Sue Marks
She is a serial entrepreneur whose latest venture is Pinstripes, a 2005 startup that takes over recruiting of talent for large companies. An expert on staffing companies, she has grown Pinstripes to 450 employees, of which 350 are in Wisconsin. That is a big win, bigger than any win from poaching from other states.
Marks just completed a major deal with Accel-KKR, a private equity firm, and that injection of capital will take Brookfield-based Pinstripes to the next level. “Ultimately,” said Marks, who is keeping her stake in the company, “I would expect us to have 1500 employees or so in this next round of expansion, especially if we look for global acquisitions.”
She added, “We do not now, not do we intend to offshore any jobs. Chasing brief periods of labor arbitrage around the globe is unnecessary and can be very risky.”
Pinstripes is deploying a hub-and-spoke strategy based on a shared services center in Wisconsin. It will have a cadre of employees in other metropolitan areas as it adds customers.
“Soon we’ll have to make a decision about enlarging our operations here in Wisconsin or opening a second service center somewhere else in the United States,” Marks added.
(Note to M7 and the Wisconsin Economic Development Corporation: make a sales call on Sue Marks about her second center. There are lots of high-end jobs in play.)
No doubt her first-round investors, Baird Venture Capital, CID Capital and the State of Wisconsin Investment Board (SWIB) made a tidy return on their exit from a seven-year investment, but the real winners are the people with the 450 jobs and the state of Wisconsin, which will see new tax revenues from both employer and employees.
Note that Marks was able to find expansion capital from outside the state. Accel-KKR has offices in Atlanta and Menlo Park, California. That runs contrary to the notion that state firms run into a “valley of death” as they try to expand. Companies with healthy growth on the top and bottom lines can always find investors, though it is trickier for startups with a long runway before becoming profitable.
Note also that SWIB and pension beneficiaries got a great return, which should encourage the board to make more startup investments in the state. Such alternative investments are good for their pensioners in terms of pay-outs, but also in sharing the general prosperity of the state. Raises only happen for public employees when times are good.
There are other benefits from Pinstripes’ success for the state, namely the jobs and economic activity in the supply chain that serves the growing company.
This is a story increasingly told in Wisconsin as a new wave of entrepreneurial energy kicks in to reinvent the state’s struggling old economy. The bastions of the state’s prosperity for the last 100 years have been agri-business and manufacturing. Both have become so highly productive that the growth in jobs numbers is no longer there. New leadership has to happen.
Fortunately, Wisconsin leaders joined the parade led by entrepreneurs in 2005 when they passed Act 255 that offers 25% tax credits to early stage investors. In the ensuing seven years, 138 companies have qualified for the credits and those deals brought in $186 million in investment. They also created 1,112 jobs with an average salary of $76,500 as of 2011.
Those totals will grow in a cumulative way as new startups are created and as the winner companies expand, like Pinstripes.
Other states are getting into the strategy of boosting startups to invigorate their economies. Minnesota copied Wisconsin with its Angel Tax Credit program and it has already run out of credits for this year. They one-upped us by making their credits “refundable,” which means out-of-state investors get the credits in the form of cash vs. an offset to state taxes.
Why not if the refundability creates more businesses and more jobs? Thirty percent of Minnesota’s 2011 investments were from outside the state.
In Chicago, 70 ventures raised $654 million in 1011, up 40% from 2010. Several collaborative work spaces have been created in the Chicago area to house startups, similar to what is planned for the new Fresh Water Council space and the new UWM Innovation Park.
The M7 region in Southeastern Wisconsin has seen acceleration in startups over the last four years. The seven counties are now averaging about one high growth deal per month. The board of BizStarts Milwaukee believes that pace can be doubled.
All we need is leadership, support for entrepreneurs and more capital. Or we could just clone Sue Marks.
