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25Apr

Wisconsin, we have a business startup problem

By Portage County Business Council

Original published by the madison,com from Tom Still

Wisconsin has a business startup problem. Despite the buzz in Madison and a few other communities, there are far too many places in the state where entrepreneurship is still just a fancy word versus economic action.

The reasons are somewhat easily explained: manufacturing and agriculture are capital-intensive and therefore not always startup-friendly; the labor force is slightly older and less educated than the U.S. average; rural Wisconsin is barely recovered from the Great Recession; and a low immigration rate works against Wisconsin because newcomers are more likely to start a business than native-born Americans.

While Wisconsin has a much higher business survival rate than the national average, and it has recorded steady progress in the subset of tech-based startups, the overall startup count remains low.

How low? The Ewing Marion Kauffman Foundation reported in 2015 that Wisconsin was dead last among the 50 states in its startup rate per capita. Yes, that’s behind Mississippi, West Virginia, South Dakota and a few other places that many people would see as less vibrant overall than Wisconsin.

One might quibble over the methodology of such reports, but few experts would dispute Wisconsin is in the bottom third of the 50 states in startups no matter how the numbers are sliced.

We need to own that fact while continuing to chip away at both the perception and the reality.

With a growing number of resources for emerging companies in place, both at the state, academic and private level, Wisconsin is poised to do better. Increasingly, in communities such as Madison, the Milwaukee area, the Fox Valley and parts of western Wisconsin, there are events, networks and support systems in place.

There are also more investment dollars available, as recent reports by the Wisconsin Technology Council and others have charted.

In the first quarter of 2016 alone, there were nearly 30 angel and venture capital deals reported, with a total value of about $50 million.

That’s much less than the nation’s leading venture capital states, which include Michigan, Minnesota and Illinois, but well ahead of about two-dozen states where the venture economy is almost nonexistent.

Wisconsin can become a better business startup state. Most of the hard work must be done within the state’s borders by leveraging public, private and academic resources. But there’s also much to be learned by asking experts with a national perspective.

That will happen in the coming months with a pair of forums involving the Kauffman Foundation, which is often cited as the nation’s leading source of information, best practices and more on the entrepreneurial economy.

It will begin at the Wisconsin Entrepreneurs’ Conference, June 7-8 in Madison, when Kauffman experts will describe what they’re seeing nationally to a crowd of entrepreneurs, investors and others. It’s important to note the Badger State is not alone in confronting the problem: Research indicates the number of new firms each year has been declining nationally for decades, and the drop accelerated during the recession that began in 2008.

Still, the Kauffman Foundation believes, there may be a turnaround in the works. “Despite this gloomy picture, there is reason to believe that we are about to enter a future with robust economic growth led by entrepreneurs,” wrote Wendy Guillies, Kauffman’s president and CEO in an April column.

She cited five factors that could increase chances for success: Adapt existing regulations to the new economy, reduce the opportunity cost for entrepreneurial experimentation, increase the labor market supply and velocity, decrease incumbent bias to support entrepreneurial entry and competition, and more data and research on entrepreneurship.

The discussion will continue June 9 at a summit on entrepreneurship spurred by Madison Mayor Paul Soglin, the Madison Region Economic Partnership, the Greater Madison Chamber of Commerce and the Tech Council.

A mixed audience including Wisconsin municipal leaders will be invited for a closer look at what works.

By looking closer at ourselves and inviting others to do the same, Wisconsin can create the conditions that will make its startup and “scale-up” economy more vibrant.