BrightStar to Invest in Gener8tor Startups If They Create WI Jobs

9/4/14Follow @XconomyWI

Wisconsin startup accelerator program Gener8tor has received a new commitment from an angel investment fund, but the money comes with a catch for portfolio companies: To be eligible, they must create “high-quality” jobs in Wisconsin.

BrightStar Wisconsin Foundation announced Wednesday it will invest $50,000 in each company that goes through Gener8tor’s bi-annual programs in Madison and Milwaukee and also meets BrightStar’s local jobs criteria. BrightStar was founded last year by a group of angel investors with Wisconsin ties. The nonprofit employs a venture philanthropy model of investing charitable donations into Wisconsin startup companies, with returns getting pumped back into its evergreen fund. The foundation has made several investments this year, including most recently putting $400,000 total into Forward Health Group and Swallow Solutions, both based in Madison.

Gener8tor companies eligible for BrightStar’s investment would be guaranteed to receive about $110,000 through the program, co-founder Joe Kirgues says. In exchange, the companies give Gener8tor a 6 to 9 percent equity stake. The accelerator’s other investment partners are Oshkosh, WI-based Angels on the Water and Madison-based Wisconsin Investment Partners.

BrightStar’s partnership with Gener8tor highlights an interesting dynamic for the accelerator. On one hand, the for-profit Gener8tor must seek the most promising startups—regardless of location—to deliver returns to its investors. On the other hand, the accelerator is run by locals who have shown an interest in helping to improve Wisconsin’s startup scene.

The eligibility requirements for BrightStar’s investments won’t mean a clash of ideals for Gener8tor, Kirgues says. The accelerator’s leaders are OK with either outcome, whether it’s a Wisconsin startup coming through the program and receiving BrightStar’s $50,000, or it’s an out-of-state company getting the nod from Gener8tor, but not earning BrightStar’s money.

In fact, the BrightStar investment could provide an extra incentive to convince startups to stay in Wisconsin after the three-month Gener8tor program finishes, Kirgues says. Gener8tor, founded in 2012, has accepted at least one Wisconsin-based company in each of its programs. Some of those Badger State startups have relocated elsewhere, but some of the out-of-state companies have decided to move their headquarters to Wisconsin, or at least set up an office here.

“Whether this becomes a recruiting tool for the region, is something we’re curious to see,” Kirgues says. “Gener8tor is encouraging the companies to go where they have the best chance to build a great company. We hope that’s Wisconsin, and we appreciate BrightStar making the case, as we have.”

BrightStar hasn’t set aside a maximum amount to invest in Gener8tor companies, and the partnership will continue for the “foreseeable future,” BrightStar portfolio manager Todd Sobotka says.

“It helps them attract and retain [companies] and improve the applicant pool,” Sobotka says.

Jeff Engel is the editor of Xconomy Wisconsin. Email: jengel@xconomy.com Follow @XconomyWI

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