State tech leaders say another dead-last startup ranking is 'wake-up call'
8/26/2016

Wisconsin tech leaders say the state’s failure to break out of its dead-last ranking in startup activity should be a “wake-up call” to policymakers.

But one of the researchers behind the rankings says the state shouldn’t panic, noting the numbers are just one piece of the puzzle. The rankings from the Ewing Marion Kauffman Foundation came just as the Madison area was celebrating entrepreneurship and technology through its weeklong Forward Festival.

And for the second consecutive year, Wisconsin ranked 50th in the nation.

“It’s going to take time to move the needle,” said Matt Cordio, the co-founder and CEO of Startup Milwaukee. “And it’s good we’re talking about it every year so we’re reminded we should be doing more.”

The rankings largely focus on new business creation in Wisconsin, finding the state’s startup density is significantly lower than any other state; it also ranks 49th in its rate of new entrepreneurs.

A separate “Main Street” ranking from the foundation ranks Wisconsin 6th when looking at survival rates of small businesses.

“What that tells you is Wisconsin is not encouraging new entrepreneurs, but they’re keeping small businesses around very well,” said Kauffman Foundation program officer Evan Absher.

Aaron Hagar, WEDC’s vice president of entrepreneurship and innovation, pointed to those Main Street numbers as a sign that the state’s startups are more likely to stick around.

“I think it just doesn’t capture what strengths we have,” Hagar said of the rankings. “We have a very robust ecosystem that we saw at Forward Fest this week.”

Today’s startup numbers led Assembly Minority Leader Peter Barca to call for a jobs summit, saying the Legislature’s “lack of action” on economic development this past session will “cost our economy dearly over the long term.”

Dems, he said, laid out a series of proposals in the past legislative session aimed at encouraging entrepreneurs.

“While other states are recovering from the Great Recession and entrepreneurship is soaring, Wisconsin is failing,” the Kenosha Dem said. “Gov. Walker and legislative Republicans have made it their priority to focus instead on efforts to consolidate their power and reward wealthy donors.”

Gov. Scott Walker’s office did not immediately respond to a request for comment.

The numbers also sparked a discussion among tech leaders on what the state should be doing to boost startups.

The state, said Wisconsin Technology Council President Tom Still, has some “obvious challenges.” Those include demographic ones, such as the state skewing older than others and having fewer immigrants. And they include its history of manufacturing and agriculture, as it’s harder to start a business in those capital-intensive fields.

But Wisconsin would benefit from ensuring it does all it can to encourage entrepreneurship, Still said, including by ensuring non-compete laws aren’t strengthened, as one bill sought to do last session.

It also needs to continue to ensure it grows the amount of angel and venture capital investments in the state, Still said. One way of doing so, several tech leaders noted, is making investments into startups more attractive by expanding the amount of tax credits for investors.

WEDC, some noted, did the opposite when it moved money allocated toward those tax credits to a program aimed at the state’s legacy industries.

“The signal that it sent as a state was that we’re not interested in entrepreneurship,” said Steven Deller, a UW-Madison economist whose research has slammed the state on its aiding of startups.

WEDC’s Hagar said the agency did so because the tax credit program was once again underused, as it has been for years. WEDC, he said, made sure any money shifted away from that program would otherwise be unused.

“The idea that we’re somehow taking resources that would be used by entrepreneurs is absolutely not the case,” Hagar said.

Some took issue with the rankings, as they focus only on business formations instead of how well those startups are doing. The success of, say, NeuWave Medical getting acquired wouldn’t be reflected in the numbers, nor would the tens of millions of dollars that SHINE Medical Technologies has raised.

Others said the rankings don’t show what they’re seeing on the ground.

Anne Smith, the co-founder at the Wisconsin Law and Entrepreneurship Clinic, noted she participated in an Uber program yesterday where entrepreneurs got to pitch their ideas to people like her.

“I thought I would see repeats of people that I somehow knew through the clinic, and I didn’t,” Smith said. “So it feels like there’s a lot of activity going on around here, and I’m surprised by the fact that we rank so low.”

And Scott Resnick, the executive director at Madison’s StartingBlock, said the numbers are likely dragged down by some parts of the state that aren’t performing as well as Madison. A recent Brookings Institute study, for example, rated Madison among the top in the nation in high-tech job growth, while Milwaukee ranked near the bottom.

“Do I ever like seeing Wisconsin last? Certainly not,” Resnick said. “But I don’t necessarily believe it’s reflective of the ecosystem we’re building here in Madison.”

See the Kauffman rankings:
http://www.kauffman.org/microsites/kauffman-index/rankings/state?Report=StartupActivity&Indicator=Rank

-- By Polo Rocha,
WisBusiness.com



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