Follow-up Capital
SEVERAL MECHANISMS operate on campus to connect entrepreneurial faculty with seed and early stage investment capital. While early stage investment capital is considered to be in short supply, the local investor community and the key players associated with UW-Madison have been working to educate faculty about who investors are and how they operate. Some of the relevant mechanisms were also highlighted in Section 7 but they are described here as they specifically relate to facilitating follow on investment in startup companies.
Office of Corporate Relations
The Office of Corporate Relations Startup Program manager, Allen Dines, also the proposed BME Partnership program manager, provides ongoing consultation and referral for faculty and staff wishing to make connections with early stage investors. In this capacity he maintains frequent contact with angel and early stage VC investors to understand their investment preferences and criteria. He is frequently an invited speaker at national and regional venture and entrepreneurship conferences. Recent examples include
- 2003 and 2004 annual meeting of the National Association of Seed and Venture Funds
- 2005 Annual meeting of the National Collegiate Inventor and Innovator's Alliance
- 2003 and 2005 IBF Med Tech Investing Conference
- 2005 WRG Mid-America Technology Commercialization and Financing conference
- 2004 BIO Mid America Venture Forum
- 2005 Midwest Association of Seed and Venture Funds
Allen Dines has served on the organizing committee of the 2004 Wisconsin Life Science Venture Conference and for three years, the 2003-2005 Michigan Growth Capital Conferences. He is also a co-founder of the Midwest Research University Network (MRUN) a working alliance of startup development professionals at the 20 top Midwest research institutions. A key activity of the MRUN is cultivating relationships between early stage investors and university research spinout companies. Mr. Dines has also served on the planning committee of the Burrill Business Plan Competition and is a member of the steering committee for the Governor’s BPC and a judge for that contest for 2004 and 2005.
Industrial and economic development Research grants
Described above in detail, this program provides funding directly to faculty principal investigators for translational research
SBIR/STTR assistance
The campus and the state of Wisconsin have been active for years in providing counseling for companies seeking to apply for SBIR/STTR and related federal grant funding. The state maintains a web support site and can assign counselors to assist a company in identifying funding sources and in strategically positioning the proposal for maximum success. In addition one person on the OCR staff has been active with campus companies for at least a decade in helping startup ventures connect with SBIR money’s. that person continues to fulfill that role for faculty and staff so interested but he has been transferred to operate out of the new Wisconsin Entrepreneurship Network.
Assistance with Establishing Early Banking Relationships
The Madison Development Corporation is a non-profit corporation with assets totaling over $12,000,000.00 and a 9 member staff. MDC's Mission is to help provide quality employment opportunities by making loans to hard-to-finance small businesses; and to provide quality, affordable housing for Madison and Dane County residents. In this role the MDC has worked with many of the high technology startups that have emerged from the university. The Business Loan Program makes loan funds available for growing or start-up businesses that cannot fully meet the underwriting standards of private commercial lenders. Loans can be made for up to $200,000 to qualifying businesses for working capital, inventory, equipment and leasehold improvements, as well as real estate.
Businesses must be located in the City of Madison. Businesses are expected to increase employment by approximately one job for every $12,500 in loan funds received or one job for every $25,000 if the job pays at twice the minimum wage. Rates are fixed, generally at or near commercial lending rates. Loans may be made up to $200,000, with our average borrower receiving about $35,000.
Terms are generally consistent with the life of assets to be financed. We often offer amortization periods that are longer than the loan term, thus reducing payments but requiring a balloon payment or MDC refinancing at the end of the term.
Credit Standards are designed to allow MDC to make higher risk loans than private lenders. While MDC does have established cash flow and collateral requirements, we can accept security from outside the business and are flexible in evaluating collateral and determining debt repayment ability. MDC generally requires personal guarantees. MDC's loan decisions are made by a Committee made up of MDC Directors and volunteer private-sector loan officers. Applications are reviewed and approved monthly. Fees are charged to cover costs of loan preparation and processing. MDC usually charges two percent (2%) of the principal amount.
State Department of Commerce programs providing financial support to startup and early stage technology companies.
The Wisconsin Department of Commerce operates several programs that provide funding to early stage companies for various purposes. In summary, the Department has three significant programs of special relevance to most high tech startups:
- Early planning grants – Up to $3,000 grants are available to formation stage entrepreneurs to gather initial business feasibility information or market segmentation data. The company must match the funds on a 1:1 basis
- Technology Assistance Grants – Up to $15,000 may be made available on a 25% match to companies to conduct business planning or analysis needed to further the company prospects for federal grant funding or private investment.
- Technology Development loan program. Up do $x00,000 loans may be available to technology companies for development of their products.
WISBIC
The Wisconsin Small Business Innovation Consortium tracks SBIR awards in the state and hosts an annual awards banquet honoring the companies that have won SBIR/STTR grants over the preceding 12 months. Also part of the program involves presentations relevant to needs of proposers.
Wisconsin Angel Network (WAN)
The Wisconsin Angel Network (WAN), a project of the Wisconsin Technology Council, was created to build angel network capital capacity throughout Wisconsin in order to increase the number and amount of seed-stage equity investments in Wisconsin companies. WAN provides services and support to angel investing networks, including: deal flow – connecting angels and Wisconsin entrepreneurs; administration – helping to organize and create networks; education – increasing number of angel investors; and networking events – increasing communication between angels.
Angel Capital Association (ACA)
The Angel Capital Association is a peer organization of angel investing groups in North America. The professional association focuses on networking and sharing of best practices among these angel organizations.
Venture Investors, LLC
Venture Investors, located in the UW Research Park Incubator, has funded 10 companies founded on technology from UW. Collectively these companies have risen over $252 million dollars. Specifically, TomoTherapy Inc. founded by BME Professor Mackie, has raised over $28 million dollars from venture capitalists to date. Venture Investors is developing a new fund with a primary investment strategy focusing on companies derived from the commercialization of technology developed at the UW. It is expected that over 60% of the investments will be associated with UW spinouts and as they implement an entrepreneur in residence initiative, this percentage will grow. They intend to start fund raising in early 2005 with a goal of raising $75 to $100 million.