WARF's Carl Gulbrandsen Discusses Venture Capital In State

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WARF's Carl Gulbrandsen Discusses Venture Capital In State

Premiere Date: 
February 14, 2014

The Wisconsin Alumni Research Foundation managing director talks venture capital.

 

Episode Transcript: 

Frederica Freyberg:

Help is on the way for start-ups looking for venture capital in Wisconsin. Two new firms will be starting up soon. To tell us more about that is Carl Gulbrandsen, managing director at the Wisconsin Alumni Research Foundation or WARF. And thanks very much for being here.

Carl Gulbrandsen:

Good being here.

Frederica Freyberg:

One of the primary questions for us is, why doesn't Wisconsin have more venture capital?

Carl Gulbrandsen:

You know, we've been talking about this for 20 years. Part of it is there's not a lot of public companies in this state, so that people are leaving, having made a lot in the market and wanting to start venture. Part of it is the fact that it's difficult to get here. You have to stop in Chicago or Minneapolis or Detroit before you get here. People don't want to take two flights to get to the place where they're investing. What we're really lacking is what's called seed funding. That's the initial funding that goes in right after the angels. If a company does become successful, there's venture money, but that's in the later stages. But in the early stages we've got one fund in town, Venture Investors. They're on their fourth or fifth fund now. They've been very loyal. They’ve great for WARF, great for the university. But it's one fund. So we'd like to have more.

Frederica Freyberg:

And how do we compare to our kind of peer states? Not well, I understand.

Carl Gulbrandsen:

We're lagging quite a ways behind, particularly on venture funding. I mean, you look at Michigan, which from a funding standpoint for research and Wisconsin is pretty comparable. Their state has spent a lot of money on attracting venture funding and they've been successful. Ann Arbor probably have six or seven funds, where we have one. To get companies started you really need the seed money. It's not just letting somebody go and do their thing. They've got to find the money to do it, particularly if you're in the life sciences. IT is a little bit less expensive. But these things take a long time, 10, 12 years to get something to the market. And investors have to be willing to wait and put that money in.

Frederica Freyberg:

There is some kind of help on the way, though, something called 4490. What is that?

Carl Gulbrandsen:

4490 is, right now, a joint partnership between the state of Wisconsin investment board and WARF. We've been working on this for almost two years now. We've agreed to form a fund. 4490 is the longitude and latitude of the center of the state of Wisconsin. And we're creating a venture fund for IT, that's information technology start-up companies. This will be a seed fund. Total value of the fund is $30 million. WARF is putting in $15 million and the state investment board is putting in $15 million. We're just in the last stages of recruiting a general managing partner to run this fund. So we hope in the first quarter that this fund will be off and running. With $15 million we're probably looking about three to five years of getting the money invested, with some follow-on funds to come along. And hopefully, my simple notion of it is, if you've got one venture fund in town, it's pretty hard. If you've got two, then you start to generate interest and more will come in. I think that will happen. And there's a lot of things happening right now in Wisconsin.

Frederica Freyberg:

Like what?

Carl Gulbrandsen:

Well, you've got the fund to funds the state is putting together, the $25 million fund to funds. The managers that are taking that over have to contribute another $5 million. So that will be a $30 million fund too to invest in other funds to come in. So that will help. And then there is a lot of buzz about IT in this.  We've got Epic, for instance. People are leaving Epic and not wanting to leave the region, wanting to start companies. There are accelerators that have developed in town, incubators, maker spaces, coworking spaces. It's all happening.

Frederica Freyberg:

So there's a lot of buzz even though people have been talking about this for 20 years. It's finally kind of happening for us. But we were interested to learn that Wisconsin's culture might have something to do with how long it has kind of taken us to get here, this culture of being risk averse and maybe even a culture of there being shame in failure. And with these kinds of things you have to be kind of willing to try it.

Carl Gulbrandsen:

Well, I think that is true. I think there's also been-- for this university there's been a culture that it's almost unseemly to take your technology and start a company. Now, WARF's been around for a long time, but it is difficult sometimes to get people interested in actually taking it the rest of the way. That's changing. And it's changing with the young faculty that you see come in and particularly the students, undergraduates and the graduate students. They really want to start companies. And it's pretty amazing. It's the most active time that I've ever been at WARF, and I've been there 16 years. So it's a lot of fun.

Frederica Freyberg:

All right. Carl Gulbrandsen, thanks very much.

Carl Gulbrandsen:

Great.

Frederica Freyberg:

University students now have a new way to launch their own business. This week, UW System and Economic Development Corporation officials announced $2 million in seed money for students to fund start-up ventures. Students will be eligible for as much as $75,000 per project.


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