Face time – Lorrie Heinemann on the nation's first nonprofit venture fund

Posted on Aug 1, 2014 :: Face Time
Margaret LeBrun
Posted by , Insight on Business Staff Writer
Lorrie Keating Heinemann

Photo by Bob Cashman/Image Studios, for Insight

Formerly the director of Financial Institutions for the State of Wisconsin, Lorrie Heinemann recently took on the role of vice president of BrightStar Wisconsin Foundation, the nation’s first non-profit venture capital firm. Heinemann, who built her career in finance and banking (including the former Valley Bank in Appleton), was co-founder of the Wisconsin Angel Network. She sat down with Insight Editor Margaret LeBrun to talk about BrightStar’s mission.

In 2004, I co-founded the Wisconsin Angel Network with Tom Still of the Wisconsin Technology Council to ensure that entrepreneurs had visible sources of risk capital. Now, I’m vice president of BrightStar Wisconsin, a nonprofit that accepts donations into our foundation, and then we turn around and make equity investments into early stage companies that create jobs.

We’re the first in the nation to receive a nonprofit status to do a fund like this solely based on our ability to help create jobs in our state. We were founded with $6 million from our eight founders and now have total commitments of over $7 million. We’ve invested in eight companies; those companies employ about 50 now and anticipate they will have over 200 jobs in the next three years.

We expect to invest in two companies per month well into the future.

Tom Shannon, BrightStar’s founder and CEO, is a UW-Madison grad who saw a lot of money being donated for scholarships and to create great buildings across the state. Badgers across Wisconsin and even outside Wisconsin are very philanthropic; they’ve given hundreds of millions of dollars. We educate our kids – but it doesn’t seem there is a source of capital or the jobs for them to stay here. Tom (Shannon) felt very strongly there was an opportunity to provide a conduit for wealthy individuals to donate money into a venture philanthropy fund so it could help create jobs.

We are unique in that, first of all, we accept donations; second, we co-invest in companies and thirdly, we are very efficient. We have a grant of $300,000 from the Wisconsin Economic Development Corp. to cover our overhead and we have donated office space in Madison and Milwaukee. We have no management fees and nearly 100 percent of our donors’ dollars go into investments in companies. Tom Shannon is donating his time.

BrightStar was launched July 1, 2013, received nonprofit status November 2013 and started actively investing in companies in February. We have been taking a very strategic approach in Northeast Wisconsin to ensure we are partnering with the local investors, universities and foundations that we can be a key part of investing in more companies here in Northeast Wisconsin. We’ve been connecting with UW-Oshkosh, particularly in its Innovation and Entrepreneurial Center, and UW-Green Bay, with community foundations and regional economic development organizations like the New North. We have had one applicant from the New North’s Fast Forward program, so we’re taking a look at that.

If we just get the average rate of return on an angel investment portfolio – which is about 23 to 26 percent rate of annual return over five to six years – we should be very successful in building a long-term, sustainable source of capital. But our screen is, job creation in Wisconsin comes first. With BrightStar the money comes back to invest into more companies.

A robust entrepreneurial ecosystem has access to capital and has educational programs in place – whether it’s through universities, colleges or chambers. One of the best known is called Gener8tor. It takes in five companies at a time, twice a year, and mentors them through the start-up process to get them to market. We know that if a company goes through an accelerator, 87 percent are still in business after five years.

We think there’s a tremendous amount of potential because Wisconsin has always been among the top 10 states in research. We have a high number of patents. Yet as a state we only receive 5 percent of venture capital. Our goal is to be one of the key sources of early-stage capital that will help transform our state to become very entrepreneurial and to be open to taking risks – which leads to very cool companies. It is absolutely inspiring and exciting to hear entrepreneurial stories and see what we can do to help make these companies successful.

Margaret LeBrun

About Margaret LeBrun

Co-Publisher, Executive Editor View all posts by Margaret LeBrun →