How can Madison become another Austin, Texas, or Silicon Valley, California?

Local technology company leaders say they’re not sure that it can — or that it should.

But they suggested several steps that could add momentum to the tech economy, such as:

Create tax breaks for companies that work with younger Wisconsin businesses.

Make more funding available to entrepreneurs, from government and corporations.

Persuade an East Coast or West Coast venture firm to open an office here.

Designate and publicize a medical technology corridor between Madison and Milwaukee.

The comments came at a recent roundtable discussion at Wisconsin State Journal offices, organized by the State Journal and Wisconsin Technology Council president Tom Still.

Still served as moderator for the panel, which included Zach Brandon, president of the Greater Madison Chamber of Commerce; Toni Sikes, CEO and co-founder, CODAworx; Kevin Conroy, president, chairman and CEO, Exact Sciences; Greg Lynch, partner, Michael Best & Friedrich and co-founder of the firm’s Venture Best Emerging Technology Practice; Mark Bakken, co-founder and chairman, Nordic Consulting and founder and managing partner, Madison HealthX Ventures; Liz Eversoll, founder and CEO, SOLOMO Technology; and John Neis, managing director, Venture Investors.

The Madison area has strengths to capitalize on, such as Epic Systems Corp., Verona, whose electronic health records software is used by clinics and hospitals serving more than half the U.S. patient population, and health information technology companies that have sprouted from former Epic employees.

But transforming into another Silicon Valley “would be a stretch,” said Sikes.

“We will not be another Silicon Valley,” Neis said decisively. For one thing, investors are hard to come by. Seventy-five percent of venture capital under management (money committed to funds in the prior eight years) is in California, Massachusetts and New York, Neis said, “and they invest 80 percent of the funds in California, Massachusetts and New York.”

Also, the Midwest’s major research centers, such as UW-Madison, the University of Michigan and the University of Illinois, were initially agrarian, or farm-based, when established in the mid-1800s and are not near big cities.

“So we have this inertia to overcome,” said Neis, whose firm is focused on early-stage funding. Founded in 1982, Venture Investors has $200 million under management. December 2014 was the 30th anniversary of the firm’s first investments, which included Promega, a Fitchburg biotech company that now has $360 million in annual revenues and operations in 16 countries.

Neis said Wisconsin could take a page from Michigan’s book. The state of Michigan has allocated $315 million to invest in entrepreneurs, and there are 31 active venture capital funds in Michigan with $1.2 billion under management, as of 2013. That compares with $25 million from the state of Wisconsin for venture capital and $339 million under management in Wisconsin, according to the National Venture Capital Association. “It really dwarfs what we have here,” Neis said.

“We’re getting our butts kicked by Michigan,” added Conroy.

A native of Flint, Michigan, Conroy said that years ago, the state of Michigan made a big push to move away from its dependence on the auto industry, and lawmakers from both sides of the aisle worked together to create seed funds.

Conroy said Wisconsin’s attitude toward start-ups has no clear direction. “It’s like the Packers going into the season saying, ‘Hey, guys, whatever you feel like (doing) today,’” he said.

Neis pointed to Renaissance Venture Capital Fund, with offices in Ann Arbor and Detroit. It invests in venture funds around the country and gets those funds to join in Michigan investments. By mid-2013, Renaissance said its initial investment of $16.7 million had produced nearly $300 million pumped into 20 young Michigan companies, according to a Forbes magazine article.

“Renaissance Ventures went around and said, ‘Hey, this is important,’” Neis said.

In Madison, attracting dollars from even three or four more investment funds could have a transformative impact, Neis said, especially if any were a regional office for East Coast or West Coast venture capital funds. “They would bring their networks (of co-investors). We need that kind of network,” he said.

One positive development has been “enormous growth” in investing in Chicago, Sikes said. Several of the Chicago venture funds are pumping money into Madison companies now, too, she added.

“Now, if we could do something about transportation (between the two cities),” Sikes said.

“I don’t understand what you mean, Toni,” said Conroy, with tongue in cheek.

“C-H-O-O C-H-O-O,” Brandon spelled, acknowledging their references to the $810 million in federal funds for a high-speed passenger train that Gov. Scott Walker gave back. It was to be part of an eventual Chicago-to-Minneapolis upgraded rail corridor.

“Because, believe me, that is a problem,” Sikes said.

“And a direct flight from Madison to San Francisco wouldn’t hurt,” added Brandon.

What’s needed is a clear partnership among government, academia and the private sector, attorney Lynch said.

With attitudes among some state legislators against Madison, that will be “a pretty challenging” hurdle, Brandon said. “You have to value and embrace Madison.”

When businesses like Exact Sciences succeed, other companies can benefit, Conroy said. Promega and Phillips-Medisize Corp., in Hudson, are among Exact Sciences’ suppliers. “So there is a huge spillover effect,” he said.

Companies in Wisconsin don’t have venture firms or other intermediaries introducing them to each other, Eversoll said. “There should be incentives for Wisconsin companies to work (with other) Wisconsin companies,” she said, so that larger, established companies might help newer companies test products or might be early customers.

A tax credit for conducting research and development with companies in Wisconsin would help, Eversoll suggested.

Conroy said even though the UW-Madison spends nearly $1.2 billion a year in research funding, the UW is at the bottom of the Big Ten schools in terms of research sponsored by corporations.

That makes it very difficult to conduct clinical trials of potential drugs and medical devices, said Conroy. He said it can take nine months to go through a review by a UW panel to allow a clinical trial while (the) “Mayo (Clinic) can get it done in two months.”

Bakken said with the health information technology growing in the Madison area as an outgrowth of Epic’s success, “the potential is huge and the time is right now ... Wisconsin has all those raw ingredients. But we need everybody to say, ‘Hey, are we all in or not?’”

Health care corridor

In the 78-mile-stretch from Milwaukee to Madison, much innovation is going on, from the Medical College of Wisconsin in Milwaukee and GE Healthcare in Waukesha and Madison to Epic in Verona, Brandon said. It could be the focus of a collaborative development effort, he said.

“If that corridor were in California, it would be on the front cover of every magazine,” he said.

“We should come up with a name for it,” Sikes said.

Epic’s prominence is starting to make investors more aware of Madison, several panel members said.

“It’s a calling card,” said Brandon. “But remember, don’t go all out on one business,” he added, referring to advice from Austin leaders who said that community diversified into technology after the computer hardware industry softened, going through boom and bust periods.

About the proposal being floated to split off the Madison campus from the rest of the UW system, the tech leaders — who met prior to announcements about the governor’s budget — said they had some concerns.

“In exchange for what?” asked Neis. He said state funds to the Madison campus would likely be cut. In fact, Gov. Walker disclosed last week that the UW System will get more autonomy but state funding will fall 13 percent over the next two years.

“I’m terrified about this institution eroding in its quality,” said Neis. “If we start losing top-tier faculty, we could see it erode very quickly ... Those of us who see the UW as an economic engine are very fearful of damage.”

“It would be crazy not to look at more autonomy (for UW-Madison),” Conroy said. “But on the flip side, there has to be a commitment to make the UW great.”

Panelists had differing views about trying to recruit companies to move to Wisconsin versus focusing on home-grown businesses. But they agreed on their ultimate goals.

“Everybody here is passionate about Madison, and we’re here to stay,” said Sikes.

“We’re passionate, we’re optimistic, and we feel there’s so much work to get done,” Neis said.

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Judy Newman is a business reporter for the Wisconsin State Journal.