‘New companies create new jobs’

If the Milwaukee area is going to increase the number of jobs here, grow its tax base and give its workforce a chance to thrive, it is going to have to grow its own by encouraging entrepreneurs to start new companies here.

Historically, entrepreneurs who started companies in metro Milwaukee operated essentially on their own. Resources to help them in their startup venture were limited.

“When I started my company, I and many other entrepreneurs felt like an orphan,” said John Torinus, a Milwaukee entrepreneur and chairman of West Bend-based Serigraph Inc.

BizStarts Milwaukee Inc., a nonprofit that was launched two years ago, is working to change that. BizStarts helps entrepreneurs fine-tune their business plans, develop a market for their products or services and connect with angel and venture capitalists to help fund their startups.

BizStarts was formed to help entrepreneurs start or accelerate fast-growing, innovative companies that attract out-of-town investments and create significant numbers of family-supporting jobs in southeastern Wisconsin.

“Now, we’ve got a support system,” said Torinus, president of BizStarts. “(Entrepreneurs) know they are encouraged and cheered, and if they’ve got a good enough plan, we’ll go get some money for them.”

In the two years since BizStarts Milwaukee has been operating, the organization has identified 23 new local businesses that have received outside investments and have high-growth potential. BizStarts has been involved in about half of those companies, said Dan Steininger, vice president and one of the co-founders of BizStarts.

“We’ve either provided mentoring, connections to the right people, or capital,” he said. “We’ll be at 30 (companies) by the end of the year if we keep on the track we’re going on now, easily. Not all of them are going to make it, but a lot of them will, and those that do will create jobs.”

Torinus said BizStarts hopes to double the number of companies it is helping to start up next year.

“We’re doing about one high-growth startup a month, with outside capital, that has to sell its products to the outside area and have a global reach,” Torinus said. “We should set a goal where we double that in a year. I think we can start 24 companies in a year. Between (University Research Park in Madison) and us, we should each be able to start one and a half to two companies a month (on average). Could we start 50 new companies in Wisconsin per year? Sure.”

That goal will be attainable because of the marketable research initiatives coming out of the University of Wisconsin in Madison, the University of Wisconsin-Milwaukee, the Medical College of Wisconsin and other universities, as well as private companies, said Julia Taylor, president of the Greater Milwaukee Committee.

“An institute like BizStarts is important because we need expertise and experts that entrepreneurs can go to to get them off on the right foot,” Taylor said. “New companies make a lot of critical decisions in their first year. And to have access to people that have taken an idea and turned it into a publicly held company is invaluable.”

Lorrie Keating Heinemann, secretary of the Wisconsin Department of Financial Institutions, agreed.

“BizStarts is creating a visible source for entrepreneurs to tap into mentors who can help accelerate their companies,” she said. “This is about getting the right people connected to your company. They’re a great connecting organization. If (entrepreneurs) can tap into their expertise and connections, they can help grow a business much faster. It’s all about mentoring and connections.”

Culture change

BizStarts is about more than starting new businesses. It’s about creating a startup friendly culture, one where budding entrepreneurs are connected with experienced business owners who help fine-tune their plans, and ultimately provide financial resources for the best business plans.

“It’s a growth strategy. It is about changing the culture,” said Steininger, the former president of Catholic Knights and the grandson of Daniel Hoan, who served as Milwaukee’s second Socialist mayor from 1916 to 1940. “This economy (in Milwaukee) is not growing. We’re not creating new jobs. And why not? Because we’re not creating new companies. New companies create new jobs. It’s pretty apparent that if we don’t get this done, this region is in deep trouble. All of us have a stake in helping to get companies started and helping to create jobs.”

BizStarts has created several programs to encourage entrepreneurs. Its Venture Track program matches entrepreneurs who have high-potential ideas with mentors who help refine their business plan and connect with potential customers. The program later helps connect the entrepreneur with venture or angel financing.

“The mentoring piece is maybe the most important piece of what we do,” Steininger said. “There are 30-plus (mentors) that are signed up, seasoned business people. They will hold hands with the entrepreneur, make connections for them, crunch the business plan and help them get the courage to get started. That’s the heart and soul of what we do.”

BizStarts also conducts quarterly networking events and sends an electronic newsletter to more than 1,600 recipients. The networking events have helped several new companies get started simply because of the connections made there, Torinus said.

“We (collectively) know a lot of the people the venture capital space, investors, lawyers and educators, and we’ve got them all talking with each other now,” Torinus said. “They know each other, and they can help make connections for each other.”

