Shattering some of the myths about Wisconsin’s startup economy
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 widely held beliefs that apply to particular types of startup businesses, but some apply to the 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 bills 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 also a little company called Epic in Verona that employs nearly 9,000 people and holds more than 50% 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 embedded 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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