By Tom Still
With 2013 perched like a nestling on the side of the nation’s fiscal cliff, it’s hard to know what factors could give the new year its wings – or force it to tumble helplessly into the abyss.
Some national and global trends point toward a bumpy first flight: The inability of Congress and the president to agree on real deficit-cutting and debt-reduction strategies; the hidden costs of healthcare reform; the double-dip recession in Europe and sluggish job growth in some sectors.
Read this commentary in the Milwaukee Journal Sentinel here.
Other trends suggest 2013 could be the year the economy gets lift. Potential drivers of national economic growth could include soaring domestic oil and gas production, stronger corporate profits, rising exports and a continuation of third-quarter 2012 GDP growth.
Leaders in Wisconsin’s tech sector appear cautiously optimistic with 2013 only days away, but a natural question to ask is: Relative to what?
If the comparison is to peers in other states, Wisconsin’s tech execs are somewhat more pessimistic than a national sample. They’re also significantly more emphatic that unless access to investment capital improves, Wisconsin will fail to live up to its potential as a tech-based economy.
In a survey released in late 2012, a national association for groups such as the Wisconsin TechnologyCouncil took the pulse of nearly 1,100 leaders in tech firms in 18 states. Those states ranged from Massachusetts to Oregon, and from Minnesota to Louisiana.
The survey total included more than 90 executives from Wisconsin. Their view of the national economy – as well as the health of their own companies – is instructive as 2013 nears.
By small but consistent margins, the Wisconsin tech execs were less optimistic than the national sample about the outlook for the U.S. economy, the national tech economy and their own companies. For example, 83 percent of the national sample was upbeat about the six-month forecast for their companies – but that share dropped to 65 percent in Wisconsin.
Asked what public policy initiatives would spur growth, 72 percent of the Wisconsin sample replied “do more to expand access to capital for startup and high-growth companies.” That compared to 58 percent for the national sample.
Asked how well or poorly state governments have represented the interests of the tech sector over the past two years, 71 percent of the Wisconsin sample replied “just OK,” “poorly” or “very poorly.” That compared to 65 percent nationally.
Two questions spoke to the execs’ perceptions of Wisconsin as a place to do business. Fifty-one percent said they would “definitely” or “probably” recommend that an entrepreneur start a business here, versus 63 percent for the national sample. While 28 percent of the U.S. sample said their state or region was performing at or above its potential as a tech-based economy, only 12 percent of Wisconsin execs said the Badger state is hitting on all cylinders.
Wisconsin’s survey sample included more life science and health technology executives than other states, which may be one reason for the less-than-cheery outlook. That tech sector has the highest capital needs – and suffered the most during the national venture capital drought.
The Wisconsin attitudes may also reflect impatience over past failures to create a state-leveraged early stage investment fund. Such funds exist in many other states and serve to attract private capital while protecting the interests of taxpayers. A revised plan may be included in Gov. Scott Walker’s 2013-2015 state budget bill, thanks to bipartisan efforts that have included key legislators, the Wisconsin Economic Development Corp. and its partners.
As the year unfolds, many tech execs will be looking for clues about how policymakers view the importance of startup companies. President Obama raised a few eyebrows among entrepreneurs during his campaign when he said, “If you’ve got a business, you didn’t build that. Somebody else made that happen.” While his comment was later portrayed as an “it-takes-a-village” moment, there’s lingering doubt about how well Obama understands the innovation economy.
Two important measures would be White House support for permanent research and development tax credits and support for the nation’s major R&D grant programs, which have driven innovation in the past.
The same skepticism may apply to Wisconsin policymakers, who approved sweeping tax changes for major state companies nearly two years ago but have yet to pass a much smaller investment capital program that could grow tomorrow’s companies today.
That’s why company leaders in Wisconsin tech sectors are waiting and watching – and hoping that efforts to spur capital growth for emerging companies won’t come too late to help. Let’s hope 2013 is truly the Year of the Entrepreneur and not another startup cliff.