Money manager Albert "Ab" Nicholas said Wednesday he has pledged $1 million to BrightStar Wisconsin Foundation Inc., a new group with an unusual plan for using charitable donations to make venture investments in young state companies.
Nicholas, who is founder and chairman of Milwaukee-based Nicholas Co., is the first contributor to be named by BrightStar since the foundation launched in July with seed pledges of $6 million from eight founding donors.
BrightStar's organizers are hoping the foundation will attract donors who might not otherwise make high-risk investments in the state's high-tech, high-potential start-up companies. Nicholas, a successful manager of publicly traded stock portfolios, said he has never made the kind of angel and venture capital investments BrightStar is planning.
Making a pledge to the foundation appealed to Nicholas as a way to make a contribution that would help the state grow economically, he said.
"If we can get these small companies to start up and expand and be successful, we're going to have more opportunities for our citizens — and more opportunities for our kids coming out of college — to have jobs," Nicholas said. "My return is going to be to help the state and that will be a wonderful return for me."
Nicholas, an alumnus of the University of Wisconsin-Madison, estimates he and his wife have donated as much as $50 million to their alma mater. In January, Nicholas added to that with the announcement he was launching a $50 million endowment that will provide scholarships for selected high school basketball players to attend University of Wisconsin System schools.
BrightStar hopes to raise at least $60 million over the next three years. To have the impact it is seeking, the foundation will have to reach $150 million or more of assets, said Tom Shannon, who has committed to be the foundation's unpaid president for three years.
The foundation's ability to operate as planned hinges on its securing Internal Revenue Service approval for tax-exempt status so donors' contributions could be tax-deductible. BrightStar plans to file its application this week and should know by the end of August if the IRS is going to give it fast-track status, Shannon said. Fast-track status would mean the IRS would make the determination in about six months, he said.
BrightStar has "a very good chance" of getting approval, Reed Hall, secretary and chief executive officer of the Wisconsin Economic Development Corp., has said. WEDC in late July pledged $300,000 in operating funds to BrightStar, pending IRS approval.
BrightStar plans to invest in young state companies in a variety of high-tech areas such as health care informatics, battery technology, water cleanup, web-based selling and medical devices, said Shannon, who has been an angel investor since overseeing the sale of Prodesse Inc., a Waukesha biotech company, for $72 million in 2009.
Prodesse was one of the state's 10 most successful exits in the last decade, said Jeff Rusinow, a BrightStar founding donor who was principal investor in BuySeasons.com, a successful online costume retailer, among other companies.
Rusinow said he gets approached two or three times a year by people seeking his involvement in new angel or venture capital funds. Shannon's idea stood out because of its potential to bring more of the big supporters of the state's economy into the effort to grow start-up companies here.
"I thought, if the model changes to a charitable one, perhaps that's the tipping point," Rusinow said.
Wisconsin has lagged the nation in job growth since the mid-1990s, partly because of its low rate of business starts when measured as a share of all private firms in the state, according to a report released this year by the Wisconsin Taxpayers Alliance.
BrightStar will go slowly in terms of raising money until the IRS determines whether it will have tax-exempt status, Shannon said.
The foundation will have a minimum contribution requirement "in the tens of thousands," and hopes to attract donations from wealthy individuals, corporations and foundations in Wisconsin and outside of the state, he said.
"We basically need cheeseheads everywhere to have a way to benefit the state they love," Shannon said. "And what's more important than having economic activity increase?"