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US state of Wisconsin launches $30m early stage venture capital fund

21 Mar 2013

The State of Wisconsin Investment Board (SWIB) and Wisconsin Alumni Research Foundation (WARF) have partnered to create an early stage venture capital fund focused on information technology.

4490 Ventures, a reference to the 44O N latitude and 90O W longitude lines that approximate the center of the state of Wisconsin, will be a $30m fund focused on early-stage companies primarily in the state.

The private fund, capitalised jointly by SWIB and WARF, is intended to generate returns and build value for state retirement fund participants and WARF’s primary beneficiary, the University of Wisconsin–Madison.

Carl Gulbrandsen, WARF’s managing director, said work on the fund has been underway for more than a year and involved significant staff effort from both organisations as well as independent research to help define the fund’s focus and scope.

“WARF has recognised for some time that there is a significant opportunity in Madison and other regions of the state in information technology startup companies, but experienced venture management and funding for such companies has been lagging our peer states,” Gulbrandsen said. “We appreciate the opportunity to work with SWIB on this effort and we all agree there are some excellent investment opportunities here.”

Michael Williamson, SWIB executive director, added, “Make no mistake about it. We are creating this fund to make money for our participants in the Wisconsin Retirement System.”

Gulbrandsen said the market research helped confirm the value of information technology being developed in the state and highlighted the strength of Wisconsin’s IT workforce skills. However, capturing value from IT innovations may call for an approach different from the licensing activity used in other industries because young IT companies may not rely on patentable technology.

As a result, an important way to capture returns and create value is to invest in the companies themselves. Williamson noted there is industry consensus regarding the need for seed stage funding in the $500,000 to $2m range for the kinds of companies the new fund will target.

The technologies involved could include data management, informatics, data storage, social grid computing, hardware, new materials, software, mobile technology security and health care information technology, such as the operating systems for medical devices or patient record keeping.

“We hope that the establishment of this fund will bring attention to the many investment opportunities that exist in this state,” Gulbrandsen said. “Past experience has shown that these types of funds often attract the talent, capital and resources necessary to create high-performing startup companies. Given the consistent top-ten ranking of UW–Madison’s computer sciences department and the high-quality work going on at other state campuses and companies, we know there are plenty of excellent ideas here.”

SWIB and WARF have also confirmed they have retained a recruiting firm that specialises in private markets investments to conduct a nationwide search for a qualified fund manager.

Assets under management at SWIB are about $90bn, while WARF has assets of more than $2bn.

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