State venture capital rises; Wisconsin firms raise most funds since 2001

Mirroring national trends, Wisconsin companies raised more venture capital last year than in any year since 2001.

The $87.6 million that state companies raised is a tiny fraction - less than 1% - of the $29.5 billion of venture capital funding dispersed nationwide in 2007, according to the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association based on data compiled by Thomson Financial.

Still, a steadily rising amount of venture capital is being deployed in Wisconsin, along with a growing angel investing infrastructure. And a number of high-profile deals have stoked optimism the momentum will continue.

"I couldn't be more positive on the state of things right now and where I think we're going," said Craig Heim, licensing manager for start-up companies at the Wisconsin Alumni Research Foundation, the technology transfer arm of the University of Wisconsin-Madison. "I think we have a tailwind behind us."

Four companies raised nearly three-quarters of the state's venture capital in 2007 - Virent Energy Systems Inc., NimbleGen Systems Inc., Deltanoid Pharmaceuticals Inc. and OpGen Inc. All are based on technologies developed at UW-Madison.

At $831.9 million, UW-Madison had the second-most science- and engineering-related research spending in the country in 2006, according to the most recent figures available from the National Science Foundation. The university also has $72.9 million of non-science and engineering research spending, according to the government agency, which is responsible for tracking such spending.

Most venture capital in Wisconsin was raised by Madison companies last year, but others included Novo Group and SilverTrain Inc., both of Milwaukee, and U.S. TrailMaps Inc. in Weston.

Two big venture capital exits - Madison-based TomoTherapy's $223 million initial public offering in May and the $272.5 million acquisition of NimbleGen Systems, Madison, by Roche Holding AG in June - were considered seminal events in the state's economic development aspirations.

"Certainly the success of TomoTherapy and NimbleGen absolutely increased awareness about Wisconsin as a good place to invest where you can have a successful exit," said Heim, who was hired by WARF last year to raise the number of companies spun out of UW-Madison's research.

Wisconsin traditionally has been regarded as a difficult place to attract management talent or create opportunities of national scale, said John Neis, senior partner at Venture Investors, a Madison firm that has invested in many of the state's biggest transactions. TomoTherapy and NimbleGen have helped refute that theory, he said.

Along with those deals, 2007 highlights included:

* Metavante Technologies Inc., Brown Deer, was spun out of Marshall & Ilsley Corp. in November; Plymouth-based Orion Energy Systems Inc. raised $78.8 million in an initial public offering in December; and ZBB Energy Corp. in Menomonee Falls raised about $20 million in an IPO in June.

* Arlington Capital Partners of Washington, D.C., bought a majority stake in Cambridge Major Laboratories, Germantown, in February for an undisclosed price, and Microsoft Corp. in October bought Madison-based Jellyfish.com for a reported $50 million.

* Venture Investors LLC closed in July on a $117 million fund, the biggest ever raised by a state-based venture capital firm.

* St. Francis-based Stark Investments entered the state's venture investment scene as a co-leader in Virent Energy Systems Inc.'s nearly $26 million funding round in September.

* The number of angel groups registered with the Wisconsin Angel Network grew to 16 from six three years ago.

All the indicators - whether it's academic R&D spending, angel and venture capital investments, IPOs or acquisitions - are trending up, said Tom Still, president of the Wisconsin Technology Council.

This year is off to a good start with Madison-based Cellectar Inc.'s announcement earlier this month that it raised $13 million from a group of state-based investors to continue developing its radioactive molecule for tracking and destroying cancer tumors, Still said.

"We have a long way to go . . . but the total package of indicators would show that we're on the right track," he said.

TOP DOLLAR

California companies pulled in 47% of the $29.5 billion of venture capital raised in the U.S. last year.

1. California, $13.8 billion

2. Massachusetts, $3.5 billion

12. Illinois, $512.4 million

15. Minnesota, $427.2 million

25. Michigan, $105.4 million

28. Wisconsin, $87.6 million

29. Indiana, $82.6 million

Sources: The MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association, based on data from Thomson Financial.

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