Can Baldwin’s innovation bill boost 47 states?

From the pages of In Business magazine.

Senator Tammy Baldwin is alarmed by something. In the aggregate, two-thirds of early-stage financing dollars are invested in companies in three states — California, New York, and Massachusetts — and startups in the remaining 47 states are left to vie for the remaining one-third.

You can chalk that up to the pace of innovation in locales such as Silicon Valley, institutions such as the Massachusetts Institute of Technology, and technology hubs in New York City, but “that’s pretty alarming,” says Baldwin. “If we’re going to remain competitive, it’s going to be a combination of state [venture funding] and action like we’re taking.”

Citing the 2016 Kauffman Foundation Index, where Wisconsin ranked last in startup activity for the second year in a row, Baldwin has reintroduced that action — the Small Business Innovation Act. The bill is designed to help Wisconsin and other flyover states overcome low startup activity by providing small businesses the capital they need to grow their companies and create jobs.

Among the biggest impediments is a lack of access to capital among startups, and her bill is focused on companies in their earliest stages that have yet to generate a positive cash flow but remain promising. The legislation would use the Small Business Administration to leverage private venture capital and target high-growth industries such as advanced manufacturing, innovation, science, research, and technology.

The bill expands the SBA’s authorization to provide up to $4 billion in leverage to small business investment companies. The SBIC program is designed to incentivize the deployment of private-equity capital used to finance operations, growth, and modernization of emerging businesses.

Unlike the state’s budding venture capital program, Baldwin’s measure places no restrictions on investments to biotechnology or life science companies. She worries that a lack of venture capital not only prevents great ideas from being commercialized but will result in promising companies being lured away by coastal investors.

With campaign season winding down, it’s too early to project bipartisan support for the measure, but Baldwin is pleased that U.S. Senate candidate Russ Feingold’s Badger Innovation Plan has similar features. For Baldwin, that’s not only a case of great minds thinking alike, it’s also a case of lawmakers responding to feedback from small business owners. “We have such a rich tradition of entrepreneurism in our state,” she says, “which seems to be encountering roadblocks at this point in our history.”

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