Is Wisconsin really in the cellar when it comes to new business creation?
Some local entrepreneurs say a study that shows startup activity in the state lags behind every other state in the U.S. just can’t be true while others say politics and outdated attitudes are indeed holding back progress.
Wisconsin remains dead last in business startup activity, for the second year in a row, a report by the Ewing Marion Kauffman Foundation says, even though nationwide, entrepreneurial activity grew for the second straight year.
The Milwaukee area — the only Wisconsin metro area on the list — is second to last among the 40 cities ranked, ahead of only Pittsburgh.
The gloomy analysis for the state persists even as Madison wrapped up the eight-day Forward Fest celebration of entrepreneurs, and even as new business accelerators were announced in Madison and Beloit.
“I’m surprised. You don’t see Wisconsin ranked dead last in any other category that I can think of,” said Pitt Fagan, vice president of data engineering for Earthling Interactive, who commented after Forward Fest’s closing social gathering Thursday evening on the Capitol Square.
But Fagan said Madison residents may have a “skewed” view.
“There’s a tremendous amount of action in Madison, specifically,” and “a mixed bag” elsewhere in the state, he said.
Preston Austin, a co-founder of Forward Fest, said he thinks Wisconsin deserves to get a black mark.
“Wisconsin political leadership is obsessed with issues not related to economic growth,” said Austin. He said the state Legislature has preempted the rights of local communities to make their own decisions on issues ranging from lodging to wage-and-hour laws.
“The Republican Legislature needs to get out of the way,” Austin said.
Montana, Nevada, and Wyoming were the top three states in the U.S. for entrepreneurship; Texas was No. 1 among the 25 largest states (including Wisconsin) and fifth, overall.
The figures are based on three metrics:
Rate of new entrepreneurs — the percent of the adult population that started a company in a given month. In Wisconsin, that’s 0.19 percent, the Kauffman report says, compared with 0.5 percent in Montana.
Opportunity share of new entrepreneurs — the percent of new entrepreneurs who opened a business because they saw a market opportunity, not because they were unemployed and needed work. That was 74.19 percent in Wisconsin compared with over 90 percent in Ohio, Nebraska and North Dakota.
Startup density — the number of startups per 1,000 businesses. Startups are identified as companies less than one year old, with at least one employee in addition to the owner. Wisconsin’s startup density is 57.9 per 1,000 companies while the figure for Nevada and Florida was over 100 per 1,000 companies.
Some government and business leaders say the analysis is far too limited.
Mark Maley, communications director for the Wisconsin Economic Development Corp. (WEDC), said startup activity is not the only relevant measure.
“(The report) is overlooking other aspects of startup success, such as wages, employment and, most importantly, the long-term success of startups in each state,” Maley said.
He said Wisconsin was seventh highest in the number of companies started in 2007 that survived at least six years and the state was No. 10 in the 10-year survival rate of businesses that started in 2003, according to 2013 figures from the U.S. Bureau of Labor Statistics.
Similarly, a report by the U.S. Small Business Administration shows 41 percent of companies that opened in Wisconsin in 2002 were still operating 10 years later, Maley said.
Tom Still, president of the Wisconsin Technology Council, said longevity is important to the economy.
“Would you rather have 100 startups with an average lifespan of two years or 80 startups with an average lifespan of five years?” said Still.
He said Wisconsin has at least 68 business accelerators, incubators and co-working spaces that give companies a stronger start. In the Milwaukee area, they include energy-based WERCBench Labs and the Water Council’s The BREW.
“The amount of resources available to entrepreneurs in Wisconsin is at an all-time high,” Still said. “There are lots of places for entrepreneurs to go and find help.”
Bunker Labs and gBETA add accelerators
“Our program is focused on providing veterans with world-class mentorship, access to investment capital and assistance in acquiring paying customers,” said Michael Ertmer, executive director of Bunker Labs Wisconsin.
WEDC is providing a $95,000 grant to match private-sector contributions including those from JPMorgan Chase & Co.; ATT Wisconsin; and UW-Madison’s University Research Park.
According to the Institute for Veterans and Military Families at Syracuse University, when World War II veterans came home, 49 percent started their own business. Among today’s veterans, 25 percent say they want to start a company but only 6 percent do, Bunker Labs said.
Bunker Labs is a nonprofit based in Chicago with 12 affiliates nationwide, including the one in Madison.
The Innovator Academy is taking applications through Sept. 6 and is free for veterans and $955 for others.
Ertmer expects to start with 10 startups. It will be the first Bunker Labs program to get any public/taxpayer financing, he said, and the first to offer grants or investments in companies that complete the program.
“Other Bunker Labs chapters are eager to build on the success of (the Wisconsin affiliate) breaking the seal for obtaining city/state/federal financial support,” he said.
Meanwhile, gener8tor — with full-scale accelerator programs and an early-stage gBETA version in Madison and Milwaukee — says it will expand gBETA to Beloit, with meetups this fall toward a full gBETA offering.
Gener8tor co-founder Troy Vosseller said the accelerator, founded in 2012, has invested in 42 companies that have since raised more than $80 million and created more than 400 jobs.
But Vosseller said it’s time for Wisconsin to “change our culture of risk aversion and non-compete agreements trapping talented, would-be entrepreneurs inside established corporations.”
Cuts to the University of Wisconsin budget are also damaging, said Kelly Hiser, CEO of Madison music startup The Rabble.
A Pittsburgh native, Hiser came to the UW-Madison to get her doctorate in musicology and stayed, starting her business with help from introductions gained through UW and other local connections.
Budget cuts that cause faculty members to flee hurt not just UW but the entrepreneurial community, she said.
“Stories like (mine) are not going to happen,” Hiser said.