Panelist: Milwaukee companies not taking advantage of Act 255

By David Wise
WisBusiness.com

Milwaukee is lagging behind Madison in the number of high-tech startup companies benefiting from a tax credit program for angel investors and venture capital investors, a panelist at a Wisconsin Biotechnology and Medical Device Association breakfast discussion in Milwaukee said this morning.

The Angel Investor and Venture Fund Tax Credit program, known as Act 255, was launched in 2005 and provides up to $11.5 million in tax credits for angel investors and venture capital investors who fund certain high risk, high-tech startups.

Serigraph CEO John Torinus Jr., co-founder of Successful Entrepreneur Investors, said the program has been a “bonanza” for Madison and the biotech and medical devices sectors, but only of some help to Milwaukee and other business sectors.

He noted that of the 85 credits issued, 52 were for companies in Madison, while just 16 were from Milwaukee and the rest from other parts of the state. Of those, 36 went to biotech firms and nine went to medical device firms, while none went for advanced manufacturing, a sector eligible under the act.

With unemployment negligible in Madison and poverty in Milwaukee the 7th highest in the nation, more is needed here in the state’s largest city, he said.

“The problems with the state economy are over here and not in Madison,” Torinus said. “It’s really, really great to have this high-tech engine over in Madison roaring away … but we need that energy and that largess to spread to other parts of the state, in particular Milwaukee.”

Part of the impetus, he said, may lie with firms in Milwaukee coming forward with more requests.
Torinus also said that eligibility guidelines should be made more clear, as he’s worked with companies that he felt should have qualified, but did not. Another, however, was successful.

Torinus noted that few companies have been recruited to Wisconsin in the last 40 years, which strengthens the need to foster an entrepreneurial economy so businesses can start here and be retained as they grow.

DeWitt Ross & Stevens attorney Ron Kuehn, who lobbies on behalf of the WBMDA in support of changes to Act 255, discussed the need to educate the Legislature about changes the group is seeking to the act, such as raising the current cap of $1 million in tax-creditable angel investment per business to $4 million.
Kuehn described Gov. Jim Doyle as a person who “gets it” when it comes to knowing what government can do to help businesses, but took issue with Dems in the Senate.

Kuehn pointed to Doyle’s Accelerate Wisconsin proposal, a plan to boost high-risk start ups, of which many parts passed the Assembly, but died in the Senate.

He said it is important for members to educate the Democratic leadership in the Senate about the importance of programs like Act 255 and the necessary changes to it, saying they “don’t get it” at the level Doyle does, while Republicans tend to support such members.

Larry Wells, CEO of NovaScan, praised the program, saying the application paperwork was relatively easy for his company to file and that his application was accepted in three weeks.

Chandra Miller Fienen, a senior advisor to Doyle, gave an overview of the act and gave it partial credit for an increase in venture capital funding from $36.6 million in 2003 to $87.7 million in 2007.

Following the discussion, Fienen presented a $250,000 loan and $380,000 in grants to MPP Group, LLC, for assistance over three years in starting a pharmaceutical development company. Feinin also announced that the Department of Commerce certified the company as a Qualified New Business Venture eligible for investor tax credits under Act 255.