Wisconsin Legislative Council
ACT MEMO
One Ea st Ma in Stre e t, Suite 401 • Ma dison, W I 53703 • (608) 266-1304 • le g.council@le gis.wisconsin.gov • http://www.le gis.wisconsin.gov/lc
Prepared by: Ethan Lauer, Senior Staff Attorney March 12, 2024
2023 Wisconsin Act 98
[2023 Assembly Bill 890]
Fund of Funds Investment
Program
BACKGROUND
The Department of Administration (DOA) administers a fund of funds venture capital investment
program. Under the program, DOA contracts with an investment manager to manage investments in
venture capital funds, which, in turn, invest in Wisconsin businesses.
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2023 WISCONSIN ACT 98
2023 Wisconsin Act 98 modifies the following features of the program: the minimum number of
investments in venture capital funds; the investment manager’s management fee; a venture capital
fund’s responsibilities; reinvestment of the proceeds from investments of program capital; and the
investment manager’s reporting requirements.
Investments in Venture Capital Funds
Under the program, the investment manager must commit the following program capital in at least four
venture capital funds:
A payment of $25 million to the investment manager from DOA in fiscal year 2013-14.
A payment of $25 million to the investment manager from DOA in fiscal year 2023-24.
The capital raised by the investment manager from sources other than DOA, which must be at least
$5 million.
At least $300,000 of the investment manager’s own capital.
Under the program, the investment manager must commit the $25 million payment from DOA in fiscal
year 2023-24 to investments in venture capital funds headquartered in Wisconsin within 24 months
after receiving it. Under Act 98, the investment manager must commit that capital to at least four such
investments.
Management Fee
Under the program, the contact between DOA and the investment manager establishes the manager’s
compensation, including any management fee.
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For a description of the program as enacted, see Legislative Council, 2013 Wisconsin Act 41, Act Memo. - 2 -
Under prior law, the investment manager could receive an annual management fee for no more than
four years, and the fee could not exceed one percent of the total amount of the following program
capital:
The two payments of $25 million from DOA.
The capital raised by the investment manager from sources other than DOA.
Act 98 removes the four-year limitation on receipt of the management fee, thus allowing the
investment manager to receive the fee on an annual basis.
Act 98 also adds the following amount to the total amount on which the one-percent fee is calculated:
Amounts reinvested (as described below) by the investment manager from the gross proceeds of the
investment of the two payments of $25 million from DOA.
Responsibilities of the Venture Capital Funds
Under the program, the investment manager contracts with each venture capital fund that receives
program capital. Each contract must impose certain requirements on the venture capital fund. Act 98
modifies two of those requirements, as follows:
Investment in Wisconsin businesses. Each venture capital fund must make new investments
in one or more businesses that are headquartered in Wisconsin and that employ at least 50 percent
of their full-time employees, including any subsidiary or other affiliated entity, in Wisconsin. If a
business fails to meet those two requirements within three years after the venture capital fund
makes the investment, the business must promptly repay the amount of the investment. Act 98
clarifies that the three-year period is measured from the initial investment by the venture capital
fund in that business.
Match capital received through the program. Under prior law, for every $1 a venture
capital fund received from the manager and invested in a business, the venture capital fund had to,
on average, invest $2 in that business from other sources. Under Act 98, the venture capital fund
must, on average and when measured across all individual businesses receiving capital under the
program, at least match any amount it receives from the investment manager with investments in
such businesses that the venture capital fund raises from other sources.
Reinvestment of Gross Proceeds from Investments
Act 98 alters the disposition of proceeds from investments made with program capital.
Under prior law, the investment manager held in an escrow account its gross proceeds from all
investments of capital contributed to the program by DOA in fiscal year 2013-14 (i.e., $25 million). At
least annually, the investment manager had to pay the amount in that escrow account to the state for
deposit into the general fund. Those two requirements were in effect only until the investment manager
had paid a total of $25 million to the state. After that point, the investment manager had to pay 90
percent of its gross proceeds from such investments to the state for deposit into the general fund.
Under Act 98, the investment manager must hold in an escrow account, in a bank with its
headquarters in Wisconsin, its gross proceeds from all investments of capital contributed to the
program by DOA in both fiscal year 2013-14 and fiscal year 2023-24 (i.e., $50 million). Rather than
paying the amount in the escrow account to the state for deposit into the general fund, the investment
manager must—within 24 months of receiving any proceeds from the investment of capital contributed - 3 -
to the program by DOA—commit 90 percent of the gross proceeds to investments in venture capital
funds headquartered in Wisconsin.
Mirroring the required contract between the investment manager and a venture capital fund that
receives an investment of program capital, the investment manager must contract with each venture
capital fund that receives a commitment of the gross proceeds. Such a contract must include all of the
following requirements:
Investment in Wisconsin businesses. Each venture capital fund must make new investments,
in an amount equal to the gross proceeds that it receives, in one or more businesses that are
headquartered in Wisconsin and that employ at least 50 percent of their full-time employees,
including any subsidiary or other affiliated entity, in Wisconsin. If the business fails to meet those
two requirements within three years after the venture capital fund makes the initial investment, the
business must promptly repay the amount of the investment.
Investment in small businesses. When it first invests the gross proceeds that it receives, each
venture capital fund must invest at least half in one or more businesses that employ fewer than 150
full-time employees, including any subsidiary or other affiliated entity.
Invest in targeted industries. Each venture capital fund must invest the gross proceeds that it
receives in businesses in the agriculture, information technology, engineered products, advanced
manufacturing, medical devices, or medical imaging industry. In addition, the venture capital fund
must attempt to ensure that investments are made in businesses that are diverse with respect to
geographic location within the state.
Match gross proceeds received. The investment manager must ensure that, when averaged
across all venture capital fund recipients, for every $1 of the gross proceeds that is committed,
venture capital fund recipients must receive $2 from other sources. Any individual business that
receives a commitment of the gross proceeds from the investment manager must receive additional
investments made by sources other than the investment manager.
Provide reporting information to the investment manager. Each venture capital fund must
provide the information necessary for the investment manager to prepare reports required under
the program, described below.
Disclose interests in investments. Each venture capital fund must disclose to the investment
manager and to DOA any interests that the venture capital fund or an owner, stockholder, partner,
officer, director, member, employee, or agent of the venture capital fund holds in a business in
which the venture capital fund invests or intends to invest the gross proceeds that it receives.
Reporting Requirements
Annual and Quarterly Reports of the Investment Manager
Under the program, the investment manager is required to submit an annual report and quarterly
reports to DOA regarding investments made with capital provided under the program. These reports
include information on the investment manager’s internal rate of return, information about each
venture capital fund that contracted with the investment manager, and information about each business
that received an investment of capital under the program, including information regarding the number
of employees employed by the business at certain times.
Act 98 requires that these reports include the same information regarding investments made with the
gross proceeds of investments, as described above. - 4 -
DOA Progress Reports
Prior law required DOA to submit two progress reports to the Joint Committee on Finance, one in
2015 and one in 2018. Each progress report must contain the following:
A comprehensive assessment of the performance to date of the investment program.
Any recommendations DOA and the State of Wisconsin Investment Board have for improving the
investment program and the specific actions that they intend to take, or propose to be taken, to
implement those recommendations.
Act 98 requires DOA to submit a progress report with the same content in 2024.
Effective date: March 2, 2024
For a full history of the bill, visit the Legislature’s bill history page.
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