By Kathleen Gallagher
Milwaukee Journal Sentinel
From an entrepreneurial perspective, it was as if Wisconsin awoke from a long slumber in 2013.
Support for a vibrant start-up community, which many say is needed to boost the state’s mediocre business growth trends, finally appears to be gaining steam.
Last year, at least $150 million in venture capital was committed to state-based organizations, including $30 million for a long-delayed state-sponsored program.
Several relatively new groups — such as gener8tor, a for-profit group that trains start-ups — took key roles by providing programs and events to support entrepreneurs and accelerate the growth of young companies.
“It’s a good directional shift, but nobody should view this as the problem being solved,” said John Neis, managing director of Venture Investors, Madison. “It’s great movement, but we still have a long ways to go.”
Despite having 2% of the nation’s population, Wisconsin pulls in less than 1% of all U.S. venture capital investment, which acts as a gauge of high-potential entrepreneurial activity in a market.
But consider what gener8tor produced last year. The accelerator invested about $750,000 in 11 start-ups that went through its programs in Milwaukee and Madison. Those 11 companies created more than 50 full-time jobs in 2013, said Joe Kirgues, a gener8tor co-founder.
Entrepreneur-led groups in the state’s two biggest cities continue helping young companies to network and learn from one another.
Madison-based Capital Entrepreneurs attracted nearly 2,200 participants to 20 events during its 10-day Forward Technology Festival in August. Two months later, Startup Milwaukee opened 96square, the first for-profit co-working space in Milwaukee. The group also began mentorship and internship programs, and organized a Startup Weekend in November that launched 15 new companies.
Digital Fertilizer, a similar entrepreneur-led effort in the Fox Valley, formed in September and already has hosted a number of events.
Bigger companies like American Family Insurance, Menasha Corp. and others are mentoring and investing in Wisconsin start-ups. The nonprofit Milwaukee Institute, in partnership with the Wisconsin Economic Development Corp., is providing grants to at least five companies to help them develop high-performance computing capabilities.
“We’re seeing that there are more and more potential founders, employees, investors and corporate partners taking their time and effort to build a knowledge economy in Wisconsin,” Kirgues said.
Drawing outside investors
All of the activity is attracting more out-of-state interest.
Two Madison companies, Nordic Consulting Partners Inc. and Propeller Health, both raised money last year from investors outside Wisconsin.
New York-based Great Oaks Venture Capital LLC, founded by a Wisconsin native, has invested more than $3 million in 14 start-ups. The firm also started University Great Oaks, a program that works with students in a University of Wisconsin-Madison computer science entrepreneurship class and invests $20,000 in selected companies coming out of the class at the end of the school year.
Sanjeev Chitre, a Silicon Valley executive and UW-Madison alumnus, has continued the conversation he began in June at the Wisconsin Entrerpeneur’s Conference about starting a venture capital fund in the state.
Chicago-based Hyde Park Ventures and West Loop Ventures, and Icon Ventures, of California, have all been in Wisconsin looking at deals recently, Neis said.
Having more eyes on the scene will help it grow more sophisticated, said Milwaukee County Executive Chris Abele, who founded CSA Partners LLC, a venture capital firm that has as one of its goals bringing more companies to the area.
“The more competent the people who are looking, the harder it’s going to be to get by with flash and fluff,” Abele said. “There will be a higher demand for substance and results.”
Biotech investment cools
Wisconsin has a “healthy pipeline” of digital technology start-ups — the sort gener8tor favors — that are growing revenue and are ready for their next round of capital, Kirgues said.
Biotech, long a sweet spot for UW-Madison’s world-class research effort, didn’t see as much activity in 2013. But many were heartened to see the July initial public offering of Madison-based Cellular Dynamics Inc., which produces stem cells in industrial quantities.
Cellular Dynamics participated in the first robust market for IPOs in many years, and “it was great news to see them go public and trade well,” Neis said.
“While life sciences is a great long-term strategic play for Wisconsin, the real impact in the next one, two, three years is going to be on the information technology side,” said Paul Jones, co-chairman of the venture capital practice group at the law firm Michael Best & Friedrich.
When entrepreneur Dominic DiMarco returned to Wisconsin from Boulder, Colo., two years ago, he observed that many state-based investors were asking questions more suited to biomedical start-ups than to a more fragmented digital technology community.
“Now, the angel and venture capital groups understand the software start-up space,” said DiMarco, co-founder of MobileIgniter Inc., a mobile app company whose Lyft.io project is trying to simplify aero-imaging. “And the community has become much more visible and established, especially on Capitol Square in Madison.”
This year will likely bring a continuation of the advances made in 2013, Jones said. Several groups from outside the area are talking about starting “Wisconsin-centric” funds in the next year, and there are “some deals in the hopper that will be pretty impressive in terms of size and profile for Wisconsin,” he said.
A Wisconsin native, Jones returned in 2003 after working with start-ups and angel and venture capital financings in Silicon Valley and North Carolina. He views his return as a good decision.
“We’re on our way,” Jones said. “I feel really good about coming here.”
More than $150 million of venture capital funding was committed to Wisconsin-based groups in 2013.
Venture Investors, Madison, $80 million
State-sponsored venture capital fund, Madison, $30 million
4490 Ventures, Madison, $30 million
CSA Partners LLC, Milwaukee, $10 million
Brightstar Wisconsin Foundation Inc., Milwaukee, $7 million