Madison lawmakers proposed a new venture capital plan last week, the latest step in their two-year slog to help create an entrepreneurial renaissance.
Meanwhile, groups of entrepreneurs, mostly concentrated in Madison and Milwaukee, continue their attempts to spark that renaissance from the ground up. And they’re using a new “lean start-up” method that’s a departure from the traditional formula used by young companies.
Both efforts are working under the shadow of a dismal record for the state.
The most recent measure – a report by the Ewing Marion Kauffman Foundation – shows Wisconsin ranked among the worst-performing statesfor its rate of entrepreneurial activity, which the report said has declined in the last decade.
The bipartisan group of lawmakers last week unveiled a new proposal, which would create a “fund of funds” and hire a manager to invest in existing venture capital funds. The state would in vest $25 million and require the funds to raise $50 million more, meaning that a total of at least $75 million would be available for investment in high-potential state firms.
The proposal follows Gov. Scott Walker’s announcement in February that he included $25 million in his proposed budget for such a plan.
The debate over how the state should handle a venture capital plan has already been rekindled.
Two Democratic legislators, Assembly Minority Leader Peter Barca of Kenosha and Sen. Julie Lassa of Stevens Point, have said they will introduce their own proposal because $25 million is not large enough to be meaningful.
Adding any new funding for start-ups is always a good thing, said Forrest Woolworth, co-founder of Capital Entrepreneurs and chief operating officer of PerBlue, a Madison gaming start-up.
The venture capital bill “could have an immediate impact on existing start-ups in Wisconsin that are in need of funding, and has the potential to enable even more new companies to form,” Woolworth said.
But he and other entrepreneurs aren’t waiting around for lawmakers to finally hammer out a plan.
Most are in some way plugged into a host of entrepreneur-led groups and support organizations focused on incubating, accelerating and funding young companies, and providing networking opportunities for their owners.
Many entrepreneurs say such efforts will be a force for economic change in Wisconsin in coming years.
“We know how entrepreneurial communities get built – by entrepreneurs from the bottom up,” said Greg Meier, a Milwaukee entrepreneur who is director of VETransfer Inc., which helps accelerate veteran-run start-ups. “The entrepreneurs in this community are bonded together more than any time in the last decade – we are collectively working to put Wisconsin on the map and grow our community.”
Entrepreneur-led groups like Capital Entrepreneurs and Startup Milwaukee are organizing networking events. The largest of these is Capital Entrepreneurs’ Forward Technology Festival, a 10-day event held in August that incorporates a range of events.
Accelerators like Gener8tor, VETransfer and Victory Spark, and other groups like BizStarts Milwaukee, are training entrepreneurs and helping them secure funding. Collaborative work spaces like Milwaukee’sBucketworks and Milwaukee Makerspace, and Madison’s Sector67, run incubators and offer tinkerers, programmers and others places to meet like-minded people.
Many are junking business plans and five-year financial forecasts for a new technique called the lean start-up method.
Developed in Silicon Valley and only a few years old, the method was highlighted in Steve Blank’s article titled“Why the Lean Start-up Changes Everything” in the May issue of the Harvard Business Review.
Advocates say the new approach is changing the face of Wisconsin’s start-up culture by encouraging businesses to identify customers early on and fail fast if they don’t find them.
“There’s a huge group of people evolving here – and they’re creating businesses,” said Joe Boucher, a Madison lawyer who works with start-ups. “I have a hard time believing that, relatively speaking, we’re falling way behind our peers.”
The collaborative work spaces and lean start-up methods have impressed the leaders of BioForward, the trade organization for the state’s bioscience industry, and the group is looking at ways to replicate them, said executive director Bryan Renk.
Meanwhile, lawmakers are trying to determine whether the state will create a venture fund.
The latest proposal excludes biotech from the list of industries the state-sponsored fund could invest in. That comes despite the University of Wisconsin-Madison’s position as one of the biggest research institutions in the country, with more than half of its $1 billion-plus of research spending typically going to life sciences.
The proposal would avoid some political land mines by creating a committee of officials from the Wisconsin Economic Development Corp. and the State of Wisconsin Investment Board that would choose the fund’s manager, with SWIB officials holding a controlling share of the committee seats.
The fund’s structure would insulate its investments from state officials and any improper political influence. The trade-off is another layer of cost.
The lawmaker’s debates are not stopping the state’s young entrepreneurs.
“You’re just hoping with all these smart kids you have a normal curve and a few pop out as headliners,” Boucher said.