HealthX has raised a combined $76 million in its two funds, the latest of which attracted a maximum number of investors, but Bakken knows he can’t go it alone if his portfolio companies are to reach full potential. It will require co-investments from other funds, almost all of which are larger and outside Wisconsin.
If the proposed “funds of funds” comes to pass, Bakken said, it will help bring more of those investors to the Badger state.
“At a high level, it would expedite things. It will pour a little gas in the tank to accelerate growth,” he said. “We’ve got a good framework in place in Wisconsin. More capital will increase the odds of Wisconsin companies getting over the hump.”
If the Wisconsin Legislature approves, the state would join neighbors such as Indiana, Illinois, Ohio and Michigan in creating such a fund, which would be a one-time investment and matched over time by private dollars at a 2-to-1 ratio. Experience in other states indicates the matching ratio usually exceeds what’s required, because such funds tend to attract outside dollars — and outside venture capital firms — to locally sourced deals.
While Wisconsin has the talent and technology to compete nationally and beyond, it doesn’t have enough locally managed capital to meet the demand. Even the largest funds in Wisconsin can only take on a limited number of investments, sometimes because those prospects are outside their specific sectors of expertise but more often because there’s not enough money to go around.