How many business ventures can the Idea Fund fund now that it’s been funded by the Badger Fund of Funds?
At least a dozen, Idea Fund of La Crosse managing director and La Crosse native Jonathon Horne hopes as his venture capital firm gets off the ground. Horne, the son of Judge Scott Horne, moved back to La Crosse about a year ago after working as an investment banker with J.P. Morgan in New York City to help grow the amount of venture capital — money that funds high-risk, high-reward startup companies — invested in the region.
Wisconsin struggles with starting new ventures, and the Kauffman Index of Entrepreneurship ranks the state last out of the 25 large states in the nation. While Wisconsin is ranked number two for small business creation, Horne said, the state lags behind the nation and neighboring states such as Minnesota in investing money in new ventures.
“The numbers are really staggering,” he said. “There is a real need for it in the state.”
The Wisconsin Legislature created the Badger Fund of Funds, a privately-managed firm, in 2013 with a public investment of $25 million and more than $10 million in private investment to date. The Idea Fund is one of the first to receive financial backing from the Badger Fund of Funds, along with local support from the Weber family of La Crosse and other investors.
“That is a huge advantage for us,” Horne said. “We get the first look at the backlog of investment opportunities in the state.”
Horne, a 2002 graduate of Central High School, said his company hopes to invest $8 million in up to a dozen companies in the state, with a focus on La Crosse and western Wisconsin. As part of each investment, his firm will take an equity position with the company, becoming minority owners and providing around $300,000 to $500,000 in startup cash and potentially additional funding later.
The Idea Fund will invest in new companies in their early stages, Horne said, and will focus on novel ideas, technologies and products, such as engineering and software design. These kinds of companies are small slivers of the economy, he said, but will generate lots of high-paying jobs for their communities and, he hopes, large returns for investors.
Young companies can be risky investments. Half such investments are total losses. But, Horne said, the one or two that are really successful can drive return on investment when the fund’s stake in the company is sold after three to five years.
“The biggest risk is we never sell that stock and lose the investment,” Horne said. “We can’t predict or promise anything.”
Despite the risks, Horne said, he was excited about the opportunities his fund will provide entrepreneurs. Horne said his firm is reviewing two dozen companies that have made the fund’s initial cut for potential investment.
“This is the lifeblood of entrepreneurship,” he said. “This is what keeps the economy vibrant.”