Wisconsin Startups Cashed in on Venture Capital Bonanza in 2014

Last year was a great one for startups nationwide trying to raise money from investors, and the venture capital boom was felt even in the normally cash-starved state of Wisconsin.

Wisconsin companies grabbed more than $346 million in investment capital last year—nearly triple the $128 million raised here in 2013. The number of deals climbed 31 percent, with at least 113 Badger State companies raising money in 2014.

Those statistics are from the latest Wisconsin Portfolio, an annual report compiled by the Wisconsin Technology Council and its Wisconsin Angel Network (WAN). The publication gathers data from public reports, filings, and surveys of investors, usually producing a more comprehensive look at angel and VC deals in Wisconsin than some national studies.

The uptick in dollars and deals for Wisconsin companies shows that it’s not just coastal startups benefiting from the recent VC bonanza. Nationwide, investors pumped $48.3 billion into 4,356 deals in 2014, a 61 percent jump in dollars invested and a 4 percent increase in deals over the previous year, according to last year’s MoneyTree report from PricewaterhouseCoopers and the National Venture Capital Association, which uses Thomson Reuters data. Internet-enabled businesses raked in the most VC investments the sector has seen since the dot-com glory days of 2000, and life sciences enjoyed the most investments for the sector since 2008, the 2014 MoneyTree study reported.

The Wisconsin numbers were skewed by the top six deals of 2014: $127.4 million in equity and debt funding for Shine Medical Technologies; Google Capital’s $40 million investment in Renaissance Learning; CorvisaCloud getting a $30 million infusion from parent company Novation Companies; Propeller Health’s $14.5 million Series B round; Comply365 getting an initially stealthy $12 million investment from Ohio-based Drive Capital; and EatStreet’s $10 million Series B round.

Take those deals out of the mix, and the other 107 companies raised $112 million—which still approaches the total from 2013, the Tech Council pointed out.

An encouraging sign for supporters of Wisconsin’s startup community is the fact that 38 companies raised at least $1 million each from investors last year—up from 27 that crossed that threshold in 2013. “That’s a sign deal sizes are growing—even with the Big Six thrown out of the mix,” Tech Council president Tom Still said in an e-mail message, referring to the top six deals of 2014.

The average deal size in Wisconsin last year was more than $3 million, although that average drops to about $1 million if the six highest deals are excluded, the report said.

“There are some good reasons to believe 2014 was not a fluke, despite the often cyclical nature of angel and venture capital,” Still said. His reasons include an increase in the number of investment groups active in Wisconsin last year, as well as a surge in early-stage investing in the Midwest as a whole.

Other highlights of the report:

—Wisconsin companies continued attracting money from outside the state last year, including from investors based in Illinois, Massachusetts, New York, and California.

—The actual Wisconsin investment total for 2014 is likely even higher. Two angel networks reported making investments in Wisconsin companies last year, but they declined to name the companies or the size of the deals.

—Wisconsin Investment Partners—the Madison-based group that has ranked as one of the most active angel groups in the Midwest and even the nation—did more deals in 2014 (16) than in 2013 (11). Others that invested in multiple Wisconsin companies last year included Venture Investors, Golden Angels Investors, CSA Partners, startup accelerator Gener8tor, Chippewa Valley Angel Investors Network, American Family Ventures, NEW Capital Fund, and the BrightStar Wisconsin Foundation.

—A diverse mix of companies snagged investments last year, including some in digital health, consumer products, biotechnology, medical devices, advanced manufacturing, and other sectors.

—The report is a reminder that making an investment is just the first step on a journey to business success and, if all goes according to plan, an acquisition or public offering. The report noted that some “state groups are actively looking for exits for their portfolio companies.” It will be worth watching which of these companies survive, thrive, and ultimately deliver a return to investors.

Jeff Engel is a senior editor at Xconomy. Email: jengel@xconomy.com Follow @JeffEngelXcon

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