It seems not a day goes by when we don’t read about one creative new business being launched in Wisconsin and another one “graduating” from the rank of startup to that of established, independent operation. Our state’s economy continues to grow, albeit slowly, maintaining its recovery from the doldrums of the 2008 recession.
The environment looms ripe for innovation, imagination and investment in new and fertile ideas. Life seems good for the entrepreneur.
Wisconsin got a jolt, though, in mid-2015, delivered by the Ewing Marion Kauffman Foundation, which since 1997 has published an annual state-by-state ranking of business startup activity.
According to the Kauffman index, Wisconsin had fallen to 50th place – dead last in the nation – in overall entrepreneurship. Never a strong performer in this category, the state finally had fallen all the way to the bottom of the list.
In looking for silver linings and brighter horizons in response, some light did shine. By other measures than Kauffman considered, Wisconsin was far from last and has been steadily climbing through the ranks, year by year, in business development.
One particularly bright spot: According to a 2015 Dun & Bradstreet survey, Wisconsin ranks near the top of the heap – number two – in the ultimate success of its startups, which might be more important than totting up lots of launches with most doomed to die on the vine.
But focusing less on the number of new businesses (which includes every mom-and-pop corner cartel) and more on longer-term measures of new business survival, expansion and success, it appears Wisconsin leans more toward a leading position: We strive to succeed where others may strive to simply begin.
From start to finish
Startup business breeding grounds – known as incubators and accelerators – are by no means new concepts; in fact, these nurturing nurseries of innovation and entrepreneurship have themselves matured and spawned more of their kind in nearly every corner of the state, mirroring national trends. The conversation in 2016 and beyond will be about how rapidly and successfully these cradles of creativity can drive new business growth.
Briefly, incubators provide resources such as space, equipment and proven expertise to aid business development, speeding growth from idea to plan to execution. Accelerators are much more focused – typically they are structured programs that shake down a startup’s business model, polish its pitch, mentor its teams and often guarantee early, sometimes pre-series A, investment.
Many incubators and accelerators across the country are focused more on innovative ideas than on traditional business models. In Wisconsin, that is changing as recognition spreads that for every “unicorn” like Facebook and Uber, there are many manufacturing, services or even retail businesses that can lift local and regional economies, creating long-term stability and much-needed jobs.
According to Aaron Hagar, vice president of entrepreneurship and innovation for the Wisconsin Economic Development Corporation (WEDC), that organization “has invested in incubators and seed accelerators so that companies with diverse backgrounds from across Wisconsin can find new markets and expand locally.”
Both work best when they represent a consortium or network of public and private institutions, existing businesses and non-profits.
For example, the Mid-West Energy Research Consortium (M-WERC), headquartered in Milwaukee, began in 2009 as the brainchild of three universities and four industrial companies. That partnership has since grown to eight academic institutions and more than 30 member companies, and it has spawned its own incubator, WERCBench Labs – offering a three-month mentorship, training and resources program for energy-focused technology startups.
Madison and metro Milwaukee have the greatest concentrations of incubators and accelerators in the state, but the growing list of such centers for economic growth crops up in every region.
In Superior, as far northwest as you can go in Wisconsin, The Development Association is a nonprofit that works with new and growing companies in Superior and Douglas Counties.
Also on our far northern shore, the Ashland Area Enterprise Center is a physical space that caters to startups and micro-businesses with leased space and support services.
Tiny Gays Mills, in southwestern Wisconsin, focuses on building food-related businesses through its Kickapoo Culinary Center. Algoma, on the opposite side of the state and on the shores of the Door Peninsula, advertises much the same for its Farm Market Kitchen, “a northeastern Wisconsin incubator for food processing businesses that preserve the region’s agricultural heritage.”
Spooner, itself home to fewer than 3,000 people, boasts that its Northwest Regional Planning Commission is “one of the largest business incubation/acceleration networks in the nation,” with six regional locations that assist startup and expanding companies with facility, financial and technical assistance.
And so it goes, from Green Bay to Oshkosh, Wausau to Wisconsin Dells, in La Crosse and Eau Claire, in Jefferson and Janesville. Local governments and regional plan commissions team with universities and technical colleges where possible, and area businesses and financial institutions lend knowledge as well as cash.
A dream factory
One of the better-known names in Wisconsin new company growth is gener8tor, with two centers in what it calls “the entrepreneurial corridor in Wisconsin” of Madison (on Capitol Square) and Milwaukee (near the Third Ward). A fast-track seed accelerator founded in 2012, gener8tor is ranked among the top 15 in the nation. Each of its two annual 12-week programs accepts no more than five applicants with at least one guaranteed to be a Wisconsin-based company, and provides a level of individual attention and business mentoring that traditional investors can’t offer.
“As practicing attorneys, Joe (Kirgues, a gener8tor co-founder) and I both witnessed firsthand how there could be more coordination of entrepreneurial resources and mentorship and more efficiency in the process of obtaining follow-on financing,” said gener8tor co-founder Troy Vosseller. “We had long been admirers of the accelerator model, and thought there was a lot of merit in following that model here in Wisconsin. We coupled that with the experience and passion of Dan Armbrust and Dan Bader, who provided the initial support and funding to start gener8tor.”
