Wisconsin Investment Partners
Type of Firm: Angel
Geographic Focus: Mostly Wisconsin
Sector Focus: Agnostic
Financing Stage: Typically seed
Investment Range: Typically $200-$250K
Investment Horizon: 7-10 years
Contact Info: http://wisinvpartners.com/
Why did you get into angel investing? What is the most rewarding part for you?
Although angel investing is risky, I like the potential for return. In other types of investments (like mutual funds), everyone else has identical information. As an angel, I know more about the specific companies I invest in, which hopefully leads to better potential. I like the idea that it’s important for me to learn about investments on a deeper level.
I find it rewarding to be around the passion and energy of the entrepreneurial community. Entrepreneurs have grit and determination and figure out ways to get things done even when curve balls are thrown at them. It’s also rewarding to mentor entrepreneurs on how they ask for money before they make their formal pitches. I’ve seen some bad mistakes, and I like to help people avoid them.
Give us a brief overview of your firm and your investment strategy.
WIP is a group of more than 100 accredited investors. A small group of members screen the opportunities and present the same information to all the investors so each can make their own educated investment decision.
We are industry agnostic. We really like to support and mentor good companies in the Wisconsin ecosystem. However, we do make investments outside the state to round out our portfolio. Our average investment is in the 200-250K range, but we have made 7-figure investments as well. For seed rounds in excess of $500K, we often syndicate with other angel groups. If we lead in this way, it’s generally easier to put the bigger dollars together for the entrepreneur.
At what point should entrepreneurs be when they pitch to you?
We want to know that you have already bootstrapped. That doesn’t always mean dollars. Get the product to a point where you truly need the seed money before you come to us. Know what your market opportunity is and have some sense of the cost of acquiring customers. To attract angel and venture capital, you need to have a business that can be scaled. Also, you should be well-rehearsed and passionate about your product. You typically only get one kick at the can. Be sure to seek out as many mentors as possible before making that initial ask.
Describe the ideal first interaction scenario you have with an entrepreneur.
A warm introduction from a trusted source is a big deal. Although we have a standard form on our website, a referral from a fellow investor or someone from an accelerator or entrepreneurship training program who believes you are ready can go a long way. We get a flood of requests. When your company is ready, take the time to find someone who will stand behind you to help get your foot in the door.
If there is continued interest, what happens next?
The first pitch is presented in a screening meeting to a group of six to eight seasoned investors. After the pitch and follow-up questions, the screening team deliberates for about 15 minutes to determine if the opportunity is “WIP-able” – a scalable business with good growth potential and a great entrepreneur. If so, the screening team will do a little more digging before presenting the opportunity to all other investors in a general meeting. The screening process can be frustrating for entrepreneurs because they must trust us and redundantly answer questions. But that’s’ the hurdle that needs to be cleared to get to the general meeting where investment decisions are made.
What can you tell us about how do you determine the value of the businesses you invest in?
After lots of initial work, I see deals lost over valuations. There are valuation factors and formulas out there, but they aren’t followed that closely in real practice. Open-mindedness is the key. You are more likely to get a no by having your own stringent valuation when you come to us. Our goal is not to give the lowest valuation. We are partners with our companies and like to make valuation determination based on interactive conversations and due diligence. In cases where you come to us with a term sheet, we recognize that someone has already done the valuation work, and we will talk with them to help us understand it.
Beside money, what else do you bring to the table for the companies you invest in?
The sheer math of it. With more than 100 investors in our group, we have a ton of connections. We’re generally only one step away from knowing the person that an entrepreneur needs to connect with to recruit key pieces of their puzzle, acquire product sales, or something else. In addition, we have been around for more than 20 years and have earned the respect and trust of the Wisconsin community and beyond. Having WIP on a company’s cap table means something not only to entrepreneurs, but also to other investors. We syndicate deals with a lot of angel groups and different VCs, which means we can help with introductions for the next level of funding.
In what ways do entrepreneurs often fall short when asking for money?
First, entrepreneurs generally don’t ask for enough money. It’s critical that the money you raise actually gets you to your intended milestones. It’s very humbling and difficult to run out of money prior to hitting your milestones. Coming back to investors for more money to cover shortfalls can hurt the valuation of your company.
Second, they don’t follow-up with us after the pitch. We say no to a lot of pitches for many different reasons. Although we try to communicate this by email, there are many things that can be expressed better in a phone conversation. I highly encourage entrepreneurs to ask for a follow-up call to discuss our feedback in greater detail and help avoid mistakes going forward.
Third, almost every entrepreneur talks too long in our screening meetings. With us, your pitch should be clear and concise in 20 minutes. Set your timer and wrap things up promptly so our team has enough time to ask questions. Also, your answers to questions should be clear and concise. I realize it can be difficult to dumb down your message to the general investor level when there might also be domain experts in the audience. In the interest of time, it’s OK to defer questions that require too much detail to a backup slide or a follow-up conversation.
And finally, know your audience. Look at the WIP website. Take the time to learn about our strategy, culture and investments. Maybe even reach out to some of our portfolio companies and ask for advice. Personalizing your pitch will increase your chances of success.
What else do you want companies that are seeking funds to know?
Last year WIP made four investments in new companies, but we had 15 follow-on rounds. When you are preparing a pitch for your seed round today, also imagine yourself pitching to us for a follow-on round in the future. Keep that in mind as you define your initial milestones and make financial projections. Don’t make seed round projections just for the sake of impressing us. Do your best to make them reasonably attainable. For companies we invest in, we keep those seed round projections for future reference. When the time comes, we compare the forecast numbers with actual numbers to help make follow-on investment decisions. We understand that projections are almost never accurate, especially with early stage companies. The rationale behind the projections is usually more important than the numbers. My advice is to make projections that you are comfortable you can achieve and support them with sound reasoning.
What is one wish you have for the Wisconsin entrepreneurship ecosystem?
I truly believe the biggest driver in our economy is the start-up ecosystem. My wish is to identify every single entrepreneur within our border and keep them here. One way to do this is through continued proactive work to identify those brilliant minds with innovative ideas at our academic institutions. Entrepreneurship is coachable, but we need those minds in the game.
Bonus Question: Tell us one fun fact about yourself or your firm.
Even with more than 100 investors, I believe our group isn’t diverse enough to participate in some of the great opportunities that come along. For this reason, I initiated an associate program with WIP last year. Our goal is to change the dynamics. We want to bring in people with different demographic backgrounds and areas of expertise. We hope this will not only open doors to people who haven’t had the opportunity to learn about the field, but will also make us better investors.
The associates we accept in the program are not accredited investors. They might be entrepreneurs who want to get an insider’s understanding, or they might be people who want to be angel investors in the future. Most importantly, we want people who are eager to learn. Participants spend about 3-5 hours per month in screening meetings where they listen to pitches and observe investor feedback and decision-making discussions. They can also assist with post-pitch information gathering and analysis. In exchange, they get immersion in the investment process. They also have a chance to network with investors and build relationships that could be helpful down the road.