BrightStar Wisconsin Foundation has made its first investment of 2016 and has sold $500,000 in “early-stage seed” tax credits to several individuals, the foundation said this week.
Phoenix Nuclear Labs, a Madison, WI-based startup that has developed particle accelerator technology with applications in areas like medical imaging and weapons inspection, is raising a funding round that currently totals more than $1.1 million, says company president Ross Radel. Last month, Phoenix filed a regulatory document showing it had raised more than $790,000 in convertible debt financing. Since then, it tacked on another $325,000, Radel says. The majority of the newest infusion came from Milwaukee-based BrightStar, says Todd Sobotka, the foundation’s portfolio manager.
According to a press release, other funds participating in Phoenix’s current round include Wisconsin Investment Partners; Madison-based Venture Management; Eau Claire, WI-based Chippewa Valley Angel Investment Network; and Knox, a private fund on the East Coast.
Phoenix will use some of the new money to expand its manufacturing and engineering teams, in an effort “to be able to serve the larger clients that we’re bringing in,” Radel says.
Sobotka says BrightStar had long known about Phoenix, in part through the foundation’s dealings with its “sister” company, Shine Medical Technologies. Shine, also of Madison, is aiming to produce a crucial medical radioisotope using Phoenix’s accelerator technology. The two companies were founded by the same scientist, and operate out of a shared facility. BrightStar took part in Shine’s recent $11.5 million bridge round, Shine vice president Katrina Pitas previously told Xconomy.
Despite those connections, Sobotka says that until recently, he didn’t view Phoenix as a potential match for BrightStar, which tends to invest relatively small amounts in younger companies.
“I always just assumed that their capital need was probably going to be beyond BrightStar’s ability to make an impact,” Sobotka says. “When eventually I did sit down and talk to Ross about this fundraise, it made sense for us.”
BrightStar uses an unconventional venture philanthropy model that pumps charitable donations from wealthy individuals and foundations into early-stage businesses that are creating jobs in Wisconsin. Any returns BrightStar nets are cycled back into its fund.
The foundation’s nonprofit status means it is not allowed to use early-stage tax credits earned through the Qualified New Business Venture program, a state initiative that offers a 25 percent tax credit on equity investments made by angel investors and VCs in early-stage companies. However, outside parties can buy credits from an entity like BrightStar, and use them when they file their state taxes.
In 2014, investors in Wisconsin businesses eligible for the program received $12.8 million in tax credits, the highest amount doled out since its inception in 2005. Totals for 2015 have yet to be released.
The group behind the recent purchase of credits from BrightStar was led by Mark Bakken, managing partner of Madison-based HealthX Ventures, Sobotka says.
BrightStar has now injected more than $4 million into 29 companies since it started investing in February 2014, he says.