Upon acceptance to the program, each company receives a $20,000 cash investment in exchange for 6 to 7 percent of common stock equity. Another $70,000 in guaranteed follow-on capital is promised upon completion from gener8tor and Angels on the Water. Wisconsin-based companies are guaranteed an additional $50,000 from the BrightStar Wisconsin Foundation. Companies also receive over $500,000 in deals and perks from vendors like SoftLayer, Rackspace, Amazon, PayPal and Microsoft. Over time, the goal is for gener8tor’s startup investments to pay dividends that create a self-sustaining fund for re-investment.
Non-financial assistance comes in areas of business planning and development, design, marketing, social media and sales. Alumni businesses are encouraged to become mentors in their own right for new gener8tor startups.
It certainly seems to work. To date, gener8tor states that it’s been responsible for 43 investments totaling $75 million in follow-on financing, helped to create 400+ jobs and helped to facilitate four exits.
Among gener8tor’s mentored businesses is Toronto, Calif.-based Tiz – which some might call a soooo-Wisconsin success story. Tiz allows for liquor stores, bars and restaurants to order directly from alcohol distributors via a SaaS (software as a service) platform.
“They’ve (gener8tor) really kind of kept us on track, very focused on our goals,” says Adam Newman, co-founder of Tiz, “and it’s not about just big goals, it’s about weekly goals, accomplishing just base hits to keep you moving along the way.”
Madison-based AkitaBox is another gener8tor-mentored SaaS firm, one that’s built on building. AkitaBox digitizes and stores as a searchable database masses of construction data including blueprints and schematics, equipment manuals, and maintenance records. The company already has documented 184 major commercial and institutional buildings totaling more than 12 million square feet.
“gener8tor connected us with people who filled our knowledge gaps in financing, product development and business planning,” said AkitaBox co-founder Luke Perkerwicz. “This advice was incredibly helpful. I truly feel that the growth of our company has been three times faster thanks to gener8tor.”
Twin Cities-based Prescribe Nutrition is another new company birthed from gener8ator’s womb, one that seeks to essentially do away with dieting by offering personalized, science-and-sense-based food and nutrition programs for those who are confused by the constant barrage of conflicting advice on what constitutes healthy eating.
The founders, Katie Jasper and Megan Morris, are certified nutritionists themselves who, they say, have charted their own journeys to nutritional health while treating and advising others. Unlike so many diet advisors, the partners claim, they possess the scientific knowledge as well as the personal, individual attention to explain the “whys” of your body’s healthiest needs and demands.
“I think if you really believe in what you do, it will shine through, and every day’s a new day,” said Morris, who is also chief operating officer.
Wisconsin’s industrial output is still its driving force, with manufacturing continuing to provide over 15 percent of all jobs – second in the nation. As such, it behooves the state to stay ahead of the pace.
To that end, Chippewa Valley Technical College (CVTC) in Eau Claire supports startup manufacturers focused on clean and advanced manufacturing technologies with its Applied Technology Center.
“One of the Applied Technology Center’s best features is its versatility,” said Tom Huffcutt, vice president of operations at CVTC. “It’s a great place for startups, but existing businesses also make use of our Equipment Access Program that allows them to use the high-tech equipment for product research and testing.”
The center features 38,000 square feet of incubation space, applied research facilities including a nanoscience lab, wetlabs space, a Class 100 cleanroom, advanced micro-machining technologies and – perhaps even more important – access to advice and support from faculty and local business leaders. CVTC offers its programs at 12 locations in its 11-county region.
Madison, of course, has long been a leader in biotechnology. More and more that leads toward industrial and intrinsically human applications – a meeting of soft and hard technologies in imaging, genetics and medical information. It may surprise some that Wisconsin is a national leader in startup software solutions that track medical data from patient to physician to health care and pharmaceutical provider.
Madison startups have driven diagnostic technologies no one could have dreamed of a decade ago. These technologies rely on hardware as well as software – there is no magic yet that measures malignancy without a machine, although a computer model may predict what a machine may not – and it still takes people interpreting technology to make a diagnosis.
Not to be outdone, Milwaukee relies on an ever-closer consortium of stakeholders to advance industrial and also medical technologies. Once competitors, Milwaukee institutions now collaborate to birth new businesses and technologies and help them commercialize more quickly.
At the 25,000-square-foot UW-Milwaukee Innovation Accelerator, Concordia University joins UWM and other stakeholders in spawning new business and biomedical solutions with a $1.5 million medical device prototyping lab, a mobile app lab, the Concordia drug discovery lab, a bioengineering lab and more.
At the Global Water Center, UWM, UW-Whitewater and Marquette University, along with a host of metro corporations (Rexnord, Badger Meter, A.O. Smith and many others) sponsor labs and office space dedicated to new business development. There, they promote and pursue a whole new paradigm of freshwater technology for a thirsty world.
“Startups from all over the world are applying to relocate to Milwaukee or Madison every year,” said Vosseller. “This shines an increasingly bright light on Wisconsin as a place where entrepreneurship happens.”