Investing in the early stages of promising young Wisconsin companies is paying off for angel investors. The rising number of enterprises financed by angels is receiving credit for surging venture capital investments in the state. Venture capital typically is attracted to opportunities created first by angel investors. Large venture capital institutions may invest independently or co-invest with original angel networks.
Companies in some industries require long periods for developing and testing products. One example is high-tech companies. In the first half of 2010, Wisconsin high-tech companies received over $100 million of venture capital. The two largest deals are Virent Energy Systems and Cellular Dynamics International. Both companies are headquartered in Madison. Virent obtained $46.4 million of capital from three institutional sources—oil company, Shell; agricultural product manufacturer, Cargill; and automaker Honda. Cellular Dynamics, a developer of stem cell therapies, attracted $40.6 million from undisclosed investors.
These investments are indicative of the financial commitments that occur as companies near the end of product development and are ready to begin production for generating sales. Angel investing helps companies reach that stage from start-up. That’s a period when developing and testing of products requires companies to retain funding from friends, family, the founders, and angel investors.
Angel investment in Wisconsin continued to grow in 2008 and 2009 as venture capital financing declined during the recession before its recent resurgence. The state created a 25 percent tax credit for angel investment in 2005. The tax credit favors high-tech companies, including those specializing in biotechnology.