Wisconsin Gov. Tony Evers is proposing a $75 million venture capital fund of funds program that would be run by the Wisconsin Economic Development Corp. (WEDC).
The program would build on the state's existing Badger Fund of Funds program, which was launched in 2013 with $25 million under former Wisconsin Gov. Scott Walker. The idea behind both programs is to spur economic growth through entrepreneurship by growing the state's venture capital ecosystem.
But given that it will need approval by the state Legislature later this year as part of the 2023-'25 budget process, the proposed new program must pass negotiating hurdles before it could come to fruition. Evers, who is a Democrat, proposed a $100 million venture capital program during the 2021-'23 budget process and the Republican-led Legislature left it out of the final budget.
The new program would invest in multiple venture capital funds, according to Evers' latest budget proposal. Each fund could receive up to $18.75 million that it would be required to invest in Wisconsin. The investments would require at least a one-to-one match from private sources, such that the program as a whole attains a required match rate of two private dollars for every state dollar invested.
Additionally, at least 20% of the total funds under management would need to be invested in minority-owned or women-owned firms, or in businesses that are located in underserved areas, according to Evers' proposal. The governor also recommended establishing an oversight board.
Given that investing state dollars in venture capital is a "high-risk, high-reward endeavor," the proposal would also require an investment manager and an annual audit that would provide financial statements, rates of return, and information about the venture capital funds and businesses receiving investment, said state Sen. Dan Feyen (R-Fond du Lac), a member of the state legislature's tech caucus and a WEDC board member.
"If there was ever a time to do this, now is that time," Feyen said in an email Tuesday. "I am generally supportive of this concept and will help to make a push that the fund to fund venture capital investment makes the final budget. I will not commit to a dollar amount, that will be the choice of our caucus and the Joint Finance Committee."
Rep. Tip McGuire (D-Kenosha), who is also a member of the tech caucus, said in an email Tuesday that he supports the governor's latest fund of funds proposal.
The Legislature's Joint Committee on Finance will consider all state spending as part of the full budget plan, not as one-off ideas, the committee's co-chair Sen. Howard Marklein (R-Spring Green) said in an email Tuesday.
“The venture capital investment idea is just one idea among many ideas," Marklein said. "The Legislature will write the state budget after we seek input from our constituents and stakeholders all over the state."
The proposal to house the new program within the WEDC could be a sticking point in the budget negotiations, Badger Fund of Funds managing director Ken Johnson said.
"The (dollar amount) is not as important as the implementation method," Johnson said. "I'm sure that it's dead upon arrival with the Republican majority."
Johnson's firm, Sun Mountain Kegonsa, was selected to manage the Badger Fund through a request for proposal process run by the Wisconsin Department of Administration and the State of Wisconsin Investment Board, Johnson said. Democratic legislators at the time didn't support the WEDC implementing the Badger Fund, he said.
The legislation that established the Badger Fund passed both houses of the Legislature in "near-unanimous margins" and involved bipartisan input every step of the way, Wisconsin Technology Council president Tom Still said.
"There's a long and productive tradition of bipartisan action around early-stage investing in Wisconsin," said Still, whose organization supports the proposed new program. "It should be very possible to continue that tradition with this fund of funds proposal."
