Type of Firm: Venture Capital
Geographic Focus: Primarily Wisconsin and the Midwest
Sector Focus: Pharma, diagnostics, medical devices, digital health
Financing Stage: Seed, Series A
Contact Info: https://ventureinvestors.com/people/
How/why did you get into investing? What is the most exciting/rewarding part for you?
While getting an MBA at UW-Madison, I got really excited about entrepreneurship and wanted to learn more about venture capital. I reached out to Venture Investors, and they hired me as an intern for two years to help with due diligence on deals. During that time, I had the opportunity to sit down with brilliant inventors and entrepreneurs who were passionate about their projects, and I was hooked. I find it rewarding to think about both sides of the equation. On the investor side, of course, this means getting a good financial return. On the entrepreneur side, this means getting potentially disruptive technologies into the healthcare system where they can do good.
Give us a brief overview of your firm and your investment strategy.
We are a healthcare dedicated venture capital fund that invests in early stage companies, mainly in seed and Series A rounds. We invest across three main verticals – pharma, diagnostics and medical devices. A common thread we look for across all those is a digital health strategy. We are headquartered in Madison and also have a presence in Milwaukee and Ann Arbor, Michigan and look for opportunities throughout the Midwest. Although it’s not a requirement, we like working with university ecosystems, and about two-thirds of our investments have a university history to them.
At what point should entrepreneurs be when they first contact you?
Entrepreneurs don’t have to be at the stage of raising capital to reach out to us. We are always willing to have a conversation. It’s important for us to build a rapport. Even if you are just at the point of having an interesting idea but are far away from forming a company, we’re glad to have a conversation. It helps us start a relationship and provide good direction in the formative stages. And if you are further along and actively looking to raise funds, that’s a great time to schedule a meeting to go over your pitch deck. You can reach us by sending an email and briefly introduce yourself and your project. We also know many of the university technology transfer offices very well and get quite a few referrals and introductions from them.
Describe the ideal first interaction scenario you have with an entrepreneur.
No matter when you reach out, keep in mind that we are investing in people. We want to hear the passion in your story. Why are you starting this company? What excites you about it? Why do you think it can make money? If you aren’t pitching in the first meeting that’s ok as it doesn’t have to be very formal, but it is important to set the stage for your compelling story and opportunity.
If there is continued interest, what happens next?
If there is further interest, we ask entrepreneurs to be patient with our process. We look at a lot of deals every year and only a small number get funded. The process is like a funnel. First, a partner from the firm will champion the deal internally. Then we will go through due diligence steps with the entrepreneur to help us understand the key risks. This includes getting to know the company, team, and market factors in much greater detail. To keep things moving along, it’s important for the entrepreneur to be responsive. After extensive due diligence, if we like the deal, we develop a term sheet.
What can you tell us about how do you determine the value of the businesses you invest in?
As an early stage investor, it’s more art than science. The companies often don’t have revenue, and our investment could be the first money in. One approach we use is to make comparisons with similar companies that have raised capital. Another approach is to work backwards from a company’s potential exit value. If we estimate that exit value and envision all the milestones and investment rounds needed to get to that point, what valuation at the beginning will allow early stage investors to get a desirable return?
Beside money, what else do you bring to the table for the companies you invest in?
I think any investor can write a check. The most important thing we do is add value beyond money. If a startup makes wrong decisions in its early stages, it could be catastrophic going forward. At Venture Investors, we roll up our sleeves and enjoy working with early stage companies and the opportunity to play a meaningful role in their development. We don’t run the company, but we take an active seat on the board so we can provide guidance and support at a critical time. For example, we have a large network of entrepreneurs and executives that is very helpful in finding candidates to build the team out. We also have a strong advisory committee that includes key opinion leaders from different scientific areas. And we have a lot of experience with regulatory strategy, which is very important for the types of companies we invest in.
In what ways do entrepreneurs often fall short when asking for money?
One way they fall short is by not having a realistic and clear plan to use the money to retire specific risks that will add value to the company. For example, if you are trying to raise $2M, what are the several milestones you intend to achieve with those funds to get to the next set of things you need to accomplish? Another place for improvement is the team. Entrepreneurs should try to surround themselves with the right people to give the right advice. If you haven’t brought somebody onboard yet because it’s early and you don’t have the funds, you should be able to talk about the people and expertise you have lined up for the future.
What else do you want companies that are seeking funds to know?
Understand who the right investors are for your opportunity. Every deal is not a venture capital deal. A deal might not be large enough for a VC investor, but it might be attractive for a strategic investor or a small angel investor. Fundraising is time consuming and can be distracting for a founding team. Approaching the right investors will help you be more efficient with your time. Keeping that in mind, don’t rely on pitching to just one potential investor when raising capital. Try to have as many balls in the hopper as you can. For example, maybe you identify five relevant potential investors and pitch to each of them.
What is one wish you have for the Wisconsin entrepreneurship ecosystem?
I wish there were a better appreciation for risk capital in the state and more of an appetite for it. There is a lot of wealth here. Much of this has been created over time in the manufacturing sector. I’d love to see more willingness to accept the risk-reward profile in healthcare opportunities and venture capital.
Bonus Question: Tell us one fun fact about yourself or your firm.
Our firm was founded back in 1982 and was originally a very small evergreen fund. This was well before venture capital was a household name. If you go back to the 80s, the best funds were in Silicon Valley and were $50 million funds. Our fund was $1 million at that time. Now there are multi-billion-dollar funds all over the country. It’s kind of fun to know we got going early in the whole venture capital ecosystem and that we’ve come a long way over time.