Bascom Ventures (part of Alumni Ventures)
Type of Firm: Venture Capital
Geographic Focus: Global (mainly U.S.)
Sector Focus: Multiple industries
Financing Stage: Seed to pre-IPO
Investment Range: $25K – $10M
Investment Horizon: 3 to 7 years
Fund size: Bascom Ventures – $6M
Alumni Ventures – $250M
How/why did you get into investing?
Becoming an investor was the culmination of more than 30 years of experience in engineering, operations, finance, logistics, mergers & acquisitions, corporate VC, and running my own startup. I’ve always been fascinated by new technologies. Investing in early stage companies is a nice marriage of my interests and background.
Give us a brief overview of your firm and your investment strategy.
Bascom Ventures is part of Alumni Ventures, which is a large organization that has 17 other funds. We’re all doing the same thing, just within different ecosystems. We don’t take money from institutions. Instead, participation is from individual investors, which is different than most big venture capital funds. Each of the Alumni Venture funds is small. Because of that, we are never the lead investor. We are always going to be a follow-on investor, which gives us the flexibility to invest along side experts in certain industries. This strategy allows us to put together a diverse portfolio across multiple industries, multiple stages, and diverse geography. For Bascom Ventures specifically, over 95% of the investors are alumni of a University of Wisconsin campus.
We do a lot of investing in companies that have a founder or board member or senior executive that went to Wisconsin as well. But it’s not exclusive. We’ll invest across multiple industries. Think of us as trying to put together a fund that mirrors what’s going on in the total venture capital industry. So, for example, if 12% of the VC industry money is going into artificial intelligence, we also try to have around 12% invested in that space.
At what point should entrepreneurs be when they first contact you? Describe the ideal first interaction scenario you have with an entrepreneur.
I’m very supportive of the Wisconsin entrepreneur ecosystem, and I’m open to talking to companies very early on to discuss where they are headed and why. I’ve been doing this with Bascom Ventures for five years, and some of the investments we made in the last six months are companies I talked to four years ago. At that time, they were not ready for raising money, but a nice relationship was created early. I like to think we got involved in their recent round because of non-investing things we did to help them grow. If early in your journey, we discuss things like what to look for and ways to grow, hopefully you’ll remember us later when the time is right for raising venture capital. When that time comes, the perfect scenario is to reach out to us while you are talking to VC funds to lead your round. Once your lead is in place, we can move very quickly to make a decision and get money to you.
Another point I’ll make is that most startup companies should never use venture capital. It’s a specific funding mechanism for specific types of businesses. As an entrepreneur, you should understand where you want your company to go and get it funded in a way that matches your goals. When you sign up for VC money, you are indicating that you have a goal to be acquired or go public within the next three to seven years. You are going to give up control within a certain time frame to allow for an exit.
What happens if there is continued interest?
If we have interest in the opportunity, there will be follow-up calls with more in-depth questions. We will ask you to share your pitch presentation deck, revenue projections and assumptions behind those projections, current capitalization table, relevant legal documents, and other company information. From there, we like to have about three weeks to conduct external diligence, which includes a conversation with your lead investor. We might go back to you with questions that arise during that period. For seed stage companies, if we decide to invest, we can let you know and wire your money within days. For Series A deals or later, there is an additional step. Our investment committee will meet with the company’s CEO and key team members to ask questions. A day later, we can give you a final answer and wire the money if it’s a positive decision.
What kind of traction should companies have achieved to be viable candidates for investment? Are there some typical benchmarks you look for?
Generally speaking, there is a different answer for each industry. There are segments where the Series A, Series B and maybe even the Series C are all pre-revenue. Think biotech. And there are other segments where a seed round company has $1M in revenue. You can get a more specific idea of the traction needed when talking with VCs in your specific industry. However, we are a little different because we are a follow-on investor. If you have a VC that’s leading, that’s good enough for us to take a look at the opportunity.
What can you tell us about how you determine the value of the businesses you invest in?
We never try to renegotiate the valuation of the company that was determined by the lead investor and the company. We might not participate in the deal because we don’t think the valuation is realistic, but that’s not our main determining factor. I’m not overly hung up on valuations in early stage deals. But one thing entrepreneurs should know is, the highest valuation isn’t necessarily the best deal for you. If you overvalue the company at an early stage, you must execute perfectly to continue to increase your valuation going forward. If you take too high of a valuation in Series A and don’t live up to your valuation, that’s a bad arc. Your Series B might be really tough to raise. The dilution you take from slightly lower valuation in the beginning or middle of your capital raising process is very minor in the long run.
Besides money, what else do you bring to the table for the companies you invest in?
We are very much a network driven venture capital fund. Through Bascom Ventures, I have 400 investors, and they are very interested in the companies I invest in. But I also have over 20,000 Wisconsin alumni who read my newsletter. Many of them have are willing to help our portfolio companies with introductions and advice on specific topics related to their domain expertise. When you expand that to Alumni Ventures, that network is over 600,000 people. Most of them are alumni of top schools like Harvard, Stanford and MIT to name a few. In addition, we have a team of three people within our organization that are dedicated to getting the right introductions for portfolio companies. For the vast majority of requests, our team can connect entrepreneurs with the specific people they are seeking. We also have over 850 portfolio companies, and there is a very vibrant ecosystem among them. They sell each other products and services, and they communicate with each other about issues they face as entrepreneurs.
In what ways do entrepreneurs often fall short when asking for money?
For those that are a fit for venture capital, I often see very detailed revenue projections, but the assumptions aren’t realistic. I’ve seen five-year financial projection slides that provide revenue estimates to the penny. The slide that interests me more is the next one with the assumptions that drove those numbers. If you say, for example, this is a $3B market and if we just get 0.5% of the market, this will be our revenue. OK, wonderful. Beyond that, why are you going to get $100M of revenue in the next five years? What’s special about you?
Another way entrepreneurs fall short is understanding the competition. If you think you don’t have competition, you are 100% incorrect. Whatever you are proposing to solve, people are solving it now but just in another way. And if they aren’t, it’s a good indication you don’t have a product people are willing to pay for. Often, the competition is the inertia of how people have done something for years. You have to overcome that somehow.
What is one wish you have for the Wisconsin entrepreneurship ecosystem?
I would like to see a few more successes that stay in Wisconsin. There are some great entrepreneurs in Wisconsin. They are coming up with some brilliant ideas. But it’s a little bit in our culture that working for a startup is dangerous. There are a lot of talented people who don’t want to do it. So, we don’t have enough management-level people who know what it’s like to go from $5M to $500M in sales. We need a few more companies to do really well and build up a talent base that knows how to help an early stage company gain traction and turn it into a homerun.
Bonus Question: Tell us one fun fact about yourself or your firm.
Our firm was the most active venture capital fund in the country in 2020. We made more investments than any other firm. While Bascom Ventures is a $6M fund that’s going to make 25 or so investments, we’re the tip of a sphere of an organization that invested about $250M in 300 companies in 2021.