partisan camps, the results paint a picture of differing perspectives.
Among Republican respondents, none said the national economy is excellent, 4% said it’s good, 34% said not so good and 61% said it’s poor.
By comparison, 7% of Democrats said the national economy is excellent, 47% said it’s good, 37% said not so good and just 9% said it’s poor.
Independent voters were somewhat closer to Republicans on this issue, with none saying it’s excellent, 19% saying it’s good, 38% saying not so good and 43% saying poor.
The latest poll was conducted Oct. 26 to Nov. 2, and included 908 registered Wisconsin voters. Other questions focused on candidates for various political offices and other issues such as abortion.
See the full results: https://law.marquette.edu/poll/
— Monthly household internet spending in Wisconsin has largely plateaued since 2016 following a decade of substantial growth, according to a recent report from the UW-Madison Division of Extension.
This trend extends throughout the Great Lakes region, according to graduate student and report author Mckenzie Boyce.
She found the average household expenditure on internet in the state rose from $2.33 per month in 1997 to $29.38 per month in 2021. But much of that growth occurred between 2006 and 2016, when the average monthly cost rose from $8.93 to $26.26.
Wisconsin’s figures were roughly in line with those of Indiana, Michigan and Ohio over the study period. While Illinois saw a similar pattern, its monthly household internet spending was consistently higher than the other Midwest states.
“This leveling off in average household spending on internet services could be a sign of little change in broadband adoption rates in more recent years,” Boyce wrote.
See the report: https://economicdevelopment.extension.wisc.edu/2023/11/07/state-internet-expenditures-in-the-great-lakes-region/
— Dem lawmakers have introduced a bill to require health insurance companies to cover infertility care such as in vitro fertilization.
Sen. Kelda Roys, of Madison and Rep. Jodi Emerson, of Eau Claire, in a Capitol press conference argued the Building Families Act would let Wisconsinites and others know the state cares about those who want to have children. Roys also said infertility coverage would lead to more Wisconsin births, which would mean more people joining the workforce in the future.
She said she hopes the bill will move through the committee process quickly, “but that would mean that the Republicans who control both chambers need to put their money where their mouth is if they believe in family values.”
“If they believe in making sure that everyone who wants to become a parent is able to do so, then they will move this bill forward,” she said. “But if that’s just rhetoric, and what they’re actually interested in is making it harder for people to choose their own reproductive destinies, then it’s going to take a change in political control.”
Medical Director of the Froedtert & the Medical College of Wisconsin’s Reproductive Medicine Center Dr. Katherine Schoyer also at the event noted “limited infertility benefits have been shown to account for less than 1% of health care expenditures.”
<br><b><i>Top headlines from the Health Care Report…</b></i>
— A recent UW-Madison study draws a connection between early childhood experiences and biological aging later in life.
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# Public Service Commission rejects utility’s proposed changes to residential solar reimbursement
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# AGRIBUSINESS
– Wisconsin farm bureau launches WisGO team
http://wisconsinagconnection.com/story-state.php?Id=989&yr=2023
# CONSTRUCTION
– Between I-794 demolition and preservation parties in public comments emerged a third option: Bury it
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# EDUCATION
– Wisconsin teacher now leads nationwide AP Spanish program
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– 3M cited for safety violations following worker’s death in Wisconsin
http://wisconsinagconnection.com/story-state.php?Id=990&yr=2023
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– Cars and cancer: 13-year-old race car driver gives to Rock County Cancer Coalition
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UW-Madison: New paper links childhood deprivation and accelerated biological aging later in life
