Startup economy accelerates across Wisconsin

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.)

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