Young Wisconsin tech companies will soon have a shot at some new money.
The State of Wisconsin Investment Board and the Wisconsin Alumni Research Foundation said Tuesday they are creating a $30 million venture fund to invest in early-stage, information technology businesses, such as those dealing with computer software, social networking, cyberspace security or even games.
SWIB and WARF will each put $15 million into the fund they are calling 4490 Ventures, referring to the 44-degree north latitude and 90-degree west longitude lines that converge in the center of Wisconsin.
"We think there's a solid base of emerging technology," said Michael Williamson, executive director of the investment board.
At the same time, he made it clear that SWIB is in the venture to make money. "Make no mistake: We're doing this because we think we can generate return for our investors," Williamson said. He said it will also provide more diversity in investments by SWIB, which manages the Wisconsin Retirement System, whose funds totaled $86.5 billion as of Jan. 31.
The 4490 Ventures fund is expected to make investments ranging from $250,000 to $2 million to about 20 companies over the next five years, said Chris Prestigiacomo, a SWIB portfolio manager.
WARF managing director Carl Gulbrandsen said the fund was incorporated this week and could begin operating this fall. A recruitment firm has been hired to search for a manager of the fund, which will be separate from both SWIB and WARF. The organization will be located in Madison. "But we expect investments are going to be made throughout the state," Gulbrandsen said.
He said the focus will not be on UW-Madison discoveries licensed by WARF. "We see a lot of great companies here that don't have WARF technology," Gulbrandsen said.
Williamson said the investment board already has committed $305 million in venture capital to promising, young companies, primarily in Wisconsin and the Midwest, and 70 percent of that has gone to life sciences companies. "So this is a great complement to that," he added.
Companies involved in fields such as software, data management and storage, mobile technology security and health care information technology take a lot less money to start than biotech companies and have a much faster exit strategy, Williamson said.
But many of them also fail. "It is the riskiest asset class but it's been a well-performing asset class. To compensate for the risk, venture capitalists expect very high returns," SWIB spokeswoman Vicki Hearing said in an interview later.
The announcement of the new fund came at a luncheon meeting of the Wisconsin Innovation Network, part of the Wisconsin Technology Council, at the Sheraton Madison Hotel.
"I think this is going to be enormously helpful," council president Tom Still said after the meeting. "This is a validation of the marketplace."
Still said 4490 Ventures is meant to be a supplement to, not a replacement for, a $25 million state venture capital fund, included in Gov. Scott Walker's budget proposal.
Shobhan Thakkar, chief operating officer of Gristmill Studios, said the Fitchburg startup game company might hope to take advantage of the new fund. "I think it's great. It's always nice to have more options for money," he said.
Gristmill developed XenoMiner, an Xbox game, that has sold 80,000 downloads. The company — a semifinalist in the Governor's Business Plan Contest — has seven part-time employees, Thakkar said.
Walker said he is "excited about the prospects" for the new fund. "Investing in new or expanding businesses is just one of the important ways we demonstrate our shared commitment to improving the business climate in Wisconsin," Walker said in a statement.