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Wisconsin early-stage firms attracted record investment in 2021

Early-stage companies in Wisconsin raised $852.4 million from angel and venture capitalists in 2021, smashing a record and continuing an upward trend.

That was the top-line finding of an annual study done by the Wisconsin Technology Council and detailed last week at an event at the University of Wisconsin-Milwaukee’s Innovation Accelerator in Wauwatosa.

The numbers show that the work done to grow entrepreneurship in Wisconsin is taking a firm hold, said Joe Kremer, director of the Tech Council’s Investor Networks. But he emphasized that more work remains.

By comparison, investment numbers for Illinois hit $2.5 billion, Minnesota logged $1.3 billion and Colorado recorded $6.5 billion in early-stage investments.

“We can pat ourselves on the back, but don’t give up,” Kremer said. “We have to keep pushing because we need to do more. We should probably double this number and then we’ll start feeling a little more comfortable.”

Early-stage investment trends in Wisconsin have been promising. The 2021 number, which represented 119 deals, nearly doubled the previous record of $483.7 million logged in 2020 and represented a more than fivefold increase over the $152.9 million figure from 2011.

Leading the way for Wisconsin companies was Madison-based Fetch Rewards, a consumer loyalty and retail rewards app, which attracted $210.7 million. That was followed by Janesville’s SHINE Technologies, a nuclear fusion technology firm, which landed $150 million in funding.

Importantly, 90 out-of-state investors put money into 42 Wisconsin companies last year.

Tom Still, president of the Wisconsin Technology Council, noted that investors everywhere began to get back into the game as the nation shook off the effects of the Great Recession. In recent years, Still noted, Wisconsin’s early-stage companies have been maturing and diversifying.

“Those companies are probably part of a class that are raising bigger dollars today,” said Still. “It was a time when Wisconsin was getting more versatile; it wasn’t all health care. All of a sudden, there were things on the engineering side, the software side, the advanced manufacturing side.”

Still added: “Wisconsin continues to attract more angel and venture capital, including money from outside the state, because more deals have strong technology, great leadership and reasonable valuations.”

Kremer also noted that entrepreneurs are getting smarter about asking for money.

“Before, you always asked for less than you needed because it was hard to raise and you were afraid to go for more,” Kremer said. Now, “investors are understanding that if you don’t fund a company enough, it’s not going to make it.”

Phil Fonfara, head of growth at Beloit’s Blue Line Battery Inc., said his five-year-old firm has parlayed early funding rounds into a company into a company with seven-figure revenues.

“Once you get to that place, it helps in raising money,” said Fonfara, whose firm manufactures high-tech, modular lithium-ion batteries for forklifts. “We’re at the one- or two-yard line of a massive adoption curve.”

Fonfara added: “The state had a very robust angel network that stepped up to help fund us to where we can now become venture backable.”

That sort of success proves to investors the downstream promise of a company. Todd Sobotka, investment committee chair at the BrightStar Wisconsin Foundation, said investors need to see market validation from early-stage companies.

“What can you show me?” Sobotka asked. “Do you have signed contracts, even though money isn’t coming in yet? Do you have [memoranda of understanding]? What is there that tells me that what you’re doing is actually wanted and that people will pay money for it?”

BrightStar Wisconsin accepts charitable donations at a 501(c)3 organization and uses them to take equity positions in for-profit, early-stage companies to help create tech-based jobs in Wisconsin. Since 2014, Sobotka said BrightStar Wisconsin has invested in nearly 70 firms.

Going forward, Sobotka said that developing entrepreneurship in the Milwaukee area will be key to boosting early-stage investment in Wisconsin. The Madison area already has a well-developed climate for new tech firms, and Green Bay has made huge strides, he said.

“The culture that exists in Madison doesn’t exist in Milwaukee, and there’s more money in the Milwaukee area,” said Sobotka. “We had a tough time engaging with Green Bay. I think Green Bay is now engaged and active and alive. I want to see those same big jumps in the Milwaukee area.”