By Tom Still
MADISON – Attorney Joe Hildebrandt has been a part of many deals connecting promising young Wisconsin companies with investors, some close at home and others in the financial centers of the nation’s East and West Coasts. Over the years, Hildebrandt told a legislative committee last week, he’s battled the notion that Wisconsin is a “flyover state” that neither wants nor welcomes investors.
Lately, Hildebrandt is happy to report, there’s a change of attitude among those investors. They’re taking Wisconsin a bit more seriously.
“A large part of that is perception versus reality. Act 255 has been a major change from that perception,” Hildebrandt said.
Wisconsin Act 255 is the statutory name for a series of changes, passed by the Legislature and signed into law by Gov. Jim Doyle, aimed at leveraging start-up companies by using investor tax credits and targeted state and private programs.
With provisions that took effect mostly this year, Act 255 has been a model for state government in the area of economic development. It was written and passed with bipartisan support. It is leveraging private investment and action through public policy – in full realization that results may not be fully apparent for years.
Perhaps most important, it has highlighted and reinforced a dramatic change in how state government is approaching economic development. Act 255 has underscored the state’s commitment to growing the economy from the ground up, rather than relying purely on chasing smokestacks that may no longer be there.
The act does so through a mix of strategies. About $65 million in tax credits over 10 years will encourage angel investors and venture capitalists to invest more in Wisconsin. Technology grant and loan programs have been refocused by the state Department of Commerce. The Wisconsin Angel Network is serving groups of angel investors, and the Wisconsin Entrepreneurs’ Network is coaching young businesses.
The thrust of Act 255 is consistent with other major initiatives in the technology development arena. For example, the Wisconsin Technology Council produces the statewide Governor’s Business Plan Contest, the Wisconsin Entrepreneurs’ Conference, the upcoming Wisconsin Early Stage Symposium (Oct. 19-20) and events through the Wisconsin Innovation Network. In each case, the emphasis is placed on helping early-stage companies and entrepreneurs.
One consequence of Act 255 is better coordination of early-stage resources. For example, the creation of the Wisconsin Angel Network has enhanced communication among angel networks and led to development of an online inventory of early-stage companies, which appears to be the first of its kind in the nation.
More angel deals may be the best way to attract more venture capital. For years, Wisconsin has wondered why it has not lured more out-of-state venture capital. One reason is that those investors have not always found the fully-formed deals that they wanted to find. By helping angel networks finds deals in the state, Wisconsin is planting the seeds for tomorrow’s venture investment.
This is not to say Wisconsin should abandon efforts to attract business from outside its borders. On the contrary, Wisconsin should be far more aggressive at doing so – perhaps emphasizing efforts to pursue investors and the kind of talent that can take young companies to the next step. Wisconsin must leverage the strengths of the “I-Q Corridor,” which stretches from Chicago to the Twin Cities, encompassing most of Wisconsin in between, and think about selling ourselves to the world as a region.
The world has changed. Nations such as China and India are economic powers in ascendance. We cannot compete with them on labor costs, but we can compete through ideas, innovation, intellectual property, investment and interstate cooperation – the “Is” of the I-Q Corridor. And we can do so while offering quality of life, environment, education and workforce.
Like many laws, Act 255 isn’t perfect. Still to come are changes in state securities laws that would remove penalties on investors, such as the onerous “wage lien law” that make investors liable for lost wages on companies that fail. As Madison banker Terry Grosenheider told committee chairman Ted Kanavas, the hard-charging Republican senator from Waukesha County, it’s easier to gamble in Wisconsin than it is to invest in a start-up company.
Act 255 is focused on building Wisconsin from within so it can compete far outside its borders. As the perception changes, so will the reality.