SWIB, WARF Narrow Search for Investment Manager at 4490 Ventures

12/17/13Follow @wroush

By the time the champagne begins to flow on New Year’s Eve, tech entrepreneurs in Wisconsin may know who they should pitch if they want an investment from 4490 Ventures, the state’s new $30 million, information technology-focused venture fund.

The State of Wisconsin Investment Board (SWIB) and the Wisconsin Alumni Research Foundation (WARF) are working to review candidates for the job of managing the fund, which aims in part to fill a gap in the state’s high-tech economy by providing seed investments to Wisconsin-based tech startups. The search could be complete within a couple of weeks, with an announcement to follow shortly after, according to Chris Prestigiacomo, a private markets portfolio manager at SWIB.

The ideal manager for the fund would have a strong track record in the private investing industry, perhaps on Wall Street, and would be passionate about supporting the technology community taking shape in Wisconsin, Prestigiacomo says.

“We have been working with a recruiter that we engaged months ago, and we are getting close,” he says. “We have narrowed it down to a few finalists, and we are going through a couple of background diligence items. We have said publicly that we are hopeful we’ll have someone picked by the end of this year.”

SWIB and WARF unveiled their plans for 4490 Ventures back in March, in an announcement that emphasized the need to diversify investing operations at the two bodies beyond their historical emphasis on life sciences companies—and to provide more local support for nascent software or hardware ventures.

SWIB manages over $90 billion in assets for the Wisconsin Retirement System, which pays retirement benefits for former employees of state and local government agencies. WARF is the patenting and licensing operation for the University of Wisconsin-Madison, and manages $2 billion in assets for the benefit of the university.

“If you look at what the early stage investing environment has looked like in Wisconsin for a number of years, it has predominantly been about life sciences and biotechnology,” says Prestigiacomo. “We’ve been investors in the life science space since the late 1990s, and for good companies in medical devices, diagnostics, therapeutics, or tools, the capital will find those companies. For information technology companies, both consumer and enterprise, it has been a little more challenging.”

It’s not that there aren’t interesting infotech startups in Wisconsin, Prestigiacomo says. It’s that the traditional investing guidelines, at least at SWIB, have explicitly ruled out direct investment in these startups.

“I watch these companies and they are getting traction in the marketplace and starting to see revenue and scale, and we know there are going to be good investment opportunities,” he says. “But what tends to happen is, the companies find capital, but it’s not here, so they have to move to either Chicago or Silicon Valley or New York or Boston, where the pockets of venture capital are. And that’s disappointing.”

Over the last two years, Prestigiacomo says, officials at SWIB “started thinking about whether there is a direct way for us to participate in those types of startups.” Executives at WARF, which invests mainly in companies that are licensing intellectual property generated within the University of Wisconsin system, were thinking about the same problem around the same time, Prestigiacamo says.

“It was really the two chief investment officers of those two organizations who started to talk about all this, and out of that came the 4490 fund.”

The name 4490 is a reference to 44 degrees north latitude, 90 degrees west longitude, a location symbolizing Wisconsin’s rough geographic center. (The actual spot is just off Murmuring Pines Lane in Juneau County, near the Wisconsin River linking Castle Rock Lake and Petenwell Lake.)

Deciding exactly how to apportion the $30 million in capital that SWIB and WARF are supplying for 4490 Ventures will be the job of the yet-to-be-named managing partner. The fund might supply seed investments as small as … Next Page »

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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