Kegonsa Seed Fund

Kegonsa Seed Fund Launched

Madison-based Kegonsa Capital Partners has formed the Kegonsa Seed Fund I, which aims to make the first investments in fledgling midwestern companies.

"The fund expects to fulfill the unmet need of many Wisconsin new product start-up companies, finding the first investment dollar," said Kenneth U. Johnson, Managing Director of Kegonsa Capital Partners, in a statement. "The recently passed early stage seed investment tax credit (Act 255) by the state Legislature provided the correct incentive for Wisconsin individuals to invest in the fund and for the fund to make early stage seed investments in the state."

Act 255, which takes effect in 2005, offers tax credits of 25 percent of an investment in a company certified by the state Department of Commerce. These credits equal $3 million per year for angel investors and $3.5 million per year for investors in certified early stage seed funds for the next 10 years.

More than 600 patents have been filed stemming from research at UW-Madison, UW-Milwaukee, the Medical College of Wisconsin, the Marshfield Clinic, the University of Minnesota-Minneapolis, the University of Illinois at Urbana-Champaign, the University of Illinois at Chicago and the University of Iowa and Iowa State University.

Prior to forming the fund, Johnson was an angel investor who focused on novel product opportunities, helping organize a company to develop the product opportunity and developing a management team to bring the product to market. He said the fund will employ a comparable strategy.

Johnson invested in nine start-up companies as an angel investor, founded five companies and participated in the management of six entrepreneurial ventures. He was previously with the Wisconsin Alumni Research Foundation as a licensing associate and with Paramount Capital, a Manhattan-based investment firm as a technology associate.

The fund initially closed April 27 with about $8 million of committed capital and expects more than $10 million of committed capital by the final closing Sept. 30. The fund has begun evaluating investments and expects to make its first investment before the end of 2004. It typically will provide the first $250,000 to $500,000 in funding.

The fund's limited partners primarily include private investors who live in Wisconsin.

"The fund looks forward to working with existing Wisconsin and Midwest venture capital firms, angel networks and individual angel investors in establishing new companies, building management teams and developing new products," Johnson said.

Kegonsa Capital Partners' Investment Committee includes Peter Johnson, founder of HyCite and Tetrionics; UW-Madison Professor Hector DeLuca, founder of Tetrionics and Deltanoid Pharmaceuticals; David Walsh, a senior partner with Foley & Lardner LLP; Elmer Lemon, CPA and retired partner at Grant Thornton LLP; Tom Burke, founder of Pan Vera LLC; and Mike McNally, Managing Director of Avolte LLC, a Boston-based investment advisory firm.

© Jeff Richgels, The Capital Times