cc  >> Welcome to Entrepreneurialism  in Society, a course offered  though the University of  Wisconsin School of Human  Ecology.  As we begin, I'd like to extend  thanks to our partners in  supporting this course, the UW  Office of Corporate Relations,  the UW College of Engineering  for their technical support, and  financial support provided  through the Ewing Marion  Kauffman Foundation, which is  committed to advancing academic  education in entrepreneurialism.  Additionally, we'd like to thank  our media partners, Wisconsin  Public Television, and their  University Place crew for taping  today's lecture.  Today, I'm very pleased to  welcome Tom Still, president of  the Wisconsin Technology Council  and the Wisconsin Innovation  Network.  Tom is the former associate  editor of the Wisconsin State  Journal in Madison.  He serves on the Board of  Directors for the Wisconsin  Security Research Consortium and  the We the People Wisconsin,  UW-Extension Board of Visitors,  the UW-Madison College of  Engineering, Industrial Advisory  Board, and the WiSys Technology  Foundation Advisory Board, among  many other civic and business  groups.  Tom writes a syndicated column  that appears regularly in 24  different publications.  He is also a lecturer here at  UW-Madison in the College of  Agriculture and Life Sciences.  And he's the co-author of  Hands-On Environmentalism,  published by Encounter Books in  New York.  Now, I've asked Tom to come and  speak with us about how  entrepreneurs can actually get  their great ideas funded. 

 So with that, please join me in  welcoming Tom Still.  (applause)  >> Well, thank you, Jeanan, and  good to see you all here today.  I'm going to run through a  presentation about the kinds of  opportunities that are out there  for financing start-ups.  At the end, I hope we get some  time for questions.  And we'll just try to dig in a  little deeper into it.  So, main sources of start-up  capital.  Some of these you've heard of,  perhaps, some you haven't.  The early stage capital market,  and we'll delve into that  throughout this presentation,  is a variety of things.  Individual angel investors, a  term I'll explain more about.  Angel networks, early stage  funds, and some early stage  venture funds. 

 Later-stage capital market,  which includes venture capital,  which is a phrase probably  you've heard of a little more  than others.  Initial public offerings, which  is down the food chain a bit.  That's after companies have  really acquired venture, on  almost every occasion.  Small business innovation  research grants, which are a  particular type of federal  research grant, which are  available to researchers in  industry partnership.  Small business administration  loans.  And finally, the most tried and  true financing mechanism of all,  which is actually make some  sales, which is something not  all entrepreneurs seem to  understand.  But it's really the most  important thing, and an  underpinning for all the other  things that have to happen.  So what's going on in  Wisconsin's early stage  investment scene?  In Wisconsin, more investors are  getting involved, and kind of  off the sidelines, taking money  that perhaps was in other venues  and putting it into this world.  Six angel networks in the state  in 2004.  We're up to 22 today, and I'll  tell you more about that in  terms of our Wisconsin angel  network, which we run. 

 There's more interest about  what's going on in Wisconsin.  We've been able to, through one  of the conferences that we run,  the Early Stage Symposium, to  help attract investors from not  only this state, but around the  region.  We're getting more coverage,  more notice, about what are the  tech based opportunities, the  entrepreneurial opportunities in  Wisconsin, in some national  publications.  And we're doing a better job  with our neighbors, Illinois,  Minnesota, and in some cases  Iowa, Michigan and Indiana,  where we'll be able to share  some deals and try to make those  available in a broader sort of  landscape.  Most importantly, we're trying  to adapt to a changing market.  It hasn't been the best economy  in the last year and a half, as  many of you know.  And so, the kinds of things we  can do with investors at this  level and many others, is very  important.  So this is a graphic  representation of the different  financing sources at different  levels of the idea.  Across the top here is,  Discovery, Proof of Concept,  Product Design, Product  Development, all the way to Mass  Manufacturing.  And then the company can be at  the Idea stage, Pre-seed  Funding, Seed Funding, Start-up  Funding, and then Growth or  Mezzanine. 

