2015 WISCONSIN PORTFOLIO putting riSK capital to WorK + + people iDEAS moNeY = New CompaNies Joe Scanlin Kerry FranK Brian JenSen liz eVerSoll ScanalyticS comply365 FiShidy SOLOMO technology Wisconsin Technology Council Wisconsin DFI: Ensuring access to strong financial institutions for the state’s business community The decision to start a business is a major one – probably one of the most important you will ever make. WE MAKE IT EASIER FOR YOU. Supporting Governor Walker’s efforts to accelerate the growth of Wisconsin businesses. Wisconsin Department of Financial Institutions stands ready to help with online access: • Create your own LLC or corporation quickly and easily Visit www.wdfi.org/apps/CorpFormation/ • Link to state and national resources through our Business Creation Resource Center Visit www.wdfi.org/BusinessCreationResources/ 201 W. Washington Ave. Innovate. Connect. Capitalize. Suite 500 Madison, WI 53708-8861 • Saluting Wisconsin’s entrepreneurs and angel networks 608-266-1622 WISCONSIN PORTFOLIO putting riSK capital to WorK + + people iDEAS moNeY THaNKs = New CompaNies thanks to the sponsors and supporters of the Wisconsin portfolio: Inside front cover Wisconsin department of Financial institutions 7 Bdo 7 ATC = New Compa 7 Venture investors Nies exeCuTiVe THe VeNTuRe oN THe summary eCoNomY CoVeR 12 Wisconsin economic page 2 page 4 page 5 Development corp. (Wedc) 12 State of Wisconsin Investment Board 12 Baker tilly 13 Johnson Bank 13 State of Wisconsin Investment Board Supporting Governor Walker’s iNVesTmeNT 2014 Deals wi aNGel 15 AT&t CapiTal page 8 NeTwoRK efforts to accelerate the growth page 6 page 10 Back cover Joe Scanlin Kerry FranK UniversityBrian research JenS enpark liz eVerSoll of Wisconsin businesses. ScanalyticS comply365 FiShidy SOLOMO technology aCT 255 liabiliTY iNVesToR page 12 iNsuRaNCe ResouRCes page 14 page 16 Welcome to the 2015 Wisconsin Portfolio, an annual publication of the Wisconsin Technology Council through its Wisconsin Angel Network and its partner, the Wisconsin Economic Development Corporation. Wisconsin Technology Council 2015 WISCONSIN PORTFOLIO people + ideas + money = new companies executive summary At least 113 Wisconsin early stage companies raised investment capital in 2014, a 31 percent jump from the prior year. More than $346 million was raised by those 113 companies, nearly three times more than 2013’s total of about $128 million. Even if the 2014’s six largest deals in terms of dollars invested are taken out of the mix, the remaining 107 companies collectively raised more than $112 million – still approaching the 2013 total. ToTal iNVesTmeNTs iN wisCoNsiN COMPANies 2009-2014 $346,198,886 $178,920,098 $163,447,237 $152,868,525 $128,327,172 $79,017,700 2009 2010 2011 2012 2013 2014 Using public reports, to consumer products, activity. The Great Lakes filings and surveys, the and from software to region, which includes Wisconsin Technology medical devices. Wisconsin, represented Council and its Wisconsin Much like 2013, investors about 13 percent of deals Angel Network tracked a from outside Wisconsin’s done across the country, “Entrepreneurs total of $346,198,886 that borders again played a according to the Halo and their was infused into the 113 significant role in funding Report, put together by the companies (see pages 8-9 state companies in 2014. Angel Resource Institute. companies for detailed reporting). Investors from Chicago, In addition to the 113 will ultimately The largest deals reported Boston, New York and companies listed in this were SHINE Medical California showed up in report, two angel networks be driving Technologies ($127.4 some deals. said they invested million), Renaissance Several angel unspecified Wisconsin’s Learning ($40 million); groups in amounts in future success, CorvisaCloud ($30 the state other Wisconsin million); Propeller Health reported companies. Those but this year’s ($14.5 million); Comply365 being more dollars are not ($12 million) and EatStreet active in reflected in the Portfolio ($10 million). Thirty-eight 2014 than year-end totals profiles some of Wisconsin companies in past years. Wisconsin because the networks each raised at least $1 Investment Partners declined to name the the people and million from investors, invested in more deals than companies involved. organizations up from 27 in 2013. the year before and was Entrepreneurs and their The average deal size was just again identified as one of companies will ultimately helping propel over $3 million for all 113 the 12 most active groups be driving Wisconsin’s companies, and just over in the United States. future success, and this them forward.” $1 million if the six eight- Other state groups are year’s Portfolio profiles figure deals are excluded. actively