Public Policy Bulletin Board
Last week, the Milwaukee Journal Sentinel reported that in 2011, Wisconsin companies received 40% less in venture capital investment than the previous year. Some may greet that news with a shrug, assuming that it’s just the consequence of a tough lending environment and slow moving economy. But the reality is venture capital investments nationwide rose 22% according to a MoneyTree Report by PricewaterhouseCoopers LLP and the National Venture Capital Association.
The report is just the latest news demonstrating how far Wisconsin is lagging behind the rest of the nation, including many of our peer states, in early stage investment. Why does that matter? It matters because entrepreneurs need money to grow. They need money to invest in new facilities, research and equipment to transition from a fledgling idea to a profitable business.
Consider that from 1980 to 2005, firms less than five years old accounted for all net job growth in the United States. This is according to a report released by the Wisconsin Growth Capital Coalition, a collection of organizations including the Greater Madison Chamber of Commerce that are committed to advancing a state venture capital bill this legislative session.
The report goes on to say that nationally, venture-backed companies accounted for 11% of all private sector employment. If Wisconsin were even able to capture the national average, it would mean more than a quarter-million jobs.
But as evidenced above, Wisconsin is not meeting the national average and is severely lagging behind our peer states in venture investment.
What is so unfortunate is that we have such incredible potential. This is especially true in the Madison region with the pipeline of talent coming from UW-Madison. More than $1 billion in research is taking place on campus – third most in the nation. The University is also among the leaders in number of patents issued. It is clear we are a region and state with a thriving entrepreneurial spirit. And yet, we have a low level of investment to foster these ideas into successful businesses. Equally unsettling, without the presence of early stage investment, we are losing this innovation to other states.
It is clear that to be competitive we need a state-leveraged venture program with the ability to invest across the full continuum of early stage capital, a strategy that more than half of the states across the country are employing with great success.
Wisconsin needs to catch up and truly support entrepreneurs and business start-ups. A public-private partnership utilizing a “fund of funds” model has proven effective and is worthy of bipartisan support.
For more information on the Wisconsin Growth Capital Coalition, visit the Wisconsin Technology Council’s website here.
-Filed by Kevin Little, Director of Public Policy