 The idea stage, the first money  in is usually from founders, the  people who actually have the  idea.  That's not unusual at all.  In fact, it's really that the  first investor in your own  company is going to be you.  Friends and family.  They quickly follow suit.  These are folks that you know  well.  They know you.  They trust your judgment.  They trust your ability to get  things done.  They're willing to put a stake  in you as an individual, often  with maybe not being an expert  on your idea, or an expert on  the technology, or whatever else  it is. 

 But they're folks who know and  trust you.  Also at that early stage,  especially if it's a tech-based  idea, that's where, you know,  even a little past that phase,  small business innovation  research grants, which are  available through at this point,  11 different federal agencies,  can be, are an important part of  the mix.  Now, this is a program that's  been around now for 35 years.  It was created in the hope that  it was going to spur small  business growth, and it has.  Some of the best ideas that you  see going on today across  America are companies that were  initially founded with one of  these grants.  You know, a good example is  National Institutes of Health  has a number of these grants.  The Department of Energy.  There are many other departments  you wouldn't think of.  It's often tied to some kind of  a campus based idea, but trying  to make the leap into the  private sector.  Debt. 

 Most banks, frankly, will not  finance entrepreneurial  ventures.  They want something to secure  the debt, other than the fact  that there's a great idea.  They're going to look ahead at,  you know, what are the kinds of  assets we can collect on, if  this business goes south.  And so, most banks will not do  that, with the exception of  acting as guarantors in the SBA  small business loan process.  There are a couple of different  major small business  administration loans that are  available.  And a lot of them are done every  year, every month, in Wisconsin.  That's the main way that banks  get involved.  But otherwise, they're a little  cautious.  They're into debt financing.  Most of what we're going to talk  about today is equity financing. 

 Money that you might get for  your company to start it up, but  the promise is, the return to  the investors a share of that  company moving forward.  And so, they're going to share  in the profits downstream,  several years in some cases,  three, five, seven years, as  opposed to having some kind of  investment based on assets that  already exist.  Individual angels.  Anybody here know where the term  angel investor comes from?  It's from a phrase that was  actually used at the turn of the  century to describe investors  who sort of took a chance on  Broadway plays.  In the theater world in New York  at the time, they were known as  angels.  Now, where that came from, I'm  not exactly sure.  But that's where it originated  in terms of this century, and  this time, this connection to  today's angel financing.  Angels are high network  individuals.  They're rich people.  They are people who have some  money that they can invest in  some kind of a business venture  that they think is worthwhile. 

 Now oftentimes, they are people  who have some expertise in that  business sector already.  They are people who are willing  to take a chance, but they also  want to be a part of guiding  that company.  They provide some important  mentor opportunities.  And they usually stick pretty  close to home.  Most angels that we see, at  least on the individual side,  are unlikely to invest more than  hour from home, simply because  then it starts to be  inconvenient and gets to be like  work.  So you know, in terms of that's  where the individual angels are.  That happens somewhere at this  point.  After founders, family, friends,  maybe an SBA loan, maybe some  SBIR, and the technology is  starting to bear itself out,  you're starting to move into  that proof of concept stage.  That's where individual angels  get involved.  Angel groups are collections of  angels. 

 That can come in a lot of  different forms.  They can be, you know, we have  angel groups in this state that  are no more than four or five  individuals.  We have angel groups in this  state that are 80 to 90  individuals, who are together  collectively under some kind of  a network.  So angel groups, and that's  where we do a lot of our work,  that's the part that's growing  in this state, from six in 2004  to 22 today.  And they're found in a lot of  different places around the  state.  I'll show you a map in a little  bit.  Early stage funds.  These operate, in some ways,  very much like angel networks,  except in terms of how they're  governed.  A fund, for this purpose, is a  regulated financial security,  whereas angel networks are not.  Angel networks are not filling  out paperwork for the Securities  Exchange Commission, but funds  are. 

 That's one of the important  distinctions there.  Now, funds may have a lot more,  the early stage funds may have a  lot more capital at their  discretion, as well.  You know, these funds may be as  much as, oh, the ones I'm  familiar with around here are  anywhere from $10 million to $30  million, total funds that they  have available for investment.  Not that they would invest all  that in one company.  They're going to spread their  bets.  But usually, that's more than  what you might see in a typical  angel network, in terms of  capital available.  And then venture funds.  Those are sort of the heavy  hitters of the private equity  world, and the people who really  move the best of the early stage  companies onto the next level.  There are, I mentioned there are  22 angel networks in Wisconsin.  Far fewer venture capital  companies. 

