Kegonsa Seed Fund

About the Kegonsa Seed Fund

Introduction

Kegonsa Seed Fund I, LP (the "Fund") is Wisconsin's premier seed venture capital fund.

The Fund is a private equity limited partnership with over $10 million of committed capital. It is managed by Kegonsa Capital Partners, LLC, a Wisconsin-based venture capital management firm.

On January 15, 2010, the Fund ended its investment period, having achieved the goal of investing in 12 new companies (all told, the Fund invested in 13 different companies). The Fund's focus is now on helping its portfolio companies succeed through continuing investments and management.

Fund History

The Fund had its first closing April 28, 2004 and its final closing January 15, 2005. The Fund's committed capital is $10.725 million ($10,725,000). Managing director Ken Johnson is among 42 individual investors of the Fund. Johnson has committed $500,000 as an investor to the Fund.

In October 2007, the Fund experienced its first liquidity event when Jellyfish.com, a Fund portfolio company, was purchased for cash by Microsoft. This exit provided a return to Limited Partners of 15 times the Fund's initial investment.

In May 2012, the Fund experienced its second liquidity event when Intelligent BioSystems, Inc, a Fund portfolio company, was purchased by QIAGEN. The exit provided a return of over three times the Fund's initial investment.

The Fund's investment period ended January 15, 2010. To date, two of the 13 portfolio companies have failed and have been dissolved. Two portfolio companies have experienced an exit; one company completed a stock redemption repurchasing the Fund's stock; and eight companies are ongoing.

Investment Focus

During the investment period, the Fund's investment focus was on being the first investor in new companies led by experienced entrepreneurs/managers with a track record of successfully growing and selling a business.

Of the Fund's thirteen portfolio company investments, eight were seed investments, two were Series A investments, and three were prior to the seed round (the Fund started the company with an inventor and invested as a founder). The average initial seed investment for the Fund was approximately $625,000.

Investment Criteria

During the investment period, a primary investment criterion for the Fund was the experience of the entrepreneur in successfully growing and selling a business. Most of the founders of the Fund's portfolio companies have had previous exit experience. In addition, company founders typically made a financial commitment side-by-side with the Fund in the seed round investment. They are fully committed and passionate for their company's product.

In a number of cases, the entrepreneur is not the business manager but the product inventor. In these instances, the Fund and the inventor/founder together recruited management. In most cases, the selected business managers had entrepreneurial and exit experience.

In approximately 25 percent of the Fund's portfolio companies, Kegonsa Capital Partners obtained rights to a novel product, recruited a management team, and formed a new company. This is in addition to the Fund's participation in the company's initial capitalization.

The Fund's investments were not technology- or product-focused; the focus was on the seed investment segment. The Fund invested in biotech companies, pharmaceutical product companies, medical device companies, Web 2.0 companies, and Internet companies—all as seed investments, all with passionate entrepreneurs.

Investment Period Closed

The Kegonsa Seed Fund I has completed its investment period; the Fund is no longer making investments in new portfolio companies.

The Fund's focus is on helping current portfolio companies succeed through continuing investments and commitments.

Facts and Figures

  • From 2005 to 2009, the Fund invested in 13 portfolio companies.
  • The average seed investment in each portfolio company was approximately $600,000.
  • Fund portfolio companies have raised $31 million in investment offerings from the Fund's inception to July 1, 2012.
  • Two Fund portfolio companies have been acquired, proviging the return of all investment capital to the Fund's Limited Partners.
  • Two Fund portfolio companies have failed and been dissolved.
  • Eight Fund portfolio companies are still in operation as of July 1, 2012.
  • The Fund's annual internal rate of return from inception to July 1, 2012 is 27 percent.
  • The Fund was the only Wisconsin fund named to Entrepreneur Magazine's Top 100 Venture Capital list in 2007.
  • Only 16 percent of the Fund's management fee is allocated to compensation and benefits for the managing director and Kegonsa Capital Partners employees. The remaining 84 percent has been used for operations, such as rent, phone, due diligence, and providing services to portfolio companies.