4 companies launching $100 million venture fund

Foxconn-led group to invest in technologies

Four major corporations, all with a significant Wisconsin presence, on Tuesday announced they will jointly launch a $100 million venture capital fund.

Advocate Aurora Health, Foxconn Technology Group, Johnson Controls International and Northwestern Mutual Life Insurance Co. each will contribute $25 million to the fund.

Named the Wisconn Valley Venture Fund — a reference to Foxconn’s name for the massive manufacturing complex it is building in Mount Pleasant — the fund will invest in companies both across the U.S. and globe in health care, technology, manufacturing and financial services.

The pot of venture money will be

one of the largest in Wisconsin. It won’t, however, have a Wisconsin investment focus.

Rather, it will seek to invest in technologies that are considered key by the participants and be “totally agnostic” about the location of the firms it supports, John Schlifske, chairman and CEO of Northwestern Mutual, said after the announcement.

While the fund will invest outside Milwaukee and Wisconsin, investors in local companies anticipate the new pot of money will help develop the startup ecosystem here.

Matt Cordio, co-founder of Startup Milwaukee, said the new fund can help attract the attention of investors to Milwaukee.

“It can play a critical role in attracting additional capital and engaging with the startup community, which has not been done before,” Cordio said.

Andy Walker, a general partner at Rock River Capital, said his $25 million fund needs a larger fund to provide follow-on investments to the companies it provides funding to.

“We need (a fund) to pick up the winners and keep running with them,” Walker said. “We need to support our winners and keep our winners here.”

No manager for the Wisconn Valley Venture Fund has been hired yet. Schlifske said the goal is to have a manager in place by the end of the year and begin investing shortly afterward. The fund manager will be based in Milwaukee.

The fund’s size will immediately set it apart from most Wisconsin-based funds. The median fund here is well under $20 million, said John Neis, executive managing partner of Venture Investors of Wisconsin, the state’s oldest and largest venture outfit. One of that firm’s funds totals $118 million.

The national median — outside of venture-rich California, Massachusetts and New York — was $28.3 million in 2017, according to the National Venture Capital Association.

“Really great news,” Neis said of Tuesday’s announcement, which was staged at Discovery World on Milwaukee’s lakefront.

“It’s completely catalytic,” said associate director of the Golden Angels Jason Graham, whose fund represents a couple hundred investors.

The new fund eclipses the $5 million both Northwestern Mutual and Aurora committed to venture funds to invest in Milwaukee area startups last year. It also exceeds the $50 million that American Family Insurance Group said it hoped to invest through the venture capital arm it announced in 2014.

The concept for the Wisconn Valley Fund came from Foxconn, said Tim Sheehy, president of the Metropolitan Milwaukee Association of Commerce. But he said the company wanted partners that shared its interest in such areas as smart cities and health care and had the financial wherewithal to join in the effort.

“It was a coalition of the willing,” Sheehy said.

Asked how Wisconsin stands to benefit from a fund that won’t have a state focus, Schlifske said, “I think the benefit to Wisconsin is that we’re building a venture capital fund that doesn’t even exist, and as that grows, I think the cool thing is when this is successful, that won’t be it; there’ll be another one (that will) be bigger.”

“So not only are we growing the investment side of it and the people who work for that investment, but all of the technology transfer is going to be for companies here, which should make us bigger and better,” he said.

Schlifske said that for the average person, the fund will be “another sign that Milwaukee’s growing from a tech perspective” and will help provide opportunities to keep talented young people in Wisconsin.

Political prism

On hand at Tuesday’s announcement, besides Foxconn Chairman Terry Gou and the CEOs of the other three companies, was Gov. Scott Walker.

“This is yet another piece of the Foxconn bonus,” said Walker, who led Wisconsin’s pursuit of Foxconn and the negotiation of state incentives that make up the bulk of a huge public subsidy package.

Walker said the venture fund, coming at a time in which Wisconsin has posted unemployment below 3 percent for six straight months and has “more people in the workforce than ever before,” would be a factor in helping the state attract and retain talent.

Like many Foxconn developments, this one carried political undertones, most clearly through Walker’s presence.

The Republican governor, who polls indicate is in a tight contest for re-election, has a big stake in having Wisconsin voters look favorably on the Foxconn deal he negotiated, said political scientist and pollster Charles Franklin of Marquette University.

“This is a signature economic achievement as he’s presented it: The chance to bring a new industry into the state,” along with thousands of jobs, Franklin said.

But what “what looked like a slam dunk maybe at the beginning has drawn a lot of skepticism over the total cost to the state as well as the location of those costs and benefits,” he said.

Central to the perceptions is the size of the public subsidies spelled out in state and local contracts with Foxconn. If the company follows through on its promises to invest $10 billion in its manufacturing campus and create 13,000 Wisconsin jobs, it stands to receive some $4 billion in public money.

Walker has said Foxconn will benefit the whole state and has promoted that perspective by appearing with Foxconn executives this summer as they announced satellite developments in Green Bay and Eau Claire and, now, in Milwaukee.

Foxconn, meanwhile, has an interest in seeing Walker re-elected.

“To the extent that they really want to build this facility here and they really want all the benefits that were promised to them in the deal, then they have to prefer the incumbent who negotiated the deal over the unknown of a Democratic governor,” Franklin said.

“I don’t think this is complicated,” he added.

The Marquette Law School Poll, which Franklin directs, has found that Foxconn “is a mixed bag, with an essentially even split on whether it will be worth the money or not,” Franklin said.