Northwestern Mutual Launches $5M VC Fund to Support Local Startups

[Updated 10/31/17 11:01 a.m. See below.] Northwestern Mutual has in recent years begun supporting and working with more early-stage businesses, most notably through its 2015 acquisition of fintech startup LearnVest and creation of a $50 million venture capital fund.

Now, the Milwaukee-based life insurance and financial services giant plans to inject $5 million into local startups over the next five years through its new Cream City Venture Capital fund, says venture partner Craig Schedler.

“We’re looking for companies that will bring talent to Milwaukee, grow the level of tech activity here, and create a vibrant ecosystem around 21st century businesses,” Schedler says.

(“Cream City” is one of Milwaukee’s nicknames. Many of the city’s large buildings that went up during the early 20th century were built using “Cream City brick,” a light-colored variety made from a clay found in southeast Wisconsin.)

The new fund will likely make seed-stage investments of $100,000 to $250,000 in Milwaukee-area startups, Schedler says.

Unlike the $50 million Northwestern Mutual Future Ventures fund, which focuses on areas aligned with the insurer’s core business interests, the Cream City fund is industry-agnostic. “What we’re really looking for are companies leveraging technology to solve large problems,” Schedler says.

The startups Northwestern Mutual invests in out of the new fund will get office space and other perks, as well as access to advisors and subject matter experts at the company, he says.

Northwestern Mutual is open to leading funding rounds, Schedler says, but will also likely team up with local investors on some deals. One potential co-investor is Aurora Health Care, a Milwaukee-based network of hospitals and clinics that on Monday announced it, too, plans to invest $5 million in local startups over the next several years. [This paragraph has been updated with information from Aurora Health Care.]

Schedler says he and Stig Haagensen, senior director of digital innovation and accelerators at Northwestern Mutual, will be in charge of identifying potential investment targets with the new fund. They will work with an investment committee to approve proposed deals. This committee will be separate from the one that evaluates investments Northwestern Mutual Future Ventures is considering making, but the two committees will use similar processes to vet deals, Schedler says.

Besides Northwestern Mutual, the country’s top seller of life insurance, Milwaukee is home to several large companies that have begun to embrace emerging technologies more over the past decade, like Rockwell Automation (NYSE: ROK).

But startups based in the Milwaukee area only raised a modest $44.6 million in venture funding last year. Moreover, the region finished last in startup activity among the country’s 40 most populous metropolitan areas, according to a ranking compiled by the Ewing Marion Kauffman Foundation.

“Everyone is aware of the statistics out there about entrepreneurship and venture capital activity in Milwaukee not being where we’d like it to be,” Schedler says. “We’re looking to be a catalyst to drive that forward and increase activity, while also bringing to bear the resources of Northwestern Mutual.”

Still, Schedler says the decision to launch the Cream City fund came down to more than just supporting startups in the insurer’s backyard.

“We believe that from a financial return perspective, there are very attractive opportunities here,” he says.

Jeff Buchanan is the editor of Xconomy Wisconsin. Email: jbuchanan@xconomy.com Follow @_jeffbuchanan

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