The state gained a new member in its roster of early-stage investors when Mastercraft Ventures was launched this month with a $2.4 million investment from the larger Badger Fund of Funds, which has invested in five other state-based funds over time.
It’s another welcome underwriting by veteran investor Ken Johnson, who showed confidence in Mastercraft founder and fund manager Mason Cook of Beloit. Cook has been a software entrepreneur and plans to invest in other sectors as well.
The only problem is Wisconsin still needs a lot more investors like Cook and Johnson, who started the Badger Fund of Funds in 2015 with a mix of private and public investment. Others in the Badger family are Rock River Capital Fund, Idea Fund of La Crosse, Gateway Capital Fund, Winnow Fund, and Winnebago Seed Fund, all in various stages of activity.
No matter how the numbers are crunched, Wisconsin still lags almost all its Midwest neighbors when it comes to the broad category of early-stage investing. That is generally defined as angel and venture capital, which is money invested in young companies in their “startup” or emerging growth stages. Such companies are typically in technology sectors such as life sciences, information, and advanced manufacturing.
Preliminary figures collected by the Wisconsin Technology Council show about $290 million in 73 early stage deals in 2024, which was down from 2023 ($490 million in 107 deals), 2022 ($640.2 million in 107 deals), and 2021 ($868.8 million in 140 deals). That trend line matches the U.S. pattern over the same years, but some surrounding states have performed better.
In a report by U.S. News & World Report that compared venture capital to the gross domestic product of the 50 states, Wisconsin ranked 40th. Nearby states ranked between 14th and 38th were Missouri, Minnesota, Illinois, Michigan, Ohio, Indiana, and Iowa.
Dealroom examined 2024 venture capital dollar totals and reported Illinois at $2.1 billion, Ohio at $1.1 billion, Minnesota at $889 million, Michigan at $654 million, Indiana at $403 million, Missouri at $388 million, and Iowa at $205 million. Are some of those states more populous than Wisconsin? Of course. But that’s only part of the story.
Venture capital has been largely a “coastal” game for decades, with states such as Massachusetts, California, New York, and Washington leading the way. Of late, however, states such as Colorado, Nevada, Texas, North Carolina, and Utah have crashed the party as investors broadened their search for game-changing technology and managers who could turn innovation into cash.
Two neighbors that stepped up with the help of forward-looking policymakers are Ohio and Michigan, both of which have created larger “funds of funds” for investing in state-based companies.
In its 2023 report, the Ohio Capital Fund noted it had invested $139.9 million in other venture capital funds, leveraging $1.41 billion in private investments across 107 Ohio companies. It reported creation of 3,250 jobs at an average salary of $107,000 and $39.2 million in tax revenues. The internal rate of return was also strong.
Venture Michigan Fund I and II have invested $264.5 million across 56 companies, leveraging $1.71 billion in total private investment. It has claimed creation of 1,762 jobs with $128 million in one recent year alone.
It’s not that Wisconsin hasn’t been innovative over time. The 2005 enactment of the Qualified New Business Venture program created an enduring tax credit for investors in young companies that meet certain criteria. The Badger Fund of Funds was a step forward, especially with early investments. The 2024 creation of the public-private Wisconsin Investment Fund through the Wisconsin Economic Development Corp. stands to help as well through a combination of public and private dollars.
What continues to elude Wisconsin, for the most part, are eight- and nine-figure deals that move companies to the next level. That’s what is happening in other Midwest states on a more regular basis, even if the coastal leaders maintain their hefty lead.
As Mastercraft’s Cook said in launching his fund: “The No. 1 reason that startups fail is they run out of money. A startup will typically need to raise multiple rounds of funding before they exit.”
It’s not that Wisconsin has flawed business ideas or bad founders. What’s needed are more funds big enough to help startups and their early investors find a profitable exit door.
