Start-ups, angels can connect on new state Web site

Wisconsin entrepreneurs can submit executive summaries of their businesses for angel investors' perusal to a new state Web site beginning May 9.

The Wisconsin Angel Network will launch a service this June to match angel investor networks with entrepreneurs based on the investors' market interests.

The WAN website, which is being called a deal-flow pipeline, has been designed to be a single source that will connect entrepreneurs and angels more efficiently than conferences or contests. Joe Kremer, the director of WAN, said the site will act as a "one-stop shop" for both sides.

"I think the whole marketplace for connecting investors with companies is quite inefficient," said Ralph Kauten, CEO of Quintessence Biosciences Inc. "It’s essentially not well advertised, as it’s required not to be through the securities laws that exist. Private placement offerings have to be private."

"I'm very hopeful that this [site] will be a successful conduit between investors and companies," he said. The idea for the WAN website has been "fermenting around the state" for years, Kremer said. In 2004 Tom Still, president of the Wisconsin Technology Council, and Lorrie Keating Heinemann, secretary of the Department of Financial Institutions, traveled the state to talk with networks of angel investors and entrepreneurs to see what needed to be done.

"Deals were getting done, and they weren't getting a lot of visibility," said Pehr Anderson, managing director of the Silicon Pastures angel network in Milwaukee. "When I need to collaborate with other angel networks on a deal, I don't know what else they've looked at and I don't know what else has been going on in their area. This will help provide a contact for decision-making by being able to look at what has been proposed and what is getting funded."

"Business is an oral tradition," he said. "What this [site] does is give people another way of making contact. It gives another interface to this information. And there are limitations to what it can do, but by centralizing it and formalizing it, it's likely to have persistent value," Anderson said.

While there are several other such Web sites across the United States, Wisconsin officials say theirs will be bigger and better.

"One of the things we did was to peruse different angel networks around the U.S. to see how they do things," Kremer said. "We picked the best ideas that they found and threw them all together. We wanted to figure out how to get more entrepreneurial deals in front of angel investors with the best resource efficiency."

The Wisconsin Angel Network is a program that stems from the Wisconsin Technology Council, the state-funded adviser to the governor and the Legislature on technology issues. Funding for the network and its site development have come from the state.

Dave Redick, a former Silicon Valley entrepreneur who is managing partner of Badger Ventures, criticized the WAN site as an ineffective use of tax dollars to further the private sector. Citing John DeFeo, former CEO of US West New Vector, Redick said, "Venture capital is hard to raise, and it should be."

"I don't think it's a proper function of government," Redick said. "They're using the taxpayers' money to do private enterprise. It's inefficient and inappropriate. Entrepreneurs need to work hard and make a lot of phone calls and do a good job on their business plans. It's meritocracy."

Ralph Kauten said, however, that "government should be interested in economic development, and where it can be helpful in facilitating it." And other angel investors agreed that there aren't enough angel networks in the Wisconsin area, so any new way to connect entrepreneurs with investment dollars is welcome.

"The way I look at it, government is to do things people can't do themselves," said Douglas Tucker, CEO of Milwaukee-based Neurognostics, which is going through angel funding rounds this year. And there's no statewide initiative like this, he said.

"[But] if they get in there and shape the way deals are made, that's going too far," he cautioned.

Dick Leazer, a manager of Wisconsin Investment Partners and former managing partner of the Wisconsin Alumni Research Foundation, said he thought the WAN site will be a center for making those connections. Used in addition to conferences, the site will provide investors with a good idea of the startup businesses looking for funding, he said, so that conferences will provide the face-to-face contact after investors and entrepreneurs have already made a connection using the Web site.

"Our group will look at all the deals, and if there's one that's in our sweet spot, life science, then we would follow up," Leazer said. "I think it'll help Wisconsin's overall entrepreneurial environment. It'll help a few more angel networks form and get started in a more prolific way, and it'll help entrepreneurs quite a bit in contacting the angel networks that are here in Wisconsin."