 Less than a handful, actually.  They operate at a different  level.  They basically don't get  involved unless it's an  investment of $5 million and up.  That's basically where they  start these days.  They tend to operate more in  specific sectors.  Sometimes they'll have a  specialty in healthcare.  Sometimes it's in IT.  Sometimes it's in advanced  manufacturing or nano, where  they tend to hire the kind of  people who can manage those  funds, drill down into the  technology, and make the  connections that are necessary  in order to push that company  along.  So venture funds.  I'll give you a little more  about that in a bit, as well. 

 Further up the food chain.  When really, the company is  growing, and it's growing at a  rapid rate, that's when you get  back into institutional equity.  Large funds, maybe insurance  companies are a good example,  may want to take part in the  financing of the company.  And bonds, those are the kinds  of vehicles that are going to  really move that company ahead  in its growth path.  But much of what I think you're  concerned about is probably in  this section.  The early stage part of the  company, where all these folks  are involved.  This is very much the later  stage.  Now it so happens, we do a lot  of our work with all these kinds  of groups, where we find a  funding gap right now, is  somewhere between the founders,  family and friends, individual  angels, sort of area and before  you get heavily into the venture  side.  There's a gap of $1 million to  $5 million, where we see a lot  of companies looking for  financing these days.  And it's a little tougher right  now, I'm not going to kid you on  that, simply because of the  economy and kind of what it's  done to company valuations, what  it's done on the upper end of  this food chain in terms of  where the VCs and others get  their money. 

 But that's sort of the sweet  spot, as we see it, where  companies have really got to  focus their efforts these days.  So, as I mentioned at the  outset, we run the Wisconsin  Angel Network.  And it was formed in January  2005, to push this along, to  help fuel the growth of early  stage financing throughout the  state, but in particular,  through angel networks,  individual angels and angel  funds, those who are a little  bit toward the lower end of that  early stage continuum.  It serves as an umbrella for a  lot of activities that we do  through the Tech Council and our  other affiliated organizations.  The Angel Network does not run a  fund, at least we don't at this  point.  We're not there making those  investments ourselves.  But we're trying to bring people  together who can make those  investments.  And we're trying to put the good  deals in front of people.  This is a chart that basically  shows some of our connections.  The Angel Network is part of the  Tech Council. 

 We get support from state  agencies, and our own  organizations, but also a number  of private sponsors.  So it operates in a space that,  because we're nonprofit, it's  also nonprofit.  And it helps set it up as a  neutral player in terms of the  angel networks around the state  and how they view us.  They know that we're not  competing with them for deals.  We're helping to facilitate  deals.  The kinds of things the angel  network does.  One of the more innovative  things at the outset, is we put  together an online deal flow  pipeline.  So let's say Lauren here has a  company, and you've got an  executive summary on it, a  thousand words, we've got this  template.  You would file that summary on  our pipeline.  And then investors, who are  accredited investors, meaning we  know they're for real, and there  are a variety of parameters to  know they're for real. 

 They would be able to look at  your deal online.  Now in the past, let's say you  lived in Wausau.  You might know one angel  investor somewhere in Marathon  County, but you might not.  But this provides exposure  around the state and a little  bit beyond, for 250 accredited  investors, who at least we make  it available to them.  They take a look, and decide for  themselves whether they want to  come talk to you some more or  not.  Now, more often than not, the  answer is they don't want to.  Maybe it's not their specialty.  Maybe it's out of what they feel  is their geographic area.  Whatever.  But we have seen deals come  together, increasingly so,  because angels in different  parts of the state all take an  interest in a deal, and then  say, well gosh, if I put in you  know, $200,000 and you guys put  in $300,000, and the network  over here in Milwaukee puts in  another $500,000, hey, we're up  to a million. 

