Venture capital pool getting deeper

Milwaukee firm raises $90 million to back Midwest projects

By JASON GERTZEN jgertzen@journalsentinel.com, Journal Sentinel

Monday, August 11, 2003

Baird Venture Partners, a Milwaukee investment firm, plans to announce today that it has raised $90 million to back technology, biotechnology and business services companies in Wisconsin and the Midwest.

The Baird fund — along with the Frazier Technology Ventures fund from a Seattle venture capital firm — marks increasing interest in the region’s high-tech sector.

“Clearly the ideas, the technology and the opportunities are there for a venture capitalist,” said Paul J. Carbone, managing partner of Baird Venture Partners.

The Baird and Frazier funds were picked this year by a State of Wisconsin Investment Board initiative to expand what has been a relatively meager venture capital pool in the state.

The size of Baird’s fund is likely to attract attention from investors elsewhere in the country, a critical step to advancing the state’s aspirations for its high-tech sector, said Roger Ganser, president of the Wisconsin Venture and Growth Capital Association.

“It will start putting Wisconsin on the map,” said Ganser, who is also a managing partner of Madison’s Venture Investors.

Venture capitalists from the East or West coasts are apt to become more interested in Wisconsin deals when a local firm can provide hands-on oversight of the company and substantial financial backing to lead an investment round.

This activity has implications for improving the state’s economy.

“There is so much data out there clearly demonstrating job growth,” Ganser said.

In addition to the number of jobs spawned by venture investing, many also are high-quality positions. One study pegged average salaries in the $60,000 to $70,000 range, Ganser said.

Wisconsin has struggled to encourage more venture investing activity.

The state’s venture investments in 2002 dropped by 31% from the prior year to $64.5 million, according to one survey. Venture investing has been down nationwide, but the drop has been a particular problem in Wisconsin because the state so far has been outpaced even by neighbors such as Minnesota.

Hopes of a turnaround came when the Wisconsin investment board approved $30 million to Baird and an additional $60 million to Frazier, which said it would open a Madison office.

Besides the investment board money, Baird so far has raised $60 million from investors that include the Wisconsin Alumni Research Foundation, Northwestern Mutual Life Insurance Co., the Helen Bader Trusts and Robert W. Baird & Co.

Baird also has expanded its staff, adding experienced venture capitalists, a biotechnology scientist and a technology industry analyst.

James E. Daverman is a senior adviser to Baird Venture Partners and chairman of the firm’s advisory board. He is a co-founder and managing partner of Marquette Venture Partners.

Wei Li, a new associate with the firm, has experience leading drug discovery projects for firms such as Vertex Pharmaceuticals. Associate James E. Pavlik has worked as an investment banking analyst. H. Josef Merrill, a financial analyst, spent three years working in Baird’s investment banking group.

Venture capitalists making high-risk investments in young companies offering potentially high returns often do more than write a check.

“Money is just the beginning,” Carbone said. “It is critical not only to have the financial capital, but the human resources to support the companies we are investing in.”