Hatching a Business

Startups learn to fly in challenging environment

Wisconsin was recently ranked dead last nationwide in business startup activity. While some take issue with what the ranking measured, the fact remains that Wisconsin isn’t exactly known for churning out innovative new companies.
Embryo
BizStarts Milwaukee is a nonprofit that assists entrepreneurs with starting and growing their businesses. Its BizForge startup resource center was launched in 2014 to offer coaching, programming and other resources for budding companies and allow them to work together in a collaborative space.

“Our program helps all entrepreneurs at any level. Anyone wanting to start a business can come to us,” said Jacquin Davidson, executive director of BizStarts.

Davidson is uniquely qualified to offer advice to the nearly 200 startups BizStarts actively works with, since she spent 35 years running businesses herself. By BizStarts’ count, it has created 182 new jobs since January, and more than half of its entrepreneurs are people of color.
“Our goal is to help create jobs, for them to stay in Milwaukee or the M7 region, and for them to feel successful,” she said.
Milwaukee could improve its startup ranking if entrepreneurship were more frequently presented as an option for youth to pursue, she said.
“The community has to embrace the importance of having smaller businesses,” Davidson said. “These are newly created jobs and they’re going to be sustainable.”

BizStarts has also been working for the past year to try to break down some of the silos in Milwaukee’s startup community and forge more collaborative relationships with other startup organizations.

“Honestly, we’re not competing, if everybody really takes a step back and looks at it,” she said. “We’re just working at different levels.”
One of the companies that has excelled with the help of BizStarts, she said, is BrightLife Innovations. The company, founded in 2012, offers one-touch video conferencing for senior living communities, to connect residents with loved ones or patients with doctors. BrightLife has successfully placed its product in several local senior living communities.

“I personally experienced the frustration of not being able to visit a loved one in a senior living community,” said founder Josh Silldorff. “That led me to start BrightLife to solve that problem so other people wouldn’t have to deal with that.”

BizStarts has helped Silldorff tailor his message to potential investors and has answered his questions along the way.

“They understand the problems that we solve and they go out of the way to make introductions,” he said. “It’s just been fantastic what they’ve been able to do.”

As for Milwaukee’s startup community, Silldorff has learned about many of the organizations by chance.

“When you are the founder and you’ve got your head down and you’re just so focused on your business, even if there’s a lot going on, it’s hard because unless they’re extremely visible, you don’t even know they exist,” he said. “I think it’s just a matter of making people aware of all the resources that are out there and how great they are.”

Incubation
Startup Milwaukee is another entrepreneurship organization that has gained some traction, with several programs. Founder Matt Cordio created the community in 2011 out of necessity as he tried to start a technology company.

“It started out of a need I personally had, which was to get more networked into the community and really help me find a technology person,” Cordio said. “We’ve been very opportunistic as we’ve grown Startup Milwaukee to really try to fill gaps that we’ve found.”

SUM’s entrepreneurial skills accelerator, The Commons, aims to help university students develop the skills they need to start a company or work in an existing company, from startups to corporations.

“Our main focus is on: Do these students learn, and are they going to either start their own company, or are they going to work in innovation in an existing company or are they going to work at a startup?” Cordio said. “One of our other big goals is, can we retain this entrepreneurship talent in the region?”

Startups have a long road ahead, and success is defined differently by each one. Some want to be acquired, some want to attract investors, and some want to bootstrap the company.

Each startup community or program also has its own goals. Some accelerators and incubators take an equity stake in the companies they work with, while others raise private seed funding or apply for public grants.

“The common theme between all accelerators is they’re providing some sort of baseline program structure that’s educational in nature,” Cordio said.

“They provide access to mentors and connections for companies or teams that are participating in the program, and they take place over a defined period of time.”

“Ultimately, maybe some of these programs do compete, but … I’ve not really heard of several companies getting offers from other accelerators and having to make a choice between them,” he said.

