A strong economy means investors and businesses are looking for lucrative expansion opportunities and new models to capitalize on growth potential. One trend spurred by the current climate is the rise of corporate venture capital (CVC) entities. Fortune 500 companies and other well-heeled organizations are spinning off dedicated CVC arms that represent a growing source of available capital, including several calling Wisconsin home.
Often functioning separately from the larger organization, CVCs can act more nimbly and assume more risk with their investments, including funding promising new enterprises. That’s good news for booming entrepreneurial communities across Wisconsin, because these investors add another source of capital, particularly well-connected and sophisticated capital, for companies looking for early-stage and growth financing.
Corporate investors are often looking for more than just a direct financial return, citing the need for strategic alignment, talent acquisition, addressing internal pain points, or offering long-term innovation potential. By aligning with their established, often global corporate parents, CVC investments can open new market opportunities that strengthen companies and support additional local growth.
Some major players in Wisconsin now include:
- CUNA Mutual Group, an insurance company serving 95 percent of U.S. credit unions, runs CMFG Ventures, which works with early-stage companies creating products to serve credit unions and their members at all life stages. The fund seeks to make investments of $1 million to $5 million in companies in fintech, data analytics, financial literacy and digital communications.
- American Family Insurance has launched AmFam Ventures, a CVC that will invest in seed through growth stage companies, typically $500,000 to $2 million, focusing on solutions that will benefit the insurance industry by merging technology and risk management. AmFam Ventures is looking at opportunities for increased connectivity, analytics and insurance-focused solutions.
- Northwestern Mutual (Cream City Venture Capital) and Aurora Health Care (InvestMKE) have each invested $5 million in a multiyear funding commitment, as well as business, technology development and mentorship resources, for Milwaukee startups. Northwestern Mutual has also created a $50 million venture fund focused on fintech, and Aurora is developing active partnerships with startups developing strategically important health care solutions.
- WEA Trust is an independent, nonprofit insurance company serving school districts and local governments. The company announced in late 2017 that it formed a strategic partnership with a Madison startup that has developed a novel health care technology product that impacts how consumers interact with health care. As an insurance provider, the investment has the potential to provide a financial return, but also to directly impact the core mission of benefiting WEA Trust members through personalized care solutions.
- Foxconn, which has just broken ground on its massive new manufacturing facility in Racine County, has purchased two properties in downtown Eau Claire for its Foxconn Place Chippewa Valley, a technology hub that will serve west-central Wisconsin, as well as house Wisconn Valley Innovation Center, a home for incubators, accelerator labs and more. The company has also purchased The Watermark building in downtown Green Bay, where it will open another innovation center. While outside of the investment fund-based CVC approach, these investments in physical places are aimed at creating an environment to support innovation and partnerships in and around the company’s AI 8K+5G ecosystem.
The CVC trend in Wisconsin, like elsewhere, is an emerging opportunity, with many funds formed in just the past three to five years. Like other financial players, each CVC has its own goals and investment strategy. While Wisconsin is home to many innovative and promising startups, it is important to recognize that many CVC investors will invest heavily outside of Wisconsin because of their narrow strategic focus. Even with investment occurring outside our borders, there is still benefit to the state by forming innovation-based relationships with high-growth companies that may need a Midwest location as they scale. The often-overlooked benefit to Wisconsin is in the development of the professional skills and networks of the fund managers and associates who can contribute to the broader entrepreneurial and venture investment ecosystems over the course of their careers.
At the Wisconsin Economic Development Corporation, we see the rise of Wisconsin corporate venture capital as another strong signal that the state’s early-stage business entrepreneurship community is healthy and growing. The continued and expanding access to resources and networks that these specialized investors offer is complementary to the accelerator programs, mentor networks, angel investors and other specialized entrepreneurship resources in Wisconsin. The confidence shown by the companies in creating CVC companies shows that Wisconsin is a vital place to start and grow a business, but also to reinvest strategically to fuel further success. And that, in turn, will help our entire business ecosystem continue to diversify, thrive and grow.
Aaron Hagar is vice president of entrepreneurship and innovation for the Wisconsin Economic Development Corporation, where he leads a team of dedicated professionals with strong relationships within the state’s entrepreneurial community to quickly advance and develop efforts to support Wisconsin’s startups, innovation-based businesses and aspiring entrepreneurs.