looking for exits for some of the people and Wisconsin’s tech-sector their portfolio companies, organizations helping diversity also shows in the and a few were also waiting propel them forward. report, which includes deals for the rollout of new state ranging from advanced initiatives. The Midwest - Tom Still, president, manufacturing to digital continued to show well in Wisconsin Technology health, from biotechnology national reporting on angel Council 3 2015 WISCONSIN PORTFOLIO people + ideas + money = new companies the venture economy: a primer At the very early stages of most businesses, funding comes from founders, friends and family, debt and grants. This initial funding can take a new venture only so far. Startups often need additional funding to accomplish additional goals in further expanding the business. A few examples include securing patent protection, building early prototypes of technology and also hiring business development and management personnel. ELOPMENT V product Seed STARTUP groWth de COMPANY Founders Funding gap Friends & Family “Super” Angels Angel Groups “Micro” Venture Funds Venture Funds inancing F Institutional Equity 4 Bonds Non-diluting government grants Debt The source of the money Through this increase in The triangle highlights the received follow-on rounds needed to reach one of valuation, the VCs exit the portion of the early stage of investment from venture these goals often comes business by one of two means, market that is considered capitalists. from the early stage capital taking the venture public the most challenging. Often market, making it a critical (Initial Public Offering, or referred to as the funding In Wisconsin, it can be a link in the development of IPO) or selling it to strategic gap, this area represents challenge for companies as entrepreneurial ventures. Early acquirers. It is through these entrepreneurs in search of they attempt to raise early stage capital is comprised “exits” the previous investors, investments between $1 stage capital, including larger, of individual angels, angel including the founders, angels million and $5 million. This follow-on funding rounds. A groups, early stage funds and others, can receive a size of investment is typically new “Badger fund of funds” and some early stage venture payback on their investments. too large for a single angel program is expected to roll funds. Exits, or the potential of an network but not large enough out in the fall of 2015. eventual exit, provide the for a venture fund. If a venture survives long incentive necessary to attract enough to enter into a rapid investors to a startup business Angel investors and DiD You KNow? growth stage or, in the case of and to keep them active venture capitalists form The Harvard Business life sciences, far enough in the in the early stage market. a vital partnership that Review examined fundraising data over the regulatory process, the venture Opposite is a graphic, called results in a startup evolving past five years and found capital market sometimes the financing continuum, into a successful business that even though several representing the stages of providing well-paying jobs takes the reins. Fueling rapid metro areas still dominate in growth, VC involvement business development and and commercializing new early-stage venture backed often results in significant the typical investors through technologies. A number of entrepreneurship, smaller increases in company those stages. businesses, originally funded cities across the country are valuation. by angel investors, have beginning to gain ground. oN THe CoVeR… The four entrepreneurs pictured on the cover of the 2015 Wisconsin Portfolio are just a few examples of the entrepreneurs behind the numbers. Here are several more entrepreneurs whose companies reported raising capital in 2014. michael BarBouche henry SchWartz rimaS BuineViciuS B. lynn allen-hoFFmann Jalem getz elizaBeth donley matt hoWard ForWard health group moBcraFt Beer roWheelS Stratatech WantaBle Stemina eatStreet 5 2015 WISCONSIN PORTFOLIO people + ideas + money = new companies how can Wisconsin improve access to investment capital? Here are some recommendations from the Wisconsin Technology Council’s 2015 report, “Investing in Next Generation Jobs.” Items of state interest: • Grow the next generation of Items for federal interest: • Raise the $8 million cap on credit- Wisconsin early stage capital • Keep the existing “accredited eligible investments in an ACT 255 professionals akin to the state of investor” threshold currently being firm, unchanged since 2005, to $12 Michigan model. reviewed by the Securities and million. • Create a merger and acquisition Exchange Commission. • Raise the credit from 25 percent to “strike force” or “welcome wagon”