RentCollegePads.com, a college housing locator website based out of Startup Milwaukee’s 96square co-working space, is one Startup Milwaukee success story. Founder Dominic Anzalone was sitting by himself at a desk in Whitewater just two years ago. Now he has a team of about 10 employees, Cordio said.

“What we’ve done is provided him with the infrastructure, connections and I think a lot of the stuff that he needs. Particularly a cheap place to have an office,” he said.

Another is Seiva Technologies, a company that was put into motion after a Marquette engineering and a Marquette business student met each other through The Commons in January. Seiva, which officially launched in June, makes a technology that helps physical therapists evaluate patients by measuring the internal biometrics of muscles.

“Our design and solution is really to assist the therapist in the clinic so that they can understand internally what is going on with their patients while using their schooling and technology on the external end,” said Andrew Hampel, co-founder and chief executive officer.
Seiva this month made its first sale, and is getting ready to launch a pilot program with several local clinics. The rapid development of the company was helped along by The Commons.
“We’ve been able to call on them anytime we face challenges,” said Sam Wesley, co-founder and head of marketing. “There’s an open area for us to test our idea, get feedback, get contact with individuals we weren’t able to before, because it pools talent. We’ve been able to knock out some crucial things a lot quicker because of it.”
“Being in a place where entrepreneurs can come together, and I know a lot of idea sharing goes on from the people that are there, that’s the impact of putting people in the same place,” Cordio said.

Mary Pellettieri is in the process of opening a commercial kitchen for her startup, La Pavia Beverage Co.

Hatching
The first prototype for Somna Therapeutics’ innovative acid reflux device, the Reza Band, was basically a wad of tissue attached to a rubber band.
Its inventor, Dr. Reza Shaker, chief of Gastroenterology and Hepatology at the Medical College of Wisconsin, created the device in 2010 when a patient with severe acid reflux ran out of options and he thought pressure on her neck might help ease her symptoms.
When the crude prototype worked, the company’s founders met with serial Wisconsin entrepreneur Tom Shannon to learn about the process of commercializing a product. Shannon guided Somna, which was officially founded in March 2012, through the tedious three-year U.S. Food and Drug Administration approval process, which included lab clinical studies, clinical trials, and an intellectual property search, said Nick Maris, president and chief executive officer of Somna.
“It’s going to be a huge company,” Shannon said. “The science is fantastic and it takes reflux…and it just destroys it.”
A major challenge for the startup was funding its operations while awaiting approval. It just raised its fourth round of seed funding through Shannon and a team of investors.
“It’s a lot of pressure because there are moments or things that could happen that point you to stopping the business,” Maris said. “We haven’t made it yet. I’ll know we make it when we are financially operating on our own dollar. I’ll also know we’ve made it in a big way when the Reza Band is a standard tool in the toolkit of doctors.”
Now that the Reza Band has FDA approval, the company has been focusing on its path to commercialization in the $54 billion acid reflux market, and adding employees to ramp up its sales and marketing efforts. Somna, which now has 12 employees, started selling the product on April 1.
“If you can possibly get into a market where there is a pent-up frustration to not only be receptive for a new idea, but actually be thirsting for a new idea, then you’re in a good spot,” Maris said. “The patients were people that were on these pills and the pills didn’t work.”
Time and money are key in startups, he said. The company needs to go faster and bigger right now.
“It’s a lot of effort for what feels like a little amount of success,” Maris said. “But you just put your head down and keep grinding.”

