MADISON, Wis. – Trade missions are an economic development tool that have worked throughout much of history and still have a role today, even in an age when face-to-face meetings across borders can be easily supplanted by virtual talks.
Maybe it’s time for Wisconsin to incentivize a “trade mission” of sorts in search of venture capital.
Venture and angel capital investments in Wisconsin companies in 2024 were the lowest in any year since 2018. There was $358 million invested in 66 such deals last year, based on nearly complete figures from the Tech Council Investor Networks. That compared to a 2021 peak of $869 million in 140 deals. Wisconsin companies raised $640 million and $490 million in 2022 and 2023, respectively, with more than 100 deals each year.
Is the decline tied to a dearth on investment-worthy companies? Perhaps, but many veteran observers believe it’s more about dollars – especially at the high end of the spectrum.
Wisconsin’s average and median deal sizes are lower than surrounding states as well as the East and West coasts, mainly because startups here don’t have access to larger pools of money.
“We’re playing down here in this kind of $3 million per company (range), and on a national basis, it’s tens of millions,” said John Neis, managing director of Venture Investors LLC in Madison, which also has an office in Ann Arbor, Mich. “We’ve got to be in that game… or we’re not going to create the kind of companies we really want to create here.”
That’s from an investor whose firm is one of the largest of its kind in Wisconsin. If there were more funds like Venture Investors in Wisconsin, more deals would be syndicated and bigger checks would get written.
Neis was a panelist at a Feb. 25 luncheon in Madison, where two other speakers offered similar views on Wisconsin needing more later-stage dollars to bring to fruition those investments made at more modest levels.
Michael Thorson, co-founder and managing director of Inventure Capital in Madison, told the group he’s seeing better companies arise as the state’s investment landscape matures. Thorson, who is also an angel investor through Wisconsin Investment Partners, added that more outside venture firms can help those young companies grow – especially if they see a potential profit from a timely investment.
“We need to incent these bigger players to set up satellite offices in the state,” Thorson said.
Shayna Hetzel, vice president of entrepreneurship and innovation for the Wisconsin Economic Development Corp., noted a multi-generational effect when young companies land enough money to truly grow. That can lead to acquisitions, sales and mergers that create a pool of experienced entrepreneurs and a “serial” effect of more startups.
“In a small ecosystem, one big company threads the next (generation) of deals and founders that can then return as angels, as advisors, as founders again,” Hetzel said.
So, how can Wisconsin attract more venture dollars? Michigan and Ohio did so by creating larger “funds of funds” for investing in state-based companies.
In its 2023 report, the Ohio Capital Fund noted it had invested $139.9 million in other venture capital funds, leveraging $1.41 billion in private investments across 107 Ohio companies. It reported creation of 3,250 jobs at an average salary of $107,000 and $39.2 million in tax revenues. The internal rate of return was also strong.
Venture Michigan Fund I and II have invested $264.5 million across 56 companies, leveraging $1.71 billion in total private investment. It has claimed creation of 1,762 jobs with $128 million in one recent year alone. It was the brainchild of former Gov. Rick Snyder, a Republican.
With Republican leaders in the Legislature declaring they will rewrite major parts of Gov. Tony Evers’s biennial budget bill, perhaps there is room for incentives to entice name-brand VCs to match a state investment, to open a Wisconsin office and to bring their checkbooks with them. It would be a modern-day “trade mission” of sorts to investors elsewhere.
This would be a down payment on Wisconsin’s future as a startup haven – from life sciences to advanced manufacturing, and from artificial intelligence to innovation in agriculture. Wisconsin has done some creative things in the past to support its entrepreneurs; now might be another such moment.
Still is president of the Wisconsin Technology Council. He can be reach at tstill@wisconsintechnologycouncil.com.