 We may be able to make this  thing go.  And so we've been able to  facilitate that kind of piece  and it's worked on many  occasions.  So we help them organize  networks, we just organized one  in the Ashland area, Ashland to  Superior, Duluth, and over a  little bit into upper Michigan,  a number of high-network  individuals there, who wanted to  start a network.  We help and educate investors,  now, you'd think they all know  what they're doing about how to  get into a deal, what the  pitfalls are, how to structure a  deal, what's a term sheet look  like.  Not really.  Not necessarily.  And so we help there in terms of  sharing that kind of knowledge.  Communications, we do a lot to  really talk about it, promote  early-stage investing as a  driving force in today's  economy.  You know, historically, two  thirds of all jobs in the United  States have been created by  small business.  That's been the pattern for a  long time, I predict it's gonna  be the pattern well into your  careers. 

 And so, where do those small  businesses get the money to  start up?  Talking from this sector.  We get some other resources that  we can use too, to allow them to  communicate with investors far  outside Wisconsin.  So the Angel market and the VC  market, and these are 2007  figures, I sort of view them as  the interlocking pyramids.  Angel tends to be mostly early  stage, these are national  figures.  57,000 deals, about 23 billion,  throughout the country.  VC's are mostly later stage, a  smaller number of deals, but a  bigger amount of money.  They're putting more capital to  work, at risk, but farther down  the evolutionary chain.  You can see here they have some,  they have early stage deals in  that venture triangle, but it's  not the biggest part.  They're usually kind of at that  mid-level deal.  In Wisconsin, in '07, we had  $147 million in what we  characterize as early stage  investments. 

 That was up 43% over '06 and up  a similar percentage of '05.  We really felt like we turned  the corner in those couple of  years.  Network investing, as a portion  of that was up 57%.  We far exceeded the national  average which was estimated at  2% for that year, and I think  it's because really a lot of  things happened to pull money  off the sidelines in Wisconsin.  It was always here but it wasn't  necessarily aimed in the right  direction.  Investors didn't necessarily  know where to go, and so that's  one of the changes that  happened.  Venture capital investment, $90  million that year, that was up  again considerably from '06.  Still well behind the US  average, I'll show you more  about that in a minute.  IPOs, initial public offerings,  this is when a company goes  public, when it offers its stock  for public purchase.  Could be on the New York stock  exchange, could be on the NASDAQ  or other exchanges, but that's  what it means when you hear the  phrase "IPO. 

 " It's to go public.  The most activity we've seen in  ten years in '07.  And because of what's happening  in the economy, '08, '09, you're  not going to see much of that.  Very few companies are going  public right now.  Small business innovation and  research awards increased by 10%  that year, that was good but we  could still do a lot better.  And SBA loans are now available  under some new terms, and I've  got a slide for that, too.  So how does that break down?  A lot in the life sciences,  which really isn't all that  surprising when you look at  Wisconsin's research makeup and  the kinds of companies that have  been created here over time.  We're a pretty good state when  it comes to bio-tech.  Pretty good when we come to  medical devices, and so it's not  surprising that with that kind  of expertise you'll see more  endorsement there.  This particular campus, UW  Madison, is the number two  campus in the country in  academic R&D, in terms of how  much is spent, raised and spent  on this campus for research. 

 The last figures we had, which  were for the '07 federal fiscal  year, about $910 million in  academic R&D here.  The only university that was  better was Johns Hopkins  University in Baltimore.  And then the company we keep is  University of California San  Diego, University of California  San Francisco, some other Big  Ten schools.  And now you're gonna say, what  about Harvard?  What about MIT?  Yeah, they're up there, but not  actually in the top ten.  They're in the second tier.  And so despite some of the  reputational things you'll hear  about some of those campuses, we  actually do more research here  than either one of the big two  out of Boston.  So the average deal size that  year was $4 million.  By the way, the energy sector  really spiked up that year.  And that followed a trend that  you saw in national venture  capital investment as well and  went from about 3% of total  deals to 14% of total deals,  basically inside of a year.  And so that was reflecting on  Wisconsin as well. 

 Again, we have the kind of  expertise to get that done.  And we have the kinds of raw  materials that are a part of it.  So you look, the rest of this  talks about the average deal  size, but about $4 million in  venture was the average size  here, which is pretty close to  what you see nationally.  A little lower here than the  national average, probably  closer to five.  This is basically that same  breakdown, but it shows life  sciences, biotech and energy  were right at the top of the  list.  And then within the Angel  network, that inside network  deals again, up 57%, average  deal size $275,000, which gives  you an idea, it's really at the  start up level where they play.  Co-investing is increasing.  And that's one of the things  we've been able to accomplish  through the Angel network and  through some other things we do  with investors in other states.  This shows kind of a  representative graph of sort of  that hockey stick curve that  we're seeing in Angel network  investing.  And this shows where the  networks are. 

