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Record early-stage investments in Wisconsin in 2019 ahead of uncertain 2020

Shelley K. Mesch | Wisconsin State Journal
Jul 12, 2020

Investments into Wisconsin’s early-stage companies topped $450 million last year — up 50% from the previous year — according to a report from the Wisconsin Technology Council and the Tech Council Investor Networks.

The steep growth continues a trend of venture capital and angel investments into companies, although the continuation of that trend could be in jeopardy from the economic fallout of the COVID-19 pandemic.

The impetus for the jump in investment dollars comes from the size of the funding rounds from companies rather than the number of companies that reported investments, according to the report. Investors made deals with 123 Wisconsin companies in 2019, only two more than in 2018.

SHINE Medical Technologies, which makes radioactive isotopes for medical imaging, took in about a quarter of the funding of last year with $132 million in investments, followed by NorthStar Medical Radioisotopes at $75 million and Redox with $36.1 million.

Should the total amount of money invested in Wisconsin startups fall short in 2020, tech council president Tom Still said the pandemic might not necessarily be the cause. Companies pulling in huge dollar amounts aren’t likely to pursue another funding round within a year.

The high funding amount for companies also signals that some of Wisconsin’s startups are proving themselves worthy of attention and maturing beyond the early-stage moniker.

Investors still made bets on some of the newest businesses in the state though, with 40% of the companies recorded raising funds for the first time.

Uncertainty for 2020

Investment numbers in the first quarter of the year, ending March 31, seemed to be on track with matching the amounts of 2019, Still said. Numbers for the second quarter, ending June 30, aren’t final yet, making it hard to tell whether they will hold steady.

Scott Resnick, chief operating officer of Hardin Design and Development and entrepreneur-in-residence at StartingBlock, said it’s hard to predict what total investment numbers will look like by the end of the year with the economic uncertainty caused by the COVID-19 pandemic and ensuing shutdowns.

“It’s a mixed bag on raising funds right now,” Resnick said.

That doesn’t mean that new investments aren’t being made, Still said, but investors may be more cautious about investing in new companies rather than investing more in existing companies.

“In general, what we have seen is ... most investors in Wisconsin are thinking about protecting their existing portfolio,” Still said.

It can also be harder for the earliest stage companies to secure funding because of social distancing, Still said. Investors often look for charismatic founders that they can believe in — along with a good business idea. That “relationship sport,” he said, is harder to play through digital meetings.

Smaller investment rounds in 2020 might also be caused by fewer cost-laden startups — such as SHINE and NorthStar — that may need to raise new funds within a year. Still said the number he’s interested in looking at is the number of companies that secure investments and whether that continues to increase.

“We’re optimistic of continued growth overall going forward, even with COVID,” Still said.