Wisconsin slowly climbing its way into recognition as tech state

Tess Hatch, a young investor with Bessemer Venture Partners in their Menlo Park office, isn’t shy when she talks about the early stage landscape in Wisconsin. In fact, as she told a packed room in Madison this month, she and her colleagues often tell their portfolio companies to think beyond Silicon Valley and expand in the Midwest.

Why look to the heartland? With about $4 billion invested in more than 130 companies around the world, Bessemer wants to go where the business costs are reasonable and the talent and technology are first rate.

It’s a message that is slowly but surely getting across to investors outside Wisconsin, from as close as Chicago and as far away as California, as the cost of doing business in the nation’s largest urban centers skyrockets and high-quality pockets of innovation emerge in lower-cost cities in the Midwest.

While those same investors see challenges to closing deals in the Midwest, they also see advantages ranging from lower valuations compared to what they see on the coasts, access to research and development centers, and a customer base too big to be ignored.

That was a recurring theme at the Wisconsin Early Stage Symposium, held Nov. 14–16 in Madison, where scores of companies met with investors in three formal settings and informally through networking encounters throughout the conference.

The interest shown by out-of-state investors can be written off as anecdotal, except some harder data backs up the fact that Wisconsin is no longer viewed as flyover land.

In 2016, about one in five angel or venture capital deals in Wisconsin involved investors from other states, a trend that appears to be holding in 2017. That’s according to the Wisconsin Portfolio, a publication of the Wisconsin Technology Council that charts deal activity every year.

A national group that periodically ranks states according to their “new economy” quotient recently gave Wisconsin its highest marks since 1999, when it first started ranking the states according to 25 specific criteria.  

Wisconsin ranked 26th overall in the November 2017 index published by the Information Technology & Innovation Foundation, just behind Ohio, Florida, and Pennsylvania and just ahead of Nebraska, Missouri, and Idaho. Top-ranked states were Massachusetts, California, Washington, Virginia, Delaware, and Maryland.

In previous years, Wisconsin’s highest rank overall was 29th and it once stood as low as 37th among the 50 states. In the 25 categories, Wisconsin ranked as high as sixth for advances in eGovernment and as low as 43rd for foreign direct investment, a standing that is certain to change as Taiwan’s Foxconn Technology Group puts down roots in Racine County. It was 27th in venture capital, not stellar but at least in a second-tier class that includes many Midwestern states.



Parts of Wisconsin are still venture-poor. That’s especially true in the Milwaukee area, despite the emergence of some smaller corporate funds. The cure in the state’s largest city would be a corporate “fund-of-funds” along the size and scale of the Renaissance Fund in Michigan or Cintrifuse in Cincinnati. Foxconn has quietly signaled for some time it has interest in the venture class.

The Badger Fund of Funds, which invests in companies at the smaller end of the scale, has announced its first deal and formation of three regional funds so far. That will increasingly add to the state’s venture footprint.

Older, more established funds are far from finished. Baird Capital, Capital Midwest, and Venture Investors have remained active and, in some cases, are raising new funds to follow on the success of previous efforts. Finally, companies such as American Family, TASC, CUNA Mutual, and WEA Trust in Madison are making corporate investments, although not always in Wisconsin.

For years, the advice to young companies in the tech space was, “Go west, young man or woman,” to paraphrase Horace Greeley’s advice from an earlier time. Many still do, but others are discovering there is more than a fighting chance at making it close to home.

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