Wisconsin VC Total Down in 2017, But New Funds Seek to Reverse Trend

Startups in Wisconsin raised about $116 million in funding last year, a total that represents a steep drop compared to recent years. The figures come from PitchBook and the National Venture Capital Association, two groups that monitor investment activity nationwide. According to their data, the state’s funding totals in 2016 and 2015 were $223 million and $228 million, respectively.

Wisconsin’s decrease in funding in 2017 ran counter to the national trend. U.S. venture funding reached $84.2 billion last year, a level of VC funding that hadn’t been observed since the early 2000s.

PitchBook and the NVCA counted 60 investments in Wisconsin-based companies in 2017, and the mean deal amount was about $1.9 million. In 2016, the groups tracked 69 deals, which had an average investment of about $3.2 million.

Last year’s largest deals included funding rounds raised by Phoenix ($12 million), Redox ($10 million), Fetch Rewards ($9.6 million), and Montage Talent ($8 million).

For the third consecutive year, startups based in the Madison, WI, area claimed more than two-thirds of the VC dollars invested statewide. Still, the Madison area’s haul in 2017 ($76.6 million) was less than half of its total in the previous year.

Milwaukee-area companies raised about $27.6 million in 2017. That represented a step back from the prior year, following a sharp increase in the region’s VC total from 2015 to 2016.

According to PitchBook and NVCA data, there were only 10 investments—worth a combined $11.3 million—in startups based outside of Wisconsin’s two most populous metropolitan areas. The VC total for companies that aren’t based in or near Milwaukee or Madison declined for the second straight year.

Metro area 2015 2016 2017
Madison $167.7 $157.7 $76.6
Milwaukee $28.1 $44.6 $27.6
Other $32.7 $20.9 $11.3
TOTAL  $228.5 $223.2 $115.5

(Annual venture capital investment totals, in millions of U.S. dollars)

Still, last year saw a number of major employers and well-known brands in Wisconsin launch funds and programs to support early stage companies in the state. Aurora Health Care and Northwestern Mutual, both based in Milwaukee, each plan to invest $5 million in local startups over the next several years. And in October, the Green Bay Packers NFL team announced it had teamed up with Microsoft (NASDAQ: MSFT) to create a new VC fund, startup accelerator, and other innovation-focused programs in Green Bay, WI.

State economic development officials have also said Wisconsin’s successful bid to woo the Taiwanese electronics assembly giant Foxconn to construct a high-resolution display plant in southeastern Wisconsin could be a boon for entrepreneurs, who might now decide to launch businesses with the hope of linking into Foxconn’s supply chain. The Taiwanese company’s investment in Wisconsin—which is expected to be $10 billion over the next three years, a figure that would be partially offset with up to $3 billion in tax credits and other incentives—will “attract a lot of venture capital into the state,” Wisconsin Department of Administration secretary Scott Neitzel said during a panel discussion late last year.

Only time will tell if these new initiatives and building projects will have a measurable effect on the overall early stage business climate in Wisconsin, which the Ewing Marion Kauffman Foundation has ranked as the worst U.S. state for startup activity three years running.

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

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