 You can add one right now up in  Douglas and Bayfield and that  area, which is the first  northern Wisconsin angel  network, true north that we've  been able to launch.  But here's where the rest of  them are situated.  You see there's a lot in  Milwaukee, a lot here, but there  is a band across central  Wisconsin that's of some  significance and I think they're  gonna continue to be a big part  of the economic growth in those  regions.  Venture capital, I mentioned $90  million, 21 deals.  $4 million average size, going  up.  One venture firm that really  plays the most in the early  stage phase is Venture Investors  LLC which is here in Madison.  They in 2006 raised $117 million  fund, which at the time was the  largest early stage Midwest fund  ever created.  And they continue to invest  that, they're probably halfway  through investing it, they're  gonna continue to do so through  this year.  And I think by 2010, 2011,  they're gonna be out raising  another new fund.  But they've been a part of some  of the really signature  companies that you hear of  around here. 

 Tumble Therapy, Third Wave  Technologies, Nimble Gym, now  Selectar.  So they've been a very active  and successful fund and one of  their principles, John Nice, he  shows up among those leading  investors in America kind of  things that you see from time to  time.  Here are venture capital  investments in Wisconsin.  It's up but not as much up as we  would like, and in fact we  thought we were about to turn  the corner on this and then the  whole economy came crashing  down, so we'll see if that  delays what we're doing or  whether or not it kills momentum  for a longer period of time.  We hope not because we still see  significant interest from VCs in  the state.  From other states because they  know that we have more deals  here that are kind of untouched  and they may see some of their  hunting grounds.  Why are VCs important?  Good examples here of companies  that began as VC financed  companies, and just the techs  base alone, I think there are a  variety of others like Home  Depot that really had nothing to  do with tech but they were  financed through venture  capital.  Huge job creator, really  disproportionate when you look  at the amount of jobs, the  amount of revenue, what they're  bringing to the economy in terms  of renewing the economy on a  continuing basis, is very  important.  And here's one that shows you  why, in my estimation, we're not  doing as well in venture as I'd  like to see.  We're ranked 20th in population,  and we're 13th in R&D spending,  we're 17th in patents, so you  know, we've got the intellectual  property here. 

 But we're down a ways in VC  investment measured as either  capital under management or  investment, number of companies.  These figures, we're a fraction  of the US average, granted that  the US average is driven way  high by what goes on in  California and Massachusetts,  just to cite two leading states.  But still, even if you took  those out, we don't do as well  as Minnesota on venture capital  right now.  I think we can catch them, and  certainly we have more Angel  activity now than Minnesota  does, but I think Minnesota is a  great example of a state that's  been able to break easily into  the top ten nationally in  venture capital and especially  around what they've done in  their medical device industry  there.  SBIR, again this is the federal  small business grants, and you  can see that a number of  companies do try to take  advantage of that and often they  do have some kind of ties into  an academic institution but also  in terms of the start up  company.  Initial public offerings, I  talked a little bit about this  before, but one thing I didn't  mention is it's an important  exit event.  How do investors get their money  out?  Well, they can get it out  through an acquisition where a  larger company buys that  company, they can get it out  through a public event, such as  this, where the stock is offered  and other investors come in and  those initial investors are paid  off, either in cash or in stock.  So this is an important part of  that evolution and why it's  rather disruptive right now that  there are now IPOs going on.  Because if that pipeline is shut  off, how are current, today's  investors going to get their  money back?  If IPOs are really at this point  just not a real thing, not  something that's gonna happen.  But traditionally they have been  a big part of the mix. 

