gener8tor: The Gift That Keeps on Giving

It’s been a few years now since I wrote my first appreciation for the folks at gener8tor.  Back then, they had just launched, and yours truly was surprised (albeit very pleasantly) that they had gotten not just off the ground but had achieved some sort of seemingly stable orbit.  Which surprised a bunch of people, I think.  I know it surprised me.

Well, here we are in November 2017 and they have flown well beyond Madison and Milwaukee to places as far afield as Minnesota, Illinois and even my own neck of the woods up here in Packerland.  Recently, it was my good fortune that a scheduled speaker for a OpenBETA Lunch program in Oshkosh had a last minute scheduling conflict.  My good fortune in that I was offered an opportunity to substitute as the headliner for the event.

The Oshkosh event was a lot like my first time at gener8tor way back when in Milwaukee.  Quirky space, a roomful (well, ok, maybe a half-dozen plus) of raw but passionate and very early-in-the-process entrepreneurs.  Who asked good questions, and shared some good ideas.

What was most interesting about the event, for me, was in fact how it took me back to those early gener8tor classes, where the entrepreneurs were rawer than raw, and the ideas sketchier than sketchy.  And, in fact, what amazed me about gener8tor then – and caused me to write my initial blog about the program and team – was how over the couple of months after I saw that cohort of newbies the gener8tor folks had somehow worked some magic to turn them into that rarest of commodities hereabouts, fundable high impact entrepreneurs.  (And, yes, they all got funded.)

Since those times, gener8tor’s flagship program has expanded to new places and moved a bit downstream in terms of appealing to less raw, even semi-polished entrepreneurs (often hailing from well beyond Wisconsin).  And I’ll admit, I had (and to a limited extent still have) some doubts about whether they can sustain their success across multiple markets and with later stage entrepreneurs.  But the results continue to speak for themselves, and if we – that is those of us who are serious about growing the high impact entrepreneurship and investing community in our little corner of flyover country – are lucky gener8tor has a lot of fuel left in the tank.

All of that said, what really made my day at the OpenBETA event was seeing gener8tor staying true to its “rawest of the raw” roots, and doing it in the New North.  In Oshkosh even.  (They also have a new gBeta program in Green Bay.)   That means, I think, that it won’t be long until entrepreneurs and investors in Madison and Milwaukee start  realizing there are deals to be done in Wisconsin in places other than Madison (mostly) and Milwaukee.

And so congratulations to all of us in the high impact entrepreneurship and investing community across Wisconsin.  We are the lucky benefactors of the gener8tor program – the gift that keeps on giving.

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Jones: Hard truth about angel investing

Paul Jones, co-chair of Venture Best, the venture capital practice group at Michael Best, has been selected as a regular contributor of OnRamp Labs, a Milwaukee Journal Sentinel blog covering start-ups and other Wisconsin technology news. Paul’s most recently contributed piece, “Jones: Hard truths about angel investing” can be found under their Business Tab in the Business Blog section: Click here to view his latest blog.

A short excerpt can be found below:

“Angel investing is a critical part of the high impact startup world, particularly outside of the big venture capital centers. A good portion of Wisconsin startup success stories achieved liftoff with critical assistance from angel investors and their capital.

But what about the angel investors themselves? How does angel investing work for them?

Well, you don’t have to look very hard to find blogs, books and speakers extolling the virtues of angel investing for the angels. And a lot of them make a pretty good case that the angel investing community makes a nice profit for its efforts. A good case, but also a misleading case.”

Click here to read more.

High Impact Entrepreneurship in Wisconsin: The Smoke and the Fire

By Paul A. Jones

When it comes to life sciences research, Wisconsin is one of the leading players in the nation, with UW-Madison a top 5 recipient of NIH funding, the Marshfield Clinic an important national player, and UW-Milwaukee an up-and-comer. With companies like Promega and Cellular Dynamics, the state has had a few noteworthy biotech entrepreneurship stories (ok, not on the Amgen or Genentech scale, but still…).  So it is perhaps not surprising that a lot of folks look at life sciences as the big story in terms of growing the high impact and venture capital sector in Wisconsin. Not surprising, but wrong. The real entrepreneurial fire in Wisconsin, at least in terms of the fire that is most likely to make Wisconsin a regular stop on the national venture capital map sooner rather than later, is in the IT sector, and particularly what, for lack of a better term, I will refer to as the “web-centric” IT sector, encompassing software startups in web-based businesses, mobile applications, etc. whether in B-to-B or B-to-C environments.

Now, let me say up front that I like the biotech sector. My first venture backed deal, way back when, was a biopharmaceutical spin-out from Duke University Medical Center. My venture fund, over ten years ago, was dedicated to early stage life sciences investing (though a cynic might suggest that the experience acted as a cure). Both of those deals were in North Carolina. The first, in 1990, when North Carolina’s venture capital bona fides rested mostly on a local fund with $6 million in capital, and the second when you could count the number of funds in the state with $50 million under management on the fingers of one hand. (Something you can do in Wisconsin today, with a couple of digits to spare.)

Having fallen for the biotech venture capital story in a venture capital-poor location before, I think folks looking for life sciences to drive the Wisconsin venture capital story over the next few years should proceed cautiously – and consider a much more attractive near term story: the web-centric sector.

First, the shadows hanging over the life sciences story as it relates to Wisconsin and venture capital. In general, building life sciences companies takes more time, more money, and more grey hair than building web-centric companies. Even a straightforward medical device play is almost certainly going to take a couple of years and a couple of million or more (usually a lot more) dollars to get to the point where it can be introduced to the market. A team that includes folks who know their way around a very complicated regulatory process, expensive distribution channels and exceptionally risk-averse customers. Take each of those variables up an order of magnitude if you are talking about a therapeutics company.

Now ask yourself, how many venture capital investors in Wisconsin have $100 million of capital (not much money, really, when you look at the funds that do a lot of biotech deals) devoted to early stage biotech deals? None. How many folks in Wisconsin have C-level experience managing big companies in the life sciences space and experience growing them from the research stage through FDA approval (and how many UW-Madison life sciences professors are going to hand over the reins of their spin-outs to those folks)? Well, let’s just say not many.

The bottom line is that while a great research base, which we have in Wisconsin, is necessary for growing a significant and self-sustaining high impact life sciences sector, it is far from sufficient. You also need a lot of very patient money with a lot of industry experience and a lot of folks with more than their fair share of grey hair. And those are things in short supply here.

Now consider what resources you need to build a web-centric business. Well, as often as not, you can build and actually sell the proverbial “minimal viable product” with somewhere between $0 and $500k, in somewhere between 3 and 12 months. And you don’t need anyone with grey hair to do that, or most likely, to take the company all the way home to the exit. And if perchance you need more capital, your needs are likely to fall in the less than $5 million sweet spot for Wisconsin’s modest collection of angel and venture capital investors. The fact is, you can probably take ten web-centric startups from conception to exit on less capital and in a small fraction of the time it takes to nurture one biopharmaceutical startup from conception to exit. Given how many startups ultimately succeed, any smart risk capital investor is going to take the portfolio of ten deals over the “all or nothing” bet on the biopharma deal.

Don’t get me wrong. I believe venture-backed biotech will be a major part of a vibrant, self-sustaining high impact entrepreneurship economy in Wisconsin. But web-centric entrepreneurs and investors will get there first.