BUSINESS

Milwaukee 7 seeks solution to 'Valley of Death' funding issue

Joe Taschler
Milwaukee Journal Sentinel

The Milwaukee 7 economic development partnership has launched a new venture capital catalyst fund to provide capital to growth stage companies caught in the so-called valley of death funding dilemma, the organization said in a statement.

The $1 million fund will be awarded to deserving companies in the form of a tailored loan/grant mix depending on the companies’ circumstances.

"The capital is intended to help put companies into position to attract next stage funding by allowing them to afford critical services," the organization said in the statement.

“We saw a need to directly support high-potential firms that have a great idea and are in the process of taking it to market, but may need some additional funds to get them to the next step,” Pat O’Brien, M7 executive director, said in the statement. “The fund’s intent is to help position companies for additional investment and assist their angel investors by not diluting their position.”

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The "valley of death" is an expression within the start-up world that generally refers to the gap between initial start-up funds and funds needed to help continue the process of a business becoming successful. The amounts of money involved vary across different types of industries.

"For many start-ups, especially those that are in more capital intensive industries, it can be a problem," said Tom Still, president of the Wisconsin Technology Council.

Among those capital intensive market segments are advanced manufacturing, medical devices and biotechnology, Still said.

"Many companies can run into it," Still said. "Many investors will say there is no shortage of money for the right idea ... and that's true, but there's still that gap."

The loan/grant mix will be made in amounts ranging from $50,000 to $125,000. The grant-to-loan ratio will depend on where a business is in its development and sales.

Examples of eligible uses and details of the program include, but are not limited to:

  • Product development or market validation to secure investor funding, new equipment, or marketing and sales assistance.
  • Terms of the M7 Capital Catalyst Fund loans can be tailored to a company’s circumstances — ranging from an equity stake to flexible pay schedules.
  • Priority consideration will be given to advanced manufacturing and technology firms.

The M7 is an economic development organization that covers 7 counties in southeastern Wisconsin.
The M7 economic development organization includes 7 counties in southeast Wisconsin.

“We’re trying to be as flexible as possible to fit the candidates’ needs,” O’Brien said. “Additionally, we aim to position this fund for growth so it can assist more and more young companies in the future.”

The fund comes on line at the same time M7 is launching its “Marshaling Our Resources” initiative. The aim of this initiative is to map out and clarify the region’s complex and sometimes difficult-to-navigate start-up funding landscape.

“This Capital Catalyst fund is just one piece to the funding puzzle,” O’Brien said in the statement. “Entrepreneurs and startups need a clear path to funding and we have a high caliber work group determined to foster greater collaboration amongst our region’s funders.”

An advisory committee is being formed to help identify and recommend candidates for consideration. The committee will include  local business accelerators and start-up support organizations that are poised to assist and support the companies selected.

To learn more about this fund or to apply for funding, visit:  http://mke7.com/Capital-Catalyst.