By Tom Still
MADISON – During last spring’s legislative debate on the pros and cons of a major venture capital bill, it was sadly apparent that more than a few Wisconsin lawmakers had their doubts about the merits of non-traditional investment capital.
The next time this debate rolls around, let’s hope members of the Senate and Assembly have read the latest study of venture capital’s role in the growing U.S. economy. It should turn doubters into believers.
Venture-backed firms created 600,000 jobs nationwide from January 2001 through December 2003, according to a study by Global Insight, a private economic firm hired by the National Venture Capital Association. That was a net gain of 6.5 percent in jobs for venture-backed companies, which account for nearly 10 percent of all private jobs. Revenue among venture-backed companies grew by $212 billion, or 11.6 percent, during the same period.
Those figures contrasted sharply with employment and revenue figures for all U.S. companies. During the same three years, the nation’s private sector lost 2.6 million jobs and revenue grew by 6.5 percent.
In Wisconsin, according to Global Insight, ventured-backed companies have provided more than 134,000 jobs and about $16.9 billion in revenue in 2000, the latest year for which complete state figures were available.
Google, eBay, Jet Blue, Home Depot, Microsoft, Apple, Intel and Starbucks are examples of companies that grew with the help of venture capital – and venture capitalists, who almost always provide leadership and market skills that young companies often lack. It’s not just the money; it’s the management advice.
In Wisconsin, a prime example is TomoTherapy, a Middleton-based medical device company that has grown from about 22 employees to nearly 140 in about four years. TomoTherapy builds equipment that allows image-guided radiotherapy of cancer patients, a process that could revolutionize treatment and save lives as well as costs.
TomoTherapy’s equipment is designed to target radiation treatment to the patient’s tumor while helping to limit damage as much as possible to the surrounding tissues. It allows for better patient planning, more accurate delivery of radiotherapy, better dosage control, and fewer side effects.
In 2003, TomoTherapy sales were about $15 million. This year, sales could reach $40 million and nearly doubt that in 2005. With the help of four rounds of investment, TomoTherapy has been able to grow and now has a backlog of orders for its equipment.
“A year ago, we were a fragile, young company,” said John Barni, Tomotherapy’s CEO. “Today, we’re booked nine or 10 months out and the challenge is to keep pace. ﾅ We are building a sustainable workforce.”
Barni credits venture capitalists such as John Neis of Madison’s Venture Investors firm with helping the company take a promising piece of technology and turn it into a company that stands on the verge of profitability.
“Venture capital is a major part of the equation for many emerging companies such as ours,” Barni said.
State lawmakers were reluctant to extend the life of Wisconsin’s Certified Capital Company (CAPCo) program, even though that publicly enhanced venture fund had backed companies such as TomoTherapy. Too many lawmakers seemed worried that someone might actually make money – which ought to be their goal, not their fear.
Nationally, the evidence abounds that venture capital sustains growth across many economic sectors –not just technology. It helps support “breeder” industries with an emphasis on research and development, boosts employment, produces higher salaries and keeps the United States globally competitive.
If a venture capital bill is proposed in 2005, members of the Wisconsin Legislature should think long and hard about supporting it. What may sound like a risky venture is really an investment with a proven track record.
Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.