 That particular year was a good  one, and it was, gosh, if you  counted everything that went on  that year, it was pretty close  to a billion.  SBA loans.  The average kind of the last  three years ending in September  of '08, that's when the crash  began, was pretty strong in  terms of the number of loans  that were made in Wisconsin,  that's a Wisconsin-only figure,  per month, SBA loans around the  state, $35 million.  It's dropped now since then to  about $20 million per month, and  in fact the latest month for  which there are complete records  is only about $13 million.  Last week, President Obama, as  part of the stimulus package,  announced that there were some  rules to increase loan  guarantees on the biggest SBA  loan program, that's the 7(a)   loan program, and eliminate  these in another major form of  lending.  So we'll see what that does in  Wisconsin, because I know a lot  of entrepreneurs were worried  these SBA loans were just  getting harder and harder to  find, because again, you still  have to find a bank that's  willing to do it.  And so banks, if they're not  lending, that's an issue.  But with these better-guarantees  and with the fees being at least  temporarily waived, we'll see  what happens, whether this does  provide that stimulus effect  that everyone hopes.  The number one mission from the  outset?  Sales.  All too often we see  entrepreneurial companies that  are, perhaps, led on the  scientists' side, which is  great, because that's where a  lot of the good ideas are gonna  come from, but they don't  necessarily make that transition  into the, "Oh my gosh, we have  to have a product and service"  side. 

 And so this is where in a very  early stage most companies  should bring in someone, if they  don't have that themselves,  who's a part of the team, who's  gonna build their business  model.  Tell them how to identify the  markets, how to really target  those sales, how to go out and  actually make the sales.  All too important, investors  need to see that as they're  going ahead and investors, they  look at a company's evaluation,  that's driven by how the sales  are going.  Sales allow you to attract and  retain those good people.  So it's all part of the formula,  no matter what stage, whether at  the founder's stage or even in  the mezzanine financing stage,  sales are a big part of the  formula.  Summary.  A lot of things have been  working, we're seeing a lot of  people in different service  sectors get involved, try to  help with training, guidance,  mentoring.  There was just a meeting across  the hall from our office today,  something call the Merlin  network in Madison, which is  experienced entrepreneurs who  are trying to mentor those  companies who are kind of coming  up through the ranks today.  Those kinds of things are  working.  Wisconsin now has more of an  infrastructure in this area than  it ever had. 

 If you look at the state's  entrepreneurial ranking over  time and maybe you have  throughout the course of this  class, it hasn't been all that  great.  Mainly because we've been a big  company state with a lot of  companies that were doing well,  really, until starting in about  2000, the most recent downturn  hit them again, that frankly  they were kind of fat and sassy.  They had been strong companies,  a big part of Wisconsin for  decades.  But all those companies began as  entrepreneurial companies  somewhere in their background,  there was a Mr. Harley, there  was a Mr. Davidson.  Kohler, and on and on.  There was a Sam Johnson.  So those kind of companies have  roots in Wisconsin, they're part  of the tradition, we just need  to get back to it and some of  this infrastructure's been  created in the last five to ten  years to help.  We're gonna have to keep  innovating; one of the things we  do is point out to the  legislature the importance of  some mechanisms, especially  around targeted tax credits that  help investors get involved, it  helps mitigate a little of the  risk that they take, and can  push them over an edge in a  close deal.  Those are some of the ideas that  we've talked about specifically,  and in fact, this was passed  also in January '05, and it's  helped a lot.  A great deal, and in fact the  governor, at the urging of a  number of groups, signed a bill  in February that expanded this,  moving ahead. 

 It was gonna expire in 2011,  it's moved it out another five  years, so it's been interesting  that the model here has been  very private-sector oriented.  The amount of state investment  is actually quite minimal,  especially when you look at what  the state gets back in tax  revenues.  A lot of other states have taken  a look at this, it's called the  ACT 255 tax credits and it's  something that will remain in  place in Wisconsin.  So back to this chart, I thought  I'd leave this up here for  discussion purposes, because it  does show all these different  kinds of stages, as well as  vehicles for financing.  So with that, I'm gonna leave it  right there, but then we'll be  open for questions.  >> Sounds good, so we can open  it up for questions, and just  put your hand up if you have any  regarding financing your  entrepreneurial efforts or those  that you're aware of.  A couple of questions that I'll  just throw out there, Tom.  The Wisconsin Angel network.  How would I access the Wisconsin  Angel network if I were a young  person or an old person with an  entrepreneurial idea and wanted  to be heard?  >> Sure.  The main way, in terms of  starting to learn more, is  through the website, which is  just wisconsinangelnetwork.com,  or you can go to our  Wisconsin technology site,  wisconsintechnologycouncil.com  and find it there. 

