By Tom Still
MADISON – All businesses must labor, to one degree or
another, under a certain amount of mythology.
Some are general myths, such as “We’re good friends and work
well together, so let’s form a partnership!” Some are more specific, such as
“I’m a great cook. I should start a restaurant!”
The startup and scale-up worlds in Wisconsin are no
different in most ways. Not only are there are widely held beliefs that apply
to particular types of startup businesses, but some apply to entrepreneurial
sector overall – as well as Wisconsin as a place to start and grow a business.
Here was my attempt to dispel a few of those folklores at
the recent Healthcare Innovation Pitch, which was held in Milwaukee’s renovated
Ward4 incubator and sponsored by a coalition of academic research and medical
technology groups.
Myth No. 1 – “All entrepreneurial ventures are pretty
much alike, so why isn’t there a template for success to be followed by all
‘treps?”
The main fallacy here is that not all startups are alike.
Some are traditional “mom-and-pop” businesses that launch on Main Street and
intend to succeed there, often without a huge amount of growth capital or employees.
Others are “lifestyle” businesses in which the owner turns a hobby or avocation
into a way to make money while still having fun. “Social” entrepreneurs are
those who turn a passion – environmentalism, education or helping children –
into a business that pays the bill while doing well by others.
In the tech world, startups most often view themselves as
“gazelles,” meaning they want to grow quickly and leap ahead of the
competition, creating a lot of value and jobs along the way. Those are the trickiest
to fund and grow, which brings me to…
Myth No. 2 – “There isn’t enough angel and venture
capital in Wisconsin for the great emerging companies here.”
The best companies will find funding if they look hard
enough, make the right pitch and persuade investors they can get a strong
return on their dollars. Next month’s Wisconsin Early Stage Symposium in
Madison is a prime example of companies putting their best foot forward for
investors, who will hail not only from Wisconsin but well beyond.
While Wisconsin isn’t California, Boston or even Minnesota
when it comes to venture capital, recent statistics show the gap is closing. In
2013, 86 Wisconsin early stage companies raised about $130 million in angel and
venture capital. In 2014, 113 Wisconsin companies did so and the total dollars
more than doubled. So far, 2015 appears to be on track. It’s not easy raising
money… but the climate is improving for companies that demonstrate market
value.
Myth No. 3 – “We’re 50th in startups among
the 50 states, so Wisconsin must be unfriendly to new companies.”
There are many reasons why Wisconsin will never be the
startup capital of America: An aging demographic, a low immigration rate and
mature, capital-intensive industries that don’t lend themselves easily to
startups. But is Wisconsin really 50th, as the Ewing Marion Kauffman
Foundation reported earlier this year?
While there aren’t reasons to think the state ranks high,
other measures show Wisconsin does well creating certain types of startup
companies and keeping them alive. The amount of support available to Wisconsin
entrepreneurs today is head-and-shoulders above what existed 10 to 15 years
ago.
Myth No. 4 – “All of the technical and management
talent is clustered on the coasts and Wisconsin is basically a flyover state.”
One story that contradicts that myth is the rise of Exact
Sciences, which was a left-for-dead cancer therapeutic company in Boston when
rescued by Kevin Conroy and Manesh Arora, who brought it back to Madison. They
were the only employees at the time. Today, Exact Sciences has 450 or so
well-paid workers with two locations in Madison – and a third on the way in the
city’s downtown. Another myth-buster is JAMF Software in Eau Claire, which was
started by two UW-Eau Claire graduates who were told they could never build a
software company in the Chippewa Valley because they wouldn’t find enough
talented people. Today, JAMF has more than 400 employees in Eau Claire and the
Twin Cities, with sales around the world.
Oh, yes… there’s a little company called Epic in Verona that
employs nearly 9,000 people and holds more than 50 percent of the national
market share in electronic health records. Growing and attracting talent to
Wisconsin is not the problem it once was because there are successful models.
Myth No. 5 – “All state policymakers seem to care
about is manufacturing, agriculture and tourism, so why bother pursuing
startups in information technology or the life sciences?”
State legislators and others in the policy world
increasingly recognize that technology isn’t just for geeks and scientists
working in wet labs. It’s imbedded in every industry, and will drive the
continued success of Wisconsin’s largest and most historic sectors. The launch
of the Badger Fund of Funds wasn’t a major investment for the state – about $25
million, to be matched by private dollars – but it signaled support for an
emerging sector.
Myths are sometimes meant to be busted. Wisconsin is
steadily replacing fable with economic fact.
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