BrightStar Wisconsin Foundation Inc. is aiming to raise $10 million that it will use to invest in more Wisconsin startups with its unusual nonprofit venture capital model.
A decade since its founding, BrightStar's model is proven as it already realizes returns and the organization is ready to take its impact to the next level, BrightStar executive director Todd Sobotka said.
"How do we leverage what we are and our position in the ecosystem to make sure more is done?" Sobotka said. "That goes beyond us just deploying capital."
With the goal of creating jobs and boosting the state's economy by investing in early-stage entrepreneurs, BrightStar has been an early investor in more than 70 Wisconsin startups to date — including companies with billion-dollar valuations like Fetch Rewards Inc. and Shine Technologies LLC.
The organization was founded in 2013 and began investing in 2014. It hasn't run a capital campaign since its inception, Sobotka said.
As Sobotka describes it, BrightStar is a charity that acts like a venture capital fund. But unlike a traditional venture fund in which investors expect to realize returns, BrightStar is funded by donors and the organization reinvests the returns in more Wisconsin startups.
The organization has received around $8.5 million in donations to date, primarily around the time of its founding. Initial investors were Mark Burish; Michael Drescher; Susan Engeleiter; Jeff Harris; George Mosher, who passed away in 2019; Jeff Rusinow; Michael Shannon and Tom Shannon.
Investors have also included foundations and other individuals. BrightStar hasn't been able to tap into corporate investors, Sobotka said.
BrightStar invests in early-stage startups, often before they're earning revenue or profit. In backing entrepreneurs at this stage, it helps young companies to commercialize ideas and grow into businesses other investors want to financially support. The organization's founder and executive board chair Tom Shannon likens it to minor league baseball.
"The Brewers, they have the star players on the major league level and they have farm teams that are bringing up raw players through single-A and double-A ball," Shannon said. "That's what we're doing. We are building these early-stage ideas into companies that (other) Wisconsin companies want to invest in."
BrightStar's model is mathematically proven because the organization has earned returns on some of its investments and reinvested that money, Sobotka said. Using its initial donations and investment returns, the organization has deployed nearly $10 million to Wisconsin startups and covered operational costs for 10 years.
From the initial $8 million BrightStar invested, Sobotka anticipates return proceeds of $20 million to $25 million. His goal, through new donations and subsequent returns, is to build BrightStar into a "$100 million machine that is just investing in Wisconsin tech," Sobotka said.
Of the more than 70 startups BrightStar backed to date, around 50 are still in business, Sobotka estimates. Around 12 of the businesses dissolved and BrightStar earned returns on eight to 10 others, he said.
Among the companies in BrightStar's portfolio that are still in business and have yet to have an exit event, Fetch and Shine Technologies are among its most promising investments.
"Fetch is a huge one," Sobotka said. "That's on the board still. That one's going to return significantly."
Last year, Fetch was valued at $2.5 billion when it raised $240 million from investors. Shine is also valued at "a couple billion," Shannon said.
BrightStar companies that have already exited include Milwaukee's Rent College Pads, Brookfield's Archangel Device, and Curate, GrocerKey and Pinpoint Software in Madison — all of which were acquired in 2021.
BrightStar's current capital raise coincides with Sobotka's full-time return to the organization after several years of stepping back from it.
Sobotka started at BrightStar around the time of its inception and worked as its portfolio manager for around five years. He then spent four years working part time for BrightStar while also working full-time jobs for Shine Technologies and then Milwaukee's Direct Supply.
In April 2022, Sobotka returned to BrightStar full time as its executive director.
"Todd knows the whole ecosystem," Shannon said. "He just has an unbelievable amount of energy. ...He's very well liked and that opens doors."
With the new $10 million BrightStar is looking to raise, the organization could reinvest in some of its portfolio companies in subsequent financing rounds — a practice the organization hasn't previously done but one that could help it maximize its investments, Sobotka said.
In its next phase, Sobotka also envisions BrightStar broadening its impact. The organization could do this in multiple ways, including by helping to develop talent and ideas into companies, and also potentially by facilitating deals outside of Wisconsin and bringing them in, he said.
"How we broaden the way in which we invest to make sure that things aren't languishing within a university or a corporation — both innovative ideas and talent," Sobotka said. "How do we facilitate things that are maybe outside of Wisconsin and pull them in?"