 That's a starting point, of  course, and there you'll see  there are different sort of  parts of the site for investors  and for entrepreneurs.  And for the entrepreneurs, the  first thing you ought to do is  create an account.  Start building that executive  summary online so that they can  begin to bring that to the  attention of the investors.  There are a lot of tools on that  site to help you do so.  We have videos from investors  and entrepreneurs, we have a  how-to guide there, we broke it  down into the main areas that  investors care about, and it's  really all about helping them  build the business plan.  Something I didn't mention  today, we run the governor's  business plan contest, this year  we had entries from 326  entrepreneurs around the state  and they, in essence, start by  building the kind of things that  are going to be on the Angel  network anyway.  So it's a good starting point,  especially when you're thinking  about, how do I get on track,  what are the basics?  >> Is there a cost associated  with that?  >> No.  Not to go on and create an  account.  There are costs for some of the  additional services that we  provide.  What we call an "e-plan" for  example is a taping that has  been reduced to a CD, and that's  an investors presentation that,  that way they can greatly expand  their reach. 

 There's a few other things, but  entering the business plan  contest, creating an  entrepreneur's account on the  Angel network, that's all free.  >> And then, from a standpoint  of creating an account and  starting to create that business  plan and that 1,000 word  executive summary as you were  describing, what might one  expect the process to continue  to look like?  And I'll ask it kind of in this  way, too.  If I'm the entrepreneur, am I  putting that information on  there to seek an Angel, or are  the Angels going on there to  look at ideas that they care to  invest in?  Or both?  >> I think it's a little bit of  both, but it's more a case of  having a really good executive  summary available for Angels who  are shopping in that sector.  Let's say your plan has to do  with software.  You've got an idea around  software, somehow.  Not all Angel networks will look  at software, but it's available  to all of them, and we have it  set up on our website that, if  you file your plan, it generates  an email to those investors who  we know, because they told us  so, they want to see new plans  around software.  So it's a little bit about the  process of making yourself  available to a broader realm of  investors than what you might  find around the block.  Joe Cramer who runs our Angel  network is an entrepreneur, he's  been a part of two start-up  companies himself, he raised  about $4 million for those two  companies.  He said, when he started, he  incidentally heard of someone  who might be an Angel investor,  you know, he was just camped  out under a doorstep to try  to get in.  And it wasn't really an  efficient way. 

 Oftentimes he'd camp out and  find out the investor wasn't  interested in the kind of  companies he had.  In this case it happened to be  advanced manufacturing.  So this opens up the realm of  opportunities, and it is up to  Angels whether they want to  contact someone.  It's not the only tool.  A lot of these Angels are not  going to spend a lot of time on  a website, but, if it's on  there, and we can point them to  it, and these individuals also  get involved in some of the  events we do, where they can  present to a wide audience,  that's an effective part of this  process, too.  At our early stage symposium in  Madison last year, we had 38  companies present over two days.  That was a juried process,  almost all of them were  companies that were on the Angel  network site who were selected  for one reason or another,  basically, we just thought they  were ready, for different levels  of investors, either venture or  Angel.  >> Hi.  You talked a lot about sales  driving funds and funding.  What would you say to nonprofits  that may not have a product or  service to sell?  >> I would think most nonprofits  are not going to be going after  equity financing, for starters,  because those people are looking  for a return on investment. 

 By definition, they would not  see the kind of return, at least  in any kind of percentage terms  that they would like, on a  nonprofit.  Nonprofit financing is a  different beast.  A lot of that is built around  grants.  I mean, we're a nonprofit, and I  can tell you how we finance  ourselves, and it's through  grants, contracts, and  generally, I'd call it earned  income from a variety of things  like conference sponsorships,  registration fees, services that  we provide, all those things add  into the mix.  But we would not find a private  equity investor who would be  interested in us, simply because  our return, it is what it is.  So it's a different beast, but I  think early on a nonprofit,  founders, friends, family,  certainly the possibility of SBA  loans.  I think those could all be part  of the mix, but beyond that, a  lot of it is sales.  When we launched the tech  council, let's see, we were  probably two thirds state  funded, and now we've turned  that around and we're one third  and everything else is private.  So we've constantly driven  towards that sales side.  I think Lauren had a question. 

 >> Yes, I do.  Now, this is only for Wisconsin.  Do other states have similar  programs and is there a national  database that goes beyond the  states?  >> Great question.  Let me start from the bottom of  the left-hand side of this  slide.  SBIR is a national program.  SBA loans, which is a big debt  vehicle is a national program,  so those are two big ones.  Founders, friends, and family,  everybody's got 'em.  Right?  Angels and Angel groups in early  stage funds tend to vary quite a  bit state to state.  There aren't many states that  have what we have in the  Wisconsin Angel network,  although some do.  Every place that I know of has  individual Angels. 

 But, gosh, it's sort of one of  the last refuges of  individualism in investing, they  vary so much state to state, the  flavor of what they want to  invest in is so different.  Angel groups tend to have  congregated on the coast.  We have more than most states,  especially of our size, probably  far more.  So, and then venture funds tend  to congregate on both coasts as  well.  And that's where, as I noted, we  need to do a little better job.  In the Midwest, the people in  Illinois, and we know this  because we hear from their  investors, tell us, gosh, they  wish they had our  infrastructure.  People in Minnesota say, gosh,  wish we had your Angels.  We say, gosh, wish we had your  VCs.  So it does vary.  >> Tom, we heard from Sonya  Newenhouse earlier, and she  talked a lot about how she, at a  very young age, really very  similarly to these students, was  able to purchase property and  then invest in it wisely, which  eventually allowed her to  leverage the equity on that  property to purchase additional  space that would enable her  business to grow and things on  that line. 

 It made me wonder in context  with what you're talking about,  how much one should expect to  invest of their own assets and  how savvy it is to do that,  especially a kind of  debt-to-ratio concept.  Are you able to address that?  It seems a little dangerous to  me to invest all of what you  have in your business.  Is there a way of avoiding  losing what you have by kind of  hitting some of these other  places?  >> Sure.  Yeah, I think that there are,  you know, I've heard figures  that are different ratios  depending on the sector, life  science or IT or whatever.  I think everybody would tell you  that sweat equity, the more you  put into that versus actual cash  equity is a good thing.  However, when you go to  individual Angels it can be  tough to value that as part of a  company's valuation.  I don't know if there's a magic  number there, but I guess I can  say you want to invest up to the  point where you think it's  starting to hurt, as an  individual.  Where you don't want to make the  pain so much that you really  can't survive and see your way  to the end, but you want to have  enough in there, and investors  want to see that, too, to  convince yourself that you're  serious and to convince others  that you're serious.  I know that when entrepreneurs  seek Angel investment, they  rarely want to give up more than  a third of the company,  somewhere in that range, in  return for the investment, but  that depends on the valuation as  well.  I've seen it range from 20% to  above 50%. 

 >> I'm curious if you want to  talk a little bit about  membership in the Wisconsin  Innovation Network, or, I don't  know that Wisconsin Technology  Council makes as much sense for  this group, but just talk about  that briefly, so that they can  understand what the benefits  would be.  >> Sure.  The tech council itself is  actually just a board.  A really big board, we've got 45  members, and they come from  different sectors around the  state.  Some of the VCs I mentioned,  some of the Angel investors,  tech companies, some services  companies have worked with them,  they're all members.  Our membership chapter, which  can involve folks like yourself,  others who are engaged in  start-up is Wisconsin Innovation  Network.  Our individual memberships are  100 bucks, and I think we have a  student membership as well.  And what that gets you, frankly,  is reduced rates into a lot of  these different events that we  host, where you get to meet the  investors and others, and do a  lot of networking, which I think  is important for entrepreneurs  to meet others like themselves  and see that they're not the  only ones in the world who are  pushing --.  And also, access to a variety of  publications that we put out.  They can be pretty educational. 

 >> Good.  Well, certainly we want to thank  you for being with us today, and  this will just be a little thank  you for you, and please join me  in thanking Tom Still.  >> Thank you.  (applause)