Survival rate high for young Wisconsin firms

The mythology that Wisconsin is somehow not a good place to start and grow a business took another hit the other day from someone who digests and understands the data, the chief economist for the Wisconsin Department of Revenue. His insights deserve the attention of young companies here and elsewhere.

John Koskinen, who has advised a bipartisan collection of governors and legislators for decades, described some of the metrics defining Wisconsin’s startup economy during a recent meeting of the Wisconsin Technology Council’s board of directors.

His findings were not all roses and champagne, of course, but basic numbers explain why no one should be deterred from starting a company in Wisconsin — and from taking part in processes that increase their odds of success. The Wisconsin Governor’s Business Plan Contest, which has an entry deadline of Jan. 31, 2020, is one example.

Koskinen dug deeper into statistics that balance one national source that, in past years, cited Wisconsin as among the worst states for startups. While Wisconsin is not in the top tier of the 50 states (33rd in 2018, according to his research) it’s not at the bottom, either.

What’s more important is the “survival rate” over time of young companies — in other words, how many firms are left standing after one year, three years, five years, or longer. By that measure, Koskinen said, Wisconsin looks a lot better. Here are some of his top-line findings:

  • Wisconsin is 17th among the 50 states in private establishment growth in the past decade or so.
  • Wisconsin is second best among the states in “firm exits,” which means young companies that have gone out of business.
  • Wisconsin is 16th among the states in net business creation, which is tied with California.

That last statistic may be the most telling because it explains why startup data alone is only part of the picture. It suggests that while Wisconsin is down the 50-state list in raw startups, it’s in the top third of the class when it comes to keeping them alive.

That’s a credit to the steady, long-term expansion of private and public programs in Wisconsin that have not only embraced startups, but collectively increased the chances of those companies doing well over time.

One cog in that system has been the Wisconsin Governor’s Business Plan Contest, which was established in 2004 and is entering its 17th year. More than 3,900 entries have been received over time from 300-plus communities around the state. About 400 of those companies have reached the finalist round over time, raising about $200 million in angel and venture capital and creating hundreds if not thousands of jobs.

Finalists have also received about $2.4 million in cash and “service” prizes, such as donated office space, legal counseling, accounting assistance, marketing expertise, information technology support, and more. It’s all a testament to the larger support system that has grown in Wisconsin, especially in recent years.

The Wisconsin Technology Council, which has produced the contest with the support of private sponsors and the Wisconsin Economic Development Corp., recently surveyed the 200-plus finalists from the period beginning 2012 and ending with 2019. Nearly 77 percent are still in business, which is well above U.S. survival rates for young companies.

By the way, the last time the Tech Council conducted such a survey, finalists from 2004 through 2011 almost showed a 77 percent survival rate.

That’s not just because of the contest, of course, but the competition has been a portal to other assistance and services available in Wisconsin that weren’t necessarily in place years ago. It takes a village to raise a startup.

The deadline to enter the 2020 contest, which is conducted in three main stages, is 5 p.m. Jan. 31 at About 250 well-chosen words will get entrants started; about 100 judges will help to make selections over time. The four categories are Advanced Manufacturing, Business Services, Information Technology, and Life Sciences. Contest mentors can help along the way.  It’s free to enter. Some public information sessions are scheduled for later in January.

Wisconsin is a good state to start a business and an even better state to succeed at doing so. Young companies, or simply people with an idea for doing so, can get a head start by entering the Wisconsin Governor’s Business Plan Contest.

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