By Tom Still
MADISON – Five years ago, it wasn’t necessary to use terms such as “entrepreneur,” “venture capital” or “knowledge worker” when talking about the state economy. That was before the recession of 2000, the war on terror and other global trends fundamentally changed the Wisconsin landscape. Seemingly overnight, a state that had relied for decades on the strength of its big companies discovered it had a shortage of small, innovative and often tech-savvy small companies to take their place.
Gone are the days when economic development meant hoisting the Jolly Roger and raiding neighboring states to bring back the plunder of a major factory. Today, successful states choose husbandry over piracy. They prefer to grow their own companies from intellectual seeds planted in a fertile business climate.
It took time, and the process is far from over, but Wisconsin is slowly building the infrastructure needed to compete in the knowledge-based economy of the 21st century. Gov. Jim Doyle will undoubtedly report on that progress this week in his annual State of the State address to the Legislature.
Within the space of a few years, Wisconsin has updated the corporate tax code to make it more competitive with other states, reduced regulatory burdens, attracted its first out-of-state venture capital company, launched the first statewide business plan contest, created a bureau for entrepreneurship within the state Department of Commerce, and nurtured a network of organizations and events to connect entrepreneurs, investors and managers.
In 2003, the passage of Act 255 by the Legislature created new tax credits for investors in start-up companies. It also laid the groundwork for the Wisconsin Entrepreneurs Network, which will harness the resources of the University of Wisconsin, the Wisconsin Technical College System, the Wisconsin Alumni Research Foundation and the state Department of Agriculture, Trade and Consumer Protection to better serve people who are starting new companies.
Another effort will be led by the UW-Madison, which is reaching out to start-up businesses through its Office of Corporate Relations and the Weinert Center for Entrepreneurship in the School of Business. In Milwaukee, TechStar represents the efforts of five academic institutions to invest in that region’s high-growth economy.
Last week, another piece of the puzzle fell into place when Doyle announced the creation of the Wisconsin Angel Network. Flanked by Department of Financial Institutions Secretary Lorrie Keating Heinemann and key legislators, Doyle described how the angel network will essentially function as a “network of networks,” helping to connect people with money to people with ideas.
Angel investing is an under-appreciated and under-reported facet of Wisconsin’s high-growth economy. Nationally, it is estimated that $18.1 billion was invested by angels in 2003, which was nearly equal to the $18.3 billion invested by venture capitalists. But unlike venture capital, which usually flows to companies beyond the start-up stage, most angel dollars are invested in early-stage firms that subsequently become investment targets for venture firms.
No one knows for sure how many angel investors operate in Wisconsin, or how much they invest. Many are high net worth individuals ($2 million or more in assets) who prefer to invest on their own. Others form networks for the purposes of vetting potential deals and sharing in the risk — as well as the profits. There aren’t many such networks in Wisconsin, perhaps nine, but one of the goals of the Wisconsin Angel Network is to provide a support system that could lead to the creation of more.
Wisconsin is adding jobs at a rate that leads the Midwest. One of the reasons for that surge of job creation is the concerted effort to encourage and educate entrepreneurs, and to create the conditions by which they can be successful. The seeds for tomorrow’s companies are being planted. Time will tell whether they grow.
Still is president of the Wisconsin Technology Council and is the former associate editor of the Wisconsin State Journal in Madison. For more information on the Wisconsin Angel Network, go to www.wisconsintechnologycouncil.com or contact director Joe Kremer at firstname.lastname@example.org