As a company grows so does the capital needs. Unfortunately, capital availability does not follow the same pattern.
With most start-up companies, the source of capital in the early stages is from the founders, family and friends. Small R & D grants may also be obtained from foundations and government sources. However, these initial sources are usually depleted before the entrepreneur has a final model or has commercialized the product.
Incented by the Act 255 Investor Tax Credits, Wisconsin's angel networks and early stage funds have carried these companies much of Wisconsin early stage investment load. However, Wisconsin's lack of venture capital does not allow the normal continuum to continue, creating a financing gap.
This gap between angel investments and venture capital can plunge a company into the "Valley of Death." Most ventures caught in this gap either never emerge or are left with no alternative other than to move out of state or sell.
Just the existence of this financing gap has a ripple effect that creates a front-end disincentive for entrepreneurs to start their ventures in Wisconsin.
Angel Network Map
In January 2005, when the Wisconsin Angel Network was created under the umbrella of the Tech Council, there were only five active angel networks or funds in Wisconsin. Today, there are 23. This map shows where those early stage investment groups are located.
Yin and Yang of Capital Markets
Angel investments and venture capital are part of the same ecosystem. They work to together, in tandem or on parallel tracks, to fuel the ideas sparked by entrepreneurs. Angel investments generally occur in the early stage of a company with venture capital following in the later stage.
Under the Umbrella
Easy to understand graphic on how the proposed Wisconsin Venture Capital Authority will work.