MADISON – Here’s a quick geography quiz. Where is the “Valley of Death” located?

(a)  Some place faraway and biblical
Some place in southern California
Someplace in Wisconsin

If you’re a Wisconsin entrepreneur in search of venture capital, the “Valley of Death” is a bit too close to home. That forbidding term describes the funding gap for early stage companies caught between their initial rounds of investment – family, friends, founders and angel investors – and follow-up rounds from venture capitalists.

The gap falls someplace between $2 million and $5 million for many start-up companies in Wisconsin, and for those who fail to bridge the gap, the “Valley of Death” is a dry and dusty desert from which there is often no return. It kills young companies and the jobs they create.

Of course, the same predicament is true for most entrepreneurs in many states, not just Wisconsin. Start-up companies always find it much harder to obtain venture capital than any early money, if for no other reason than the competition is so stiff.

In Wisconsin, the existence of world-class technology, an emerging entrepreneurial culture and tax credits for early stage investors has helped to create a number of companies that are ready for venture capital. Those companies have shown commercial promise – but they lack the capital to get over the hump.

That’s because Wisconsin is a place where venture capital is more a mirage than a true oasis. While Wisconsin claims 1.83 percent of the nation’s population, its companies attract only six-tenths of 1 percent of the nation’s venture capital deals.

A bill introduced this week in the Legislature promises to help Wisconsin entrepreneurs cross that “Valley of Death” and grow into productive companies.

The focal point of Senate Bill 94 is the creation of two funds totaling $400 million under the umbrella of a new Wisconsin Venture Capital Authority. The complementary funds – the Jobs Now Fund and the Badger Jobs Fund – are designed, respectively, to address Wisconsin’s short-term and long-term investment needs.

The proposal builds on the success of the widely acclaimed and often duplicated Act 255 Tax Credits, which were passed in 2005 and enhanced in 2009. Those tax credits have helped enhance early stage investing in Wisconsin – but largely at the “angel” capital level, thus creating a need for follow-up investing by venture capital firms in emerging companies.

The credits helped spawn angel networks across Wisconsin, and those networks have dramatically increased both the number of deals and the dollars invested in those deals. But many angels are tapped out. They need “exits” – company mergers, acquisitions or venture investments – to recoup their money. And the companies in which those angels have invested are struggling to survive.

Senate Bill 94 proposes to cross the “valley of death” in two ways:

The Jobs Now Fund is the rapid-response fund. It would issue $200 million in tax credits to insurance companies over time in return for investments in certified capital funds. The tax credits would be for 80 percent of the value of the investments made, so $200 million in credits could attract $250 million in investments. The credits could not be claimed for a minimum of five years, so the money would be put to work well before the credits are paid. The fund will eventually create a source of revenue for the state’s general fund through returns on investments. In other states, this approach is called a “certified capital company,” or CAPCo, approach.

The Badger Jobs Fund is the longer-term tool. It would invest in qualified venture capital funds on a “fund of funds” basis. The authority could issue up to $200 million in private placement bonds for the Badger Jobs Fund, with the bonds supported by investment returns, the incremental growth of state tax collections from financed companies, and contingent tax credits. Bonds would not be a debt of the state, and no more than 15 percent of the funds could go to any single venture capital firm. For every $1 a qualified venture capital fund receives from the Badger Jobs Fund, it would need to raise $3 on its own.

At a May 16 legislative hearing, the Jobs Now Fund received the most scrutiny because of the past performance of CAPCo funds in Wisconsin as well as other states. Critics say such funds are an inefficient way to create jobs, but proponents say they work well over time.

Look for more debate on the bill’s details in coming weeks. But there’s no debating the fact that young companies are the No. 1 creators of jobs in Wisconsin. Senate Bill 94 can help ensure the most promising companies don’t die of thirst while crossing the “Valley of Death.”

Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal.