The Wisconsin challenge of playing catch-up in the creation of an economy driven by startups hasn’t played prominently in the soon-to-end gubernatorial debates, but it should have.
In one major dimension, we live in an innovation economy that is led by entrepreneurs. They are the major job creators; they are the best bet to lead Wisconsin out of a four-decade economic slide relative to the country as a whole; they are our ticket to a higher level of prosperity.
Both Gov. Walker and challenger Mary Burke deal with that challenge in their white papers on economic development strategy, but not so much on the campaign trail, where tactical, gotcha politics prevail.
During his first term, Gov. Walker expanded the use of investment tax credits for angel and venture investors, and he and the Republican-led legislature took a wee step toward a state fund that matches private dollars invested into startup companies.
Burke, the daughter of a big-time entrepreneur, tells on the stump of making a run at a startup early in her career, including sleeping on a cot in its office. She calls in her paper for bolder state action on behalf of an entrepreneurial economy.
Walker has said he considers the $30 million Badger Fund, which is not yet operating, a pilot.
The non-partisan Be Bold – Wisconsin Prosperity Strategy of 2010, crafted by the state’s economic leaders, called for a $1 billion Wisconsin Prosperity Fund over a five- to ten-year period for investments in innovative technologies and high growth startups.
In her “Invest for Success” campaign document, Burke ups the ante some. She says, “As Governor, I will quadruple our state’s venture capital fund from $30 million to $120 million over four years. I will use this to attract another $250 million in private funding on the same terms as private investors.”
She devotes five pages to a range of measures to move Wisconsin up from near bottom of the 50 states in startups to “one of the best states in the U.S. for innovative entrepreneurship.” She makes the point that “nearly all of our largest Wisconsin-based businesses got their start right here.”
Her proposals include: a small business capital access program; eliminating the ban on state venture investments in biotechnology startups; further expansion of angel and venture investment tax credits; creation of a non-profit entity to hold equity in high growth companies; expansion of K-12 and university education in entrepreneurial skills; doubling of the prizes for the Wisconsin Governor’s Business Plan Contest; more support of organizations like BizStarts Milwaukee and the Wisconsin Women’s Business Initiative Corp.; state matching dollars for the federal program for innovation grants; entrepreneur in residence programs on university campuses; super-charging of technology transfer from university R&D to startups; and reversing a 1970s prohibition on University of Wisconsin classified research.
It’s a long list that shows she has done her homework on this pivotal lever for prosperity.
Gov. Walker devotes three pages to the subject in his economic plan, “Continuing Wisconsin’s Comeback.” He says: “Increasing startups is very important. Creating an
environment where startups can grow and prosper will be important now and in the years ahead.”
His list of actions taken includes: support for accelerators that gets new businesses up and running; investments in seed funds; broader support for the investment tax credits; state grants tied to federal innovation grants; and his signature on a crowd funding law.
His actions to date are directionally sound, but they don’t add up to a major commitment for a strategy priority. Wisconsin has pulled from near bottom among the states for early stage investing a decade ago to about the middle of the pack.
States that have serious startup strategies, like Michigan, Colorado, Utah and Arizona, stimulate investments of two to seven times as much as Wisconsin.
It shouldn’t take a two-by-four aside the head to get our political leaders to understand the long-term impact of entrepreneurs on this state’s destiny. Just look at the impact in the last two decades of startups like Epic, QuadGraphics, Artisan Capital Partners, ProMega, Generac, Direct Supply, Ruud Lighting, American Medical Security, Logistics Health Inc. in LaCrosse, ZyWave, Connecture, and many, many more. Where would we be without them?
Perhaps because creating a startup economy is a long-term proposition, it’s hard to get the attention of politicians looking for what can help them in the next election cycle.
University leaders in Madison, Milwaukee and Whitewater and some private colleges have stepped up their educational programs for entrepreneurs, and that’s a critical long-term play. But their technology transfer efforts could be much stronger. A chart in Burke’s paper shows only six startups spun out of UW – Madison in 2009 and 2010, despite the expenditure of more than $2 billion on academic R&D.
On a positive note outside of the political arena, there are more early stage funds in Wisconsin than ever before, so there’s growing leadership from the private sector. Importantly, a few foundations have devoted some of their alternative investment portfolios to those Wisconsin funds. That’s a major break-through.
The needle is moving in Wisconsin. The next governor needs to do what it takes to get it spinning.