Venture Investors has raised $80 million — money that the Madison venture capital firm will funnel into promising, young companies in Madison and beyond, over the next decade.
“Given the (economic) climate, we are ecstatic to have raised a fund because a lot of our peers have not been successful,” said John Neis, a managing director of Venture Investors.
Neis says the firm will choose 12 to 15 companies over the next three to five years, and will provide them with initial funding as well as follow-up investments as they grow. Venture Investors focuses on early-stage life science and technology companies, primarily in the Midwest, and has a branch office in Ann Arbor, Mich.
“We principally look at what’s happening at the great research universities in the region. We’re in the backyard of two of the largest public research universities, both with more than $1 billion of research spending,” Neis said.
Tom Still, president of the Wisconsin Technology Council, said the new fund is good news for Wisconsin startups.
“I’m thrilled that they’ve successfully raised a fund. Venture Investors has been a part of the scene here in early-stage investing for a long time,” Still said. “For local companies, it’s clearly one more investor who’s back in the game, actively looking for investments.”
This is the fifth fund, but not the largest, for Venture Investors, which was established in 1982. Its first three funds raised $7 million; $15.6 million; and $37 million. In 2007, the firm closed on a $118 million fund. But times have changed since then, Neis said; nationwide, venture capital funding has shrunk.
“It’s a very different fund-raising time, overall,” Neis said. According to the National Venture Capital Association, 88 venture firms raised a total of $7.2 billion during the first half of 2013. At that rate, they will fall behind totals of $19 billion in each of the last two calendar years.
Commitments to Venture Investors’ new fund are from organizations such as the State of Wisconsin Investment Board; the Customized Fund Investment Group on behalf of the Venture Michigan Fund; Wisconsin Alumni Research Foundation; American Family Insurance; WEA Insurance; Thrivent Financial; and MGE Energy. New investors include Western National Mutual Insurance.
But some past investors could not participate this time.
“U.S. Bank had been a longtime investor in us, but with passage of (the) Dodd-Frank (bill) and all the too-big-to-fail regulations, banks are no longer allowed to invest in the asset class,” Neis said.
Over the past 31 years, Venture Investors has given a leg up to 68 companies, including local biotech leader Promega Corp.; biotech Third Wave Technologies, purchased by Hologic for $580 million; and cancer treatment machine manufacturer TomoTherapy, acquired by Accuray in a $277 million deal.
Venture Investors’ goal is to return three to four times the amount invested, overall, Neis said. And some of the firm’s portfolio companies have folded.
“That’s the nature of the business. If we hadn’t had companies that didn’t make it, then we wouldn’t be taking, really, enough risk,” he said.
So far, six companies have received early investments from Venture Investors’ fifth fund, including two in Madison: Nextt, an online, private social network, and Madison Vaccines Inc., with proprietary DNA vaccines.
The others are from Detroit, Cleveland, Texas and California. Neis said, though, investments elsewhere can forge relationships with other venture funds, which may, in turn, join Venture Investors in funding Wisconsin companies.
“They’re a mature fund. They have connections across the U.S. All of that works to the advantage of Wisconsin companies,” Still said.