State pledges $300,000 to support BrightStar Wisconsin Foundation

Wisconsin Economic Development Corp. would provide operating funds to venture capital vehicle

Wisconsin Economic Development Corp. has pledged $300,000 in operating funds for BrightStar Wisconsin Foundation Inc., a new group that is proposing an unusual plan for raising donations to make venture investments in young state companies.

“The nonprofit BrightStar will provide opportunities for philanthropists to support the growth of Wisconsin entrepreneurs,” said Reed Hall, secretary and chief executive officer of WEDC, the state’s economic development agency. “This is an innovative investment resource to leverage additional private funding dedicated to helping early-stage Wisconsin companies grow and succeed.”

BrightStar plans to send an application in the next few weeks to the Internal Revenue Service to get tax-exempt status. WEDC would provide the money if the foundation got that status, which is critical to the plan for raising funds from wealthy individuals, companies and foundations. Hall has said BrightStar has “a very good chance” of getting approval.

WEDC will have representation on the foundation’s board. As a condition of receiving investments from the fund, WEDC will require companies — for five years after receiving a BrightStar investment — to provide information about employment, salaries and wages, and any other funding they have received.

BrightStar also plans to provide WEDC with information about the investments it makes, said Tom Shannon, who has committed to run the foundation for three years for free. But the foundation hopes to expand beyond the required information and develop indexes to show how well it is performing, he added. One such index might be some sort of “job power index,” Shannon said.

“The main think is we want to know what’s happening with (full-time equivalents) at the end of each year,” he said.

That might not be as simple as it sounds. For example, would it be better to create more jobs with a lower median wage, or fewer jobs with a higher median wage?

“We’d like to monitor a number of inputs over the years and see if we can get some data that makes some sense to help us understand where best to invest for jobs,” Shannon said.

Hall said WEDC was approached in January by Shannon. The agency decided to provide support based on the soundness of the plan, the experience Shannon and the other founding donors have in raising private capital for their own companies, and the amount of time Shannon has volunteered to get the fund established.

BrightStar plans to invest donors’ money in young companies in high-growth, technology-related industries such as information technology, biotech, nanotech, cleantech and medical devices.

Shannon and seven other founding donors have pledged at least $500,000 each, for a total of $6 million, to seed the foundation. They have said they hope to raise at least $60million more over the next three years.

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