Learning to fly
Some of Milwaukee’s startup communities are focused on particular sectors, like water or food and beverage.
The BREW, the global seed accelerator created by Milwaukee-based The Water Council, is getting ready to start its third round of the program. It selects companies from several phases of the startup process that have a water technology that is marketable.
“We like the fact that there’s one or two that are that early idea,” said Elizabeth Thelen, director of entrepreneurship and talent for The Water Council. “One of the biggest assets of the program (is) the startups themselves. So as they work together and share their experiences, that’s why that is really helpful. It’s not just that the people in the later phases are the only ones coaching on the floor. It really does go both ways.”
The BREW’s first batch of companies included Vegetal i.D., which the incubator has helped through network contacts.
“It’s kind of the one-call deal,” Thelen said. “Instead of 10 calls to get to the person you need, we can help them with one phone call.”
Vegetal i.D. was a non-traditional participant in the BREW. The company is based in France and has its U.S. headquarters in New York.
But it was interested in launching a Milwaukee arm in 2011 and wanted to make contacts locally, so it made sense to accept Vegetal to the program, Thelen said.
Brennon Garthwait, who serves as the company’s boots on the ground in Milwaukee, had recently completed the Launch Pad incubator program at the University of Wisconsin-Whitewater.
“We really weren’t that established. We had projects here but there was still a lot of acclimation I guess you would say to get used to the way business is done in the U.S. versus in France,” Garthwait said. “(At the Global Water Center) I can network from my desk.”
Vegetal has used the BREW’s resources, including office space, a $50,000 grant and a broad network of contacts, to create a pilot program in cooperation with the Milwaukee Metropolitan Sewerage District. On MMSD’s roof, Vegetal is testing its storm water runoff solution, which diverts rainwater into irrigation instead of into the sewer system during potential flooding events.
“The Water Center’s piece, albeit kind of third party to this, is pretty much the reason this (pilot project) happened,” Garthwait said. “The level of value that we’ve gotten from being in Milwaukee and just the Water Center has been a huge boon to our company. The accelerator program really helped us focus our efforts.”
After more than 20 years of brewing experience at companies like Goose Island in Chicago and MillerCoors in Milwaukee, Mary Pellettieri decided to start making her own bitter concentrate sodas and formed Milwaukee-based La Pavia Beverage Co. last year to make Top Note Tonics.
The company is in the process of opening its own kitchen space in Milwaukee’s startup-centric Lincoln Warehouse after moving from shared-use food processing incubator Watertown Farm Market Kitchen. Last year, Top Note sold about 120 cases of its beverages, and Pellettieri hopes to double that number this year.
“I was in a really good place to see operations, marketing, logistics, the whole piece altogether. I always wanted to be an entrepreneur and I was always in beverage,” Pellettieri said. “It’s pretty exciting to build a kitchen and do what you want with it.”
She has networked with groups like food and beverage cluster FaB Wisconsin and the now-defunct Milwaukee chapter of Startup Chicks to network and grow Top Note, and plans to apply for FaB’s new incubator, FaBcap.
The Milwaukee market can be tough for startups, especially for food and beverage companies that want to get into grocery stores, she said.
“There seems to be a lot of enthusiasm for local stuff, but it’s still very hard. That’s not the only qualifier to get in the door,” Pellettieri said. “The demand has to start obviously with the customer. Distributors and retailers need to have their doors open to the smaller players.”

Brennon Garthwait with Vegetal i.D.’s storm water runoff solution on the roof of MMSD.

Startup helpers
Milwaukee plays host to a growing number of startup communities, incubators and accelerators.
• BizStarts Milwaukee–BizForge
• Crowds.io
• FaB Wisconsin–FaBcap
• Gener8tor Milwaukee
• Global Entrepreneurship Collective–Revolution Labs–VictorySpark
• Mid-West Energy Research Consortium – WERCBench Labs
• Milwaukee County Research Park–Technology Innovation Center
• Startup Milwaukee–96Square | + Innovation in Milwaukee–The Commons
• Scale Up Milwaukee–Scalerator
• The Global Water Center–The BREW
• Wisconsin Women’s Business Initiative Corp.
• University of Wisconsin-Whitewater Launch Pad
• Ward4

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Molly Dill
Molly Dill, former BizTimes Milwaukee managing editor.