Op-Ed

Wisconsin’s New Economy Taking Off

More than half a billion was invested in startup companies in last two years.

By - Jul 27th, 2016 01:51 pm
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Lubar Center for Entrepreneurship

Lubar Center for Entrepreneurship

Wisconsin and Milwaukee have been making front-page news for their low levels of “business dynamism,” as so determined by experts in the cheap seats.

The Kauffman Foundation of Kansas City rates us 50th of the states.

From the front lines of the startup economy, where I’ve been for a couple of decades, I don’t buy their abstract rankings. Something is wrong with they way their experts count.

For openers, Kauffman’s main ranking counts companies with just a couple of employees. Those small startups are important (all businesses are important), but they are not strategic drivers of the economy.

Both the Wisconsin Economic Summits of 2000 to 2003 and the Be Bold Wisconsin Prosperity Strategy of 2010 correctly targeted high growth startups, companies like Epic, FiServ, Direct Supply, QuadGraphics that get to the top of supply chains over time. The smaller companies then sell into those supply chains.

Let’s understand this dynamic in real terms. Take Hartford, Wisconsin. This very healthy city in Washington County is blessed with startups that have gone big time: like Signicast, Broan-Nutone, a big plant of QuadGraphics, three Wendorff companies (Hartford Finishing, Sno-Way and Steel Craft) and several others. The community’s retailers, restaurants, banks, local government, non-profit organizations, law and accounting firms are doing well because the big boys at the top of the supply chains are doing well. Pull the major firms out and what happens to the community? It wouldn’t be pretty.

So, how are we really doing in absolute terms since the imperative for starting lots of high-growth companies “innovation economy” was realized and put into regional strategies across the state in 2010?

In short, we have made amazing progress.

Comparisons aside to areas of the country that had a head start on the startup economy (Silicon Valley, the North Carolina Research Triangle, Austin, San Diego, even Madison), let’s take a look at some of the recent metrics here:

  • More than a half billion dollars has been pumped into Wisconsin startups in the last two years. That’s double the rate in 2012 and 2013. Wow!
  • In 2015, more $209 million went into 128 companies. That is double the number of startups from just three years earlier. Double!
  • Early stage investments in 2016 are on track to exceed 2015. More progress!
  • Wisconsin’s unique 25% tax credit for early stage investors jumped to $18 million in 2015, double the level from two years earlier. Again, double!
  • The Wisconsin Technology Council has counted 684 active investors in 18 different early stage investment groups. It’s becoming the thing to do in Wisconsin. They are multiplying like rabbits!
  • Southeastern Wisconsin 36 funded high-growth startups in 2015, compared to 70 in Dane County. The Milwaukee region is catching up quickly. Will it pass Dane? It’s great competition!

Further, there are other less measurable advances that paint a brighter picture than the doom-and-gloom crowd would put forward:

  • There are incubators, accelerators and entrepreneurial education programs on campuses all over the state to offer a support system for business people with enough guts to start a company. That network didn’t exist 15 years ago. Bless them all!
  • Technology transfer offices at R&D centers across the state have enlarged their focus from patents and licenses to include startups. (The Ariosa Diagnostics startup out of the Medical College of Wisconsin had a $600 million exit.) The shift in focus is huge!
  • Research disclosures are up sharply at campuses beyond UW – Madison. There’s brainpower for commercialization across the state!
  • The Lubar Center for Entrepreneurship at UW – Milwaukee, with public and private funding approaching $25 million, will be come a hub for the region’s entrepreneurial ecosystem. It will be the face of UWM as “E-University” across all departments, starting in 2017!
  • Be Bold called for $1 billion in a ten-year startup state initiative. State political leaders dipped a toe in the water with a $30 million Badger Fund. It’s been slow getting going, but will kick in with deals in the coming year. It all helps!
  • Five foundations put about a million dollars into “impact investing” in startups. It’s a test case. If they get a good return, more foundations will follow!

In short, screw the rankings and the subsequent headlines! Let’s just keep doing right stuff, execute the 2003 and 2010 state strategies with vigor, leadership and good cheer. Positive results will follow! (It’s already happening.)

(Disclosure: I am a general partner in a Wisconsin startup fund and did three startups earlier in my career.)

John Torinus is the chairman of Serigraph Inc. and a former Milwaukee Sentinel business editor who blogs regularly at johntorinus.com.

Categories: Business, Op-Ed

5 thoughts on “Op-Ed: Wisconsin’s New Economy Taking Off”

  1. Vincent Hanna says:

    So someone who is a partner in a startup says ignore all those rankings because I am smarter and we’re doing great? Wow I am convinced. Another terrible piece from this guy. Thanks UM.

  2. Mohammed says:

    Kudos to WI for finally doing what every other state has already been doing. This is an absurd pat on the back when Wisconsinites haven’t gotten over their inherently conservative, risk adverse nature. Seriously, Minnesota and Iowa (Iowa for god’s sake!) are leaps and bounds above WI in terms of attracting jobs and forming business. Madison is the most dynamic region in the state by a mile, and Des Moines is growing at double Madison’s rate. Wisconsin needs to become the easiest state in the country to form a business and the WEDC needs to actually keep companies here instead of losing HQ after HQ to international mergers.

  3. dudemeister says:

    The WEDC does fall short in most every measure except intention. It tends to (fruitlessly) pursue a lot of old-economy employers (ie traditional manufacturing or agriculture-related businesses). Foolishly, efforts in Wisconsin are not focused on softening the blow of start-up failure.

    On a semi-related note, I really wish they would build that Lubar Center for Entrepreneurship. Great building (high modernism riff!), great program idea, will produce results on par with the UWM SoFS.

  4. Daniel golden says:

    Torunus does every thing but quote Scott Walker’s favorite go-to source for positive rankings and quotes:CEO Magazine. No matter how poorly Wisconsin is doing compared to other Midwestern states or the nation as a whole, Walker always finds a positive ranking in CEO Magazine. Is it surprising that a bunch of million dollar a year business executives would support a governor who continues to embrace the failed dogma that tax cuts for the “job creators” will stimulate the economy?. Torinus should address the real question: Why are the other Midwestern states doing better than Wisconsin?. Perhaps he could then pen a column telling his readers what went wrong in Kansas and Louisiana, both of which have pursued the same goofy supply side nonsense that right wingers have been preaching for decades, and are in economic free fall.

  5. Vincent Hanna says:

    He doesn’t trust The Kauffman Foundation? Fine. How about data from the U.S. Census Bureau, the Small Business Administration and a report by PricewaterhouseCoopers and the National Venture Capital Association? Using data from those sources and considering both small business loan environment, including venture capital funding per 100,000 people, as well as local business economy, Wisconsin ranks 46. Sell your BS elsewhere John. https://www.nerdwallet.com/blog/small-business/most-entrepreneurial-states-where-small-business-loans-rule-2015/

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