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Omaha, Nebraska-based management consulting firm Chapman and Co. LLC’s 2017 State of the Silicon Prairie Report compares Midwestern states and peer cities to demonstrate not just how much venture capital activity occurred, but also how cities and states should have performed. BizTimes received an early copy of the report.
Milwaukee also underperforms when compared to its peers, with $48 million in venture capital activity in 2017, when it should have had about $142.6 million.
In the city rankings, Milwaukee came in 8th, behind Chicago; Champaign, Illinois; Minneapolis; St. Louis; Madison; Ames, Iowa; and Kansas City.
Milwaukee was in tier 2, which compared cities with population between 900,000 and 2 million (Milwaukee has a population of 1.6 million). In 2017, Milwaukee brought in $174.5 million in SBA loans; had 52,820 STEM jobs; had 28 Inc. 5000 companies with $1.1 billion in total revenue; and boasted nine incubators and accelerators.
While SBA lending is strong compared to peers, and there are several companies that are consistently ranked in the Inc. 5000, the report describes technology, innovation and high-growth in Milwaukee as “muted.”
On the 2017 scorecard, Milwaukee received an “A” grade for Real Companies, a “B” for Cool Jobs, a “B” for Structure, an “A” for Innovation, a “D” for Funding, an “A” for Connectivity, and a “B” for Community Spirit.
“The city needs to insert some verve into the community that can create large, compelling companies that go beyond just service in the local market. This would be signaled by increasing venture capital in the community, or even companies raising larger sums,” the report says. “Since 2009, Milwaukee has had two companies raise more than $10 million in a round. Madison has had six. Kansas City has had 14. St. Louis has had 23. The point is that a city the size of Milwaukee should be producing big fundings, exits, and a larger number of venture deals. It is sitting below its high growth capacity despite having many building blocks.”
The report recommends Milwaukee entrepreneurs seek out customers in Chicago, St. Louis and Minneapolis; that the city increase its venture capital capacity by leveraging the region’s expertise in manufacturing and water; and that the city tout its own entrepreneurial success stories.
Also included in the report were Madison, Green Bay, Eau Claire and La Crosse. Madison placed fifth in the city rankings.
“Pound for pound, Madison may be the best ecosystem in the middle part of the country,” the report says. “But the simple girth of St. Louis, Chicago and Minneapolis overwhelm the smaller Madison. There is not a single metric where Madison underperforms, except the community is slightly below average regarding commercial broadband access.”
The report notes the importance of the University of Wisconsin and WARF in helping advance research and technology into startup companies. And it notes Madison’s success in building angel networks and gaining ties to venture capital investors regionally, despite the fact that there is not much venture capital locally. Madison firms SwanLeap and Exact Sciences Corp. are both noted as fast-growing startups.
The report’s recommendations for Madison include: “Madison needs to keep growing companies – not just become a haven for the Googles that are looking for an inexpensive place to open a development shop. Avoid the lure of recruiting big names, and instead, focus on building wealth for the people, community, and the state of Wisconsin.”
Green Bay is ranked No. 22, which is better than most cities of similar size. Among its strong points are broadband access, SBA loans, and industrial niches such as paper and packaging. However, access to both talent and capital are challenges it must overcome.
Among the recommendations for Green Bay: “Build connections in markets beyond Wisconsin. Find industrial clusters in paper, logistics, packaging, etc. For example, becoming a design and packaging hub would make it critical to work with New York and L.A. Whereas paper might require connections in the timberlands of the southeastern United States.”
Eau Claire is ranked No. 33. The report indicates it is lacking capital resources, customers for services and products, transportation and startup structure. But it does have unique industries such as adhesives, wood and nonmetal mining. The report recommends Eau Claire leverage its proximity to Minneapolis-St. Paul.
“Wisconsin as a state seems full of mid-size communities such as Eau Claire that can rebuild their manufacturing base around innovation and technologies for which their communities and regions are uniquely prepared and trained,” the report says.
La Crosse is ranked 29th. It also needs more startup activities to bring inventors together, and more access to capital, the report says.
“For the community to continue to build high-growth businesses, it needs to retain its talent. It produces nearly 700 high technology graduates per year, but it has a low ranking regarding cool jobs,” the report says.
