By Tom Still
MADISON – Year after year, the rap on Wisconsin’s startup sector has been that too few companies are created here. Fair enough. However, it’s equally important to ask: What’s the survival rate for young companies born in Wisconsin?
The answer offers an encouraging glimpse at Wisconsin’s resourceful entrepreneurial culture.
A study released this month by the University of Nebraska’s Bureau of Business Research showed that Wisconsin ranked only 48th among the 50 states in 2011 for “establishment births per person,” meaning new company formation.
However, the same study ranked Wisconsin 18th overall in its “State Entrepreneurship Index,” up from 34th in 2010 and among a half-dozen states that recorded the biggest jumps up the scale. Wisconsin rose from 34th in 2010 – up 16 spots – an improvement rate on a par with Minnesota, Ohio, Utah, Maryland and Maine. Five years ago, Wisconsin ranked in the bottom 10 states overall.
How can Wisconsin score low on company creation but steadily climb up the entrepreneurial ranks?
Eric Thompson, a Nebraska researcher who helped to create the index about five years ago, said part of the answer lies in how adept Wisconsin entrepreneurs are in keeping their young companies alive.
“The numbers suggest that Wisconsin is doing well when it comes to nurturing those companies that do get launched there,” Thompson said. “Your entrepreneurs tend to be good at staying in business.”
That trend is reflected in the study’s rankings for growth in “establishments per person,” which means numbers of companies per capita. In 2010, the state ranked 22nd. By 2011, it stood 7th, behind only Massachusetts, North Dakota, California, Illinois, Pennsylvania and New York. Wisconsin ranked 26th in 2010 and 9th in 2011 in a related category – percentage growth in establishments per person.
The state also ranked 16th in patents per 1,000 people and 27th in income per non-farm proprietor.
“With our index, we look at new business formations, but we don’t want to end there,” said Thompson, who earned a Ph.D. in agricultural economics from the UW-Madison in 1992. “We also want to look at the staying power of companies, the overall growth in establishments, intellectual property and the income levels of those who run companies.”
One reason why new companies in Wisconsin have high survival rates is the existence of a support system that is far more extensive today than a decade ago. A number of organizations share in training and connecting entrepreneurs to investors, mentors and other resources. While access to investment capital is still limited – especially for emerging companies – other resources, events and tools exist to help them bootstrap their way to success.
Ten years ago, there was no Governor’s Business Plan Contest (by the way, three-quarters of its finalists are still in business), no Wisconsin Entrepreneurs’ Network, no Wisconsin Angel Network, no BizStarts Milwaukee, no MERLIN Mentors, no investment tax credits, no Wisconsin Entrepreneurs’ Conference, no private accelerators and precious few regional economic development groups. The rise of that infrastructure has extended many a helping hand.
Entrepreneurship was a bureau in the former Wisconsin Department of Commerce, but it commands division-level status in the Wisconsin Economic Development Corp., its public-private successor. In the UW System, where teaching students how to start businesses was confined to a few lonely programs a decade ago, it is now a trend on most campuses and within the UW-Extension.
Still, there will always be entrepreneurs who don’t know where to turn. The Wisconsin Entrepreneurs’ Toolkit (http://www.witoolkit.com/) is a one-stop source for help. Next month’s Wisconsin Early Stage Symposium (http://www.wisearlystage.com/) will be a showcase for more than 40 emerging companies and a gathering place for entrepreneurs.
Lost in the political fray over creating 250,000 jobs in Wisconsin is a second goal that appears far more achievable – adding 10,000 companies over four years. If Wisconsin continues to keep existing young businesses alive and does a better job of birthing companies, perhaps it can lay claim to a new title: Startup Star of the Snowbelt.
Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal.