The statistics hardly need to be rehashed at this point. It’s well documented that Wisconsin has routinely found itself toward the bottom of lists ranking venture capital activity nationally.
In recent years, various efforts have taken aim at that problem in hopes of increasing the flow of VC dollars to the state.
A couple of years ago, Dana Guthrie identified a particular need within the state’s startup ecosystem for pre-revenue investment in the Milwaukee area. She drew that conclusion after reading a 2018 Wisconsin Tech Council report showing that, of the $300 million in VC invested in the state that year, less than 10% went to Milwaukee County and less than 5% of that total made its way to the city.
She saw an opportunity in the state’s most diverse and populous – yet undercapitalized – city.
So, Guthrie, a software engineer and Milwaukee School of Engineering alumna, set out to solve that problem. In 2020, she began raising funds for Gateway Capital Fund, a fund designed to invest in pre-revenue startups in the metro area.
Within eight months, she had exceeded her $10 million target, closing an oversubscribed $13.5 million fundraise – a significant feat for an emerging investor in a city that has proven to be difficult for first-time fund managers to raise capital.
Early commitments from the Greater Milwaukee Foundation and West Bend Mutual Insurance Co. helped build momentum, and Guthrie ultimately assembled a diverse group of limited partners, including corporations, foundations and individual investors. One-third of her limited partners are African American and a fourth of them are women, she said.
She’s bucking trends nationally; only 5% of U.S.-based VC partners are women and 33% of them are women of color, according to Women in VC, an organization that tracks demographics in VC.
“From a personal level, I think it’s significant because representation does matter,” Guthrie told BizTimes in a July interview after reaching her fundraise goal. “So, I think the raise means a lot mostly because it’s a true reflection of everything great about Milwaukee.”
Now, she has begun making investments. Gateway Capital has so far made a $400,000 lead investment in Tip a ScRxipt, a Milwaukee-based fintech startup that helps intermediaries like health care providers and pharmaceutical companies deploy payment assistance programs; and a $400,000 investment in Geno.Me, a Madison-based biotech startup that links genomic and electronic health record data in an open marketplace.
Gateway Captial is industry agnostic. Guthrie noted it’s “pure coincidence” that her first two investments are connected to the health care industry.
“Tip a ScRxipt and Geno.Me have potential to generate great returns. Both are led by strong founders that understand their value proposition and also have ‘customer obsession,’ which is important at the early stages. They’re both going after large market problems, which presents opportunity to scale,” she said.
For her contributions to Milwaukee’s startup ecosystem, Guthrie is the BizTimes Milwaukee Best in Business Community Leader of the Year.
Guthrie worked for 12 years in software product development at Johnson Controls and founded her own angel investment network, Milwaukee-based Alchemy Angel Investors, before launching Gateway Capital. Compared to her previous roles, making investments as a VC fund manager has introduced new challenges related to her decision-making process.
“I’m an engineer, so I’m accustomed to making decisions based on a lot of hard data. In early-stage investing, many of the startups don’t have financial history that help inform the investment decision. So, your decision has to be based on other parameters such as the strength of the founding team. That doesn’t come natural to me. I’m always searching for more data to back my decision, in addition to the conviction that I have for the team,” she said.
In November, Geno.Me founder Britt Gottschalk, a native of Milwaukee, said the company plans to relocate to her hometown – another win for a city that has historically lagged Madison on startup activity metrics.
“I can’t take all the credit for Geno.Me coming to Milwaukee. Britt was raised here, so she already had an affinity to the area,” Guthrie said. “While I believe there’s opportunity already here in Milwaukee, bringing talent to Milwaukee also develops the ecosystem, so I’m open to the concept (of attracting a founder to Milwaukee). The winters don’t make it an easy sell. But I’m not from Milwaukee originally, yet I’ve been here for 15 years now. So, it’s not impossible.”
While Guthrie anticipates the fund generating financial returns, she also expects its investments will produce social returns that promote upward mobility and economic growth in the region.
“Ideally, we’ll have multiple founder success stories, founders of all different backgrounds that are reflective of the market and who will invest back in Milwaukee,” she told BizTimes in July. “That’s the vision.”