A young Wisconsin venture capital firm has raised more than $23 million for its first fund, and plans to soon begin drawing on the pool of money to back startups based in the state.
Rock River Capital Partners said in a document filed with federal securities regulators last week that the size of its first fund now stands at nearly $23.5 million, up from $21.2 million in June.
Andy Walker, one of two partners managing the fund, says Rock River will likely announce its first investment by the end of the month. He estimates his firm will invest in 12 to 15 startups, all headquartered in Wisconsin, over the next four to five years.
Rock River is part of the Badger Fund of Funds, a program supported in part by the state of Wisconsin that was created to provide capital to early-stage businesses. The structure of the program calls for a combination of public and private dollars to flow into the central Badger Fund and, further downstream, recipient funds like Rock River. Walker says that about $7 million of the total his firm raised for its first fund came from the Badger Fund.
The state of Wisconsin has committed $25 million to the fund-of-funds initiative. The program has so far backed the launch of five recipient funds, which are geographically spread out across the state.
Rock River will likely make an initial investment of $500,000 to $1 million in its portfolio companies, then inject additional capital into some of them in subsequent financing rounds, Walker says. Rock River prefers to be the lead investor in deals it participates in, according to the firm’s website.
Walker says Rock River will likely back startups from a range of industries. But they’re all likely to be businesses developing technologies for new products and services, he says.
“Given my background, I have a bias toward software companies,” he says. “I think venture capital tends to work well in software world.”
Walker has experience as both an entrepreneur and investor. He previously served as CEO of Chicago-based Channel IQ, which was sold to Market Track in 2016 for an undisclosed sum. Walker says he has backed several startups as an individual, or “angel” investor, including Madison, WI-based Fetch Rewards.
Rock River’s other partner is Christopher Eckstrom. Like Walker, he’s a graduate of the University of Wisconsin-Madison who returned to the state in recent years after living in Chicago. Eckstrom has worked at several investment firms in his career, including Australia-based Macquarie Group, where he helped manage a hedge fund.
The tagline on Rock River’s website is “venture capital for the new Midwest.” Because the firm is part of the Badger Fund of Funds, Rock River can only invest in Wisconsin-based companies. However, Rock River is trying to “downplay” that requirement somewhat, Walker says.
One reason is that over the past several years, a handful of venture-backed startups have moved to Wisconsin from other states, Walker says. Many of these companies have cited the state’s Qualified New Business Venture Program as a factor in their relocation decisions. It allows eligible angel investors and venture funds to receive a 25 percent tax credit on investments in startups certified under the program.
Examples of companies that launched elsewhere but now call Wisconsin home include Allergy Amulet, Bright Cellars, and Lumanu. All three participated in 12-week programs run by the startup accelerator Gener8tor in Wisconsin before deciding to move there.
Walker says the chances of getting a company to relocate to Wisconsin are likely better if its founders have already shown they’re willing to spend 12 weeks living and working in the state.
“They’re already in Wisconsin for the accelerator,” he says. “We’d love to offer them a check and ask them to stay, if it makes sense” for both parties.
Still, Walker says he doesn’t envision Rock River “going down to Chicago and pulling companies up” into Wisconsin.
“There’s plenty of capital in Chicago,” he says. “If they can’t raise [money] down there … there’s probably something wrong.”