The BizStarts web site (www.bizstartsmilwaukee.com), launched earlier this year, now includes entrepreneurial resources such as sample business plans and tips on how to develop the right “elevator speech.”

The web site and newsletter are aimed at changing some of the perceptions about Milwaukee’s business environment, Steininger said.

“Our goal is to make people start saying, ‘This is a great place to start a business,'” he said. “It’s PR with a goal in mind, to rethink the region as a great place and an exciting place to start a business.”

The Cleveland model

BizStarts was started as a Greater Milwaukee Committee initiative in 2007. It spun off as an independent nonprofit one year later.

The program was modeled after a Cleveland, Ohio-based program named JumpStart Inc. Founded in 2004, JumpStart estimates that it has helped start about 700 new companies and create around 61,000 jobs in the six years it has been operating, said Ray Leach, the organization’s chief executive officer.

“We were the first entity that has helped create an ecosystem of investing entities, mentoring and technical assistance (for entrepreneurs),” Leach said. “This is a catalyst of nonprofit and for-profit (entities) that are doing important work to move companies along, none of which were existing five years ago.”

JumpStart is now helping about 1,000 entrepreneurs every year. The group, through JumpStart Ventures, its early-stage investment fund, invests in about 15 companies per year. It now lists about 50 companies in its portfolio. Affiliated angel and venture capital funds invest in an additional 30 to 40 companies per year, Leach said.

Halfway there

BizStarts hopes to emulate the success that JumpStart has had, Steininger said.

However, much work needs to be done in Milwaukee.

“I would say we’re about 50 percent of the way there,” Steininger said. “We’ve got the entrepreneurs that come to us with good ideas. There are some really exciting things that are starting to happen right now. But we need more capital.”

JumpStart has been successful, in part, because it has involved Cleveland’s private foundations from the beginning, Steininger said. Those organizations have donated millions of dollars to the organization, giving it a significant source of funding that BizStarts does not currently have.

However, the Milwaukee organization is working to change that.

“We’re starting to have that dialogue with various private foundations,” Steininger said. “I really respect the private foundations. So many of them are dedicated to solving the problems with poverty. That is only the beginning. There, we’re probably only five or 10 percent down the road, compared to where they (in Cleveland) are.”

BizStarts also needs more early-stage investment money available for the entrepreneurs and companies it hopes to generate, Steininger said. The group will begin raising funds for its own early-stage investment fund next month, Torinus said, with the goal of having it operational in six months.

“Every deal (now) is a snowflake. We’d like to be able to, instead of doing deals episodically, we’ve got to do them systematically,” Torinus said. “We’re going to continue doing angel investments (as we do now).”

Tom Shannon, former chief executive officer of Prodesse Inc., a Waukesha-based respiratory disease diagnostics firm that was acquired by California-based Gen-Probe Inc., last fall, agreed.

“It’s all about funding (to help new startups),” Shannon said. “I do think there is enough private funding (available) here. I think it’s doable. But we need to get out and get the word out to the funding sources.”

Shannon, who is now working as one of BizStart’s volunteer mentors, said the group also needs to build a pipeline of potential leaders and managers for companies that are forming.

“I see, hopefully in a couple of years, having a talent pool ready to step into positions with these companies,” Shannon said. “I don’t think that will be hard to do if BizStarts has enough visibility.”

By the end of this year, BizStarts will have hired a full-time executive director to run the day-to-day operations of the organization. Currently, Steininger and Torinus are performing many of those functions. By hiring a full-time director, the pair will be freed up for fundraising and mentoring.

“Those guys can’t be every place,” Shannon said. “The next step forward is getting that executive director. We need someone to be the spoke of the wheel. Dan and John will continue as the founders, and we’ll have the organization evergreen itself.”

Gaining momentum

Although BizStarts has only been operating for two years, it is off to a good start, said Leach of Cleveland’s JumpStart.

“I’ve been very impressed with them,” he said. “BizStarts has been able to generate a lot of outcomes with a lot less resources (than JumpStart). They’ve made a heck of a lot of progress. They’ve got the right vision and the right approach. It’s a model that’s going to work.”

Shannon said BizStarts could produce long-lasting, measurable change in Milwaukee’s employment by attracting young professionals and ultimately raising the region’s net worth.

“The prosperity in a region is all about high-quality jobs,” Shannon said. “Everything else is secondary. If jobs mean prosperity, and if jobs come from the creation of small businesses, then we’re right where we need to be. We need to be sure that BizStarts is supporting the three legs of the stool – ideas, managers and money.”


Editor’s note:
BizStarts Milwaukee is not affiliated with BizTimes Milwaukee.

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