Wisconsin early stage firms raised record dollars in 2020, but state still lags Midwest neighbors

Wisconsin early stage firms raised record dollars in 2020, but state still lags Midwest neighbors

The latest edition of “The Wisconsin Portfolio” shows more than $483 million was raised by the state’s early stage companies in 2020, a record for any calendar year in Wisconsin but still not on par with other Midwest states.

The report by the Wisconsin Technology Council and its Tech Council Investor Networks showed 110 angel and venture capital deals and four crowdfunded deals, down from 121 total deals in 2019. Average and mean deal sizes grew in terms of dollars invested, which was consistent with national trends and a sign that more young companies are surviving and growing.

Despite a record year, Wisconsin lagged states such as Michigan, Minnesota, Ohio, Illinois, Indiana and Missouri, even after accounting for differences in population. Michigan recorded $3.1 billion in investments, for example, and is now the nation’s fastest-growing venture capital state in percentage terms over the five years beginning in 2016. Illinois, Minnesota and Ohio were each billion-dollar-plus investment hubs in 2020, along with Michigan.

“Other states are doing more to support their early stage economies through policy initiatives such as ‘funds of funds’ that lever public and private investment,” said Tom Still, president of the Tech Council. A committee of the Wisconsin Legislature recently turned down a proposal for a $100-million state investment in such a fund.

Over the five-year period beginning in 2016, Wisconsin early stage companies have raised nearly $1.75 billion. There were $276.2 million in early stage investments in 2016, $231 million in 2017, $300.7 million in 2018, $454.4 million in 2019 and $483.7 million in 2020.

Using public reports, filings, surveys and more, the Tech Council tracked a total of $483,663,700 invested in 114 companies. Companies raising the most were Fetch Rewards, SHINE Medical Technologies, NorthStar Medical Radioisotopes and Sunvest, which collectively accounted for about $280 million of the state total.

Wisconsin’s 2020 figures saw continued growth in median and average round sizes. Average round size is at an all-time high of $4.2 million (up from $3.8 million in 2019) while the median round size hit $1 million for the first time (up from $700,000). Removing the four 2020 “mega-deals” brings the average round size down to $1.8 million and the median to $940,000.

Continuing a multi-year trend, 51% of companies raised $1 million or more in 2020. In 2019, it was 43%; in 2018, 38%; and in 2017, 29%.

For nearly 60% of early stage companies that secured funding, 2020 was the first year doing so while the remainder received continued support. Wisconsin’s investor tax credits were used more in 2020 than the previous three years. About $16 million in angel and venture tax credits (Qualified New Business Venture) representing nearly $65 million of investments in 77 early stage companies were charted. Other trends of note in 2019:

  • Equity funding (73.7%) continues to be the most popular, followed by debt funding (14.0%).
  • Fewer women-led or women-owned business raised funding in 2020. Just over 12% of companies that raised funding in 2020 were woman-owned or woman-led, down from 22% in the previous year. The national average ranges between 20% and 25%.
  • The two major industries continued to be Healthcare and Information Technology, which combined for nearly two-thirds of all deals and dollars. However, Wisconsin’s tech-sector diversity also showed. Charted deals ranged from advanced manufacturing to digital health, from energy to consumer products, and from ag-tech to medical devices.
  • Investors from outside Wisconsin’s borders continued to play a significant role in funding state companies in 2020. Fifty-five out-of-state investors took part in 31 Wisconsin deals.

“The use of Wisconsin Early Stage Seed tax credits continues to be strong,” said Joe Kremer, director of the Tech Council Investor Networks. “Early Stage Seed tax credits are reserved for certified investment funds under the Wisconsin Economic Development Corporation and are eligible for sale or transfer.”

“On balance, our ecosystem continued to mature in 2020, despite the effects of the COVID-19 pandemic,” Still said. “It’s great to see major deals because it signals more companies are moving beyond the startup stage. Much work remains to be done, however, to take full advantage of Wisconsin’s assets in research, technology and talent.”

Here is the full report: https://wisconsintechnologycouncil.com/publications/wisconsin-portfolio/

The 13th annual publication also features a profile on Tim Keane, the 2020 inductee to the Wisconsin Investor Hall of Fame; policy highlights and updates; a primer on early stage investing in Wisconsin; and a resource guide. It also includes charts and graphs that detail deals by industry, geography, round size and more.

The Tech Council Investor Networks are among major Tech Council programs and projects. They include the Tech Council Innovation Network, the Governor’s Business Plan Contest, the Wisconsin Entrepreneurs’ Conference, the Wisconsin Tech Summit, the Wisconsin Early Stage Symposium and the Wisconsin YES! youth business plan contest. To learn more or to join TCIN, visit http://wisconsintechnologycouncil.com/investors/membership/