M7 region scores another sweet exit

7Summits_Square_Logo_largeDon’t you wish you were an angel investor in the 7Summits deal?

I missed it. Darn it.

Its founders, led by CEO Paul Stillmank, and investors have pulled off an early exit, the dream of most entrepreneurs. The company was launched in 2009. It raised expansion capital from angels in 2012. And it sold a large share of the company this month.

The Achilles heel of most early stage investing is the long, long wait until founders and investors get their money back with a return. Seven to 12 years is the range for most exits, and that’s way too long. It’s hard to get a high rate of return, 20% to 30%, which high risk investors deserve, if the intervening years are stretched out. Some exits seem to be off in eternity.

Stillmank and his team launched 7Summits in Milwaukee in the hot market of building on-line communities for all kinds of organizations, for-profit and non-profit. It grew fast to $6 million in sales in 2012 and more than $11 million in 2013.

That rapid growth and the related profitability attracted capital from the West Coast, where risk taking in young ventures in part of the culture. The buyer, Sverica International Management LLC, said it does deals between $10 million and $40 million. So, money in that range was paid out as Christmas presents to the people who took the risk and poured their hearts, souls , cash and energies into 7Summits.

The M7 region needs to celebrate every such success, because successful entrepreneurs are the ticket to regional prosperity. We need a prosperity strategy, rather than the prevailing poverty mitigation strategies. Yes, we need a safety net, but what we need more is job creation, less unemployment and under-employment. Job creation is what entrepreneurs do better than anyone else.

All of Wisconsin’s great employers started here. That is not an over-statement.

Let us count the ways that early exits like 7Summits help the Wisconsin economy:

• The company already has created 59 good-paying jobs in the city. Its employees are members of the so-called “creative class.”

• An infusion of capital from Sverica will enable Stillmank to double its employment in 2014. That is outstanding job growth.

• The founders and angel investors will have free cash to reinvest in other startups, and they probably will after tasting this kind of success.

• Local, state and federal coffers will benefit from the taxes paid on the sale, as well as the continuing taxes paid by the company and its employees. Those tax revenues weren’t there before. (No public subsidies were involved.)

• Vendors in the 7Summits supply chain also benefit from its rapid growth. There is a multiplier effect.

• High, early returns encourage other people to become entrepreneurs and angel investors.

It is becoming an axiom in early stage investing that early exits are the way to go. Entrepreneurs, who are great at innovation and getting a company off the ground, might not always be the ones to scale up its growth.

Not always, but often, bigger companies or venture capital investors might be better suited to take a company national and international.

Exits leave the entrepreneurs open to move onto yet another startup. Sue Marks is a Milwaukee example. She is now growing her third staffing company. It is fact that successful entrepreneurs have a much easier time raising capital than rookies. Smart investors want in on their deals.

So, let’s hear a big round of applause for Stillmank and his team. They are helping to reinvent the M7 and state economies.

The M7 region is now home to about one high-growth startup per month. We need to double that rate in the New Year.

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  • tod maclay

    Aren’t we a unique bunch of individuals in northern Wisconsin? The Finns, Italians, Poles, Swedes, Germans and others here have evolved into a cultural mix that makes up the north today. We are a proud, diversified people working hard in a harsh economy and near-arctic environment.

    We are all connected. Where else can you drive 100 miles in any direction and acknowledge friends and acquaintances on any road or in any store? Where else can you stop at any watering hole and have voices welcome you like an episode of “Cheers”?

    Some may say we are financially poor. We’d like to see more prosperity through jobs and higher income, but we’re already so rich. Rich with trust and friendships. Rich to be living in the last bastion of sanity, where neighbors assist neighbors and there is mutual respect among the people for their properties, cultures and opinions.

    In the last two years we’ve become divided by the idea of opening a mine in our backyard.

    We have been force-fed buckets of misinformation by biased media, committees and county officials. If this iron ore is so precious, where are the big dogs like U.S. Steel or PolyMet? Could it be these large entities know the iron ore cannot be mined profitably or safely?

    Why are we willing to negotiate and give GTac and Madison everything at the cost of poisoning our environment? To risk environmental harm to our biggest asset, Lake Superior, would be a sin.

    Do you really think GTac cares about the health and well-being of the citizens of northern Wisconsin? The complaint against GTac official Bill Williams in Spain should be viewed as a warning. The suit states that arsenic has poisoned the water supply by leaching out of the company’s dry stacking piles. This is the same dry stacking method proposed in the Penokee Mountains.

    I suggest everyone read the recent headline in the Ashland Daily Press: “Second geologist confirms asbestos fibers.” Marsha Bjornerud, a geology professor from Lawrence University in Appleton, examined rock samples from the Penokees and confirmed the presence of the dangerous fibers.

    When are we going to stop listening to the spin of corporate greed and the fist-pounding of the pro-mine people? It’s time to take the blinders off and see that we’d be trading our land, water, air and health to put more weight of gold in the purse of GTac and the politicians in the Capitol. We cannot bear this cost. Are we ready to bow down to Madison politicians who never cared if we existed or even knew where northern Wisconsin was until now?

    Are we ready to change our landscape and independent way of life? Are we ready to employ union workers from other parts of the country during the construction phase and the actual mining itself? (Only spinoff jobs will be left for the locals.)

    Are we ready for a bigger tax burden to pay for infrastructure such as roads, schools, sewer, water, electricity and law enforcement (since with money comes more crime)? And we will no longer know our neighbors.

    All of this burden we will be forced to bear on our own because GTac, Madison and the pro-mining “officials” have conspired to give nothing back to the people of northern Wisconsin.

    I want to thank all the local politicians and other people who are standing up against the onslaught of this juggernaut in our territory. I hope this letter inspires others to write letters to the editor and talk with their neighbors.

    Russell Buccanero lives on Moore Park Road in the town of Anderson in Iron County. His property is near the the land on which Gogebic Taconite plans to construct a 22-mile long, 1,000 foot deep open pit iron mine. Despite GTac’s offers to buy his land, he has steadfastly refused to sell.

    • JohnTorinus

      We have been promised by Republican political leaders and regulators that all environmental issues will be taken into account during the permitting process. We need to make sure that happens. The process has to be transparent.
      The emissions from my printing company are monitored and regulated down to each gram of ink, literally. The same kinds of standards need to apply to the GTAC mine.