Two tech-oriented groups were quick to endorse Gov. Tony Evers’ plan for a $100 million state-backed venture capital fund when he first pitched the proposal in February.
One was the Wisconsin Technology Council, which has been the state’s leading voice on startup policy for more than 20 years.
The other was the Wisconsin Startup Coalition, a group formed last year that is focused on advocating for entrepreneurs and the state’s early-stage ecosystem.
Both groups applauded Evers’ proposal to create a fund of funds venture capital program to support Wisconsin-based startups, saying it would make the state more competitive among its neighbors, who have historically outpaced the state in a variety of metrics, including deal flow and secured investments.
While both organizations want to see increased VC and startup activity in the state, each says it takes a distinct approach in doing so.
WSC is a nonprofit advocacy organization founded by Matt Cordio, who is a co-founder of Skills Pipeline and Startup Milwaukee, and Peter Welch, chief operating officer of Madison-based government relations firm The Welch Group.
The Wisconsin Technology Council is a nonprofit member organization formed in 2001 to be a policy advisor to the governor, the Legislature and related state agencies and an educational and networking resource for entrepreneurs and high-growth firms.
Over the past two decades, the Tech Council has put its support behind Wisconsin’s investor tax credits program (Act 255) and the creation of the Badger Fund of Funds, a state-backed venture capital fund; organized state-wide programming like the Wisconsin Entrepreneurs’ Conference; and published the Wisconsin Portfolio to chart venture investment in the state and produced other publications. Wisconsin startup leaders also give the Tech Council credit for influencing the new $100 million fund of funds proposal and other entrepreneur-friendly aspects of the governor’s recent budget proposal.
Since November, WSC has grown to include more than 60 members, about 70% of whom are startup founders, Cordio said. His goal is to double the number of annual first fundings over the next five years in Wisconsin. It was 52 in 2019, up from 32 in 2018.
WSC is proposing policy recommendations that focus on access to capital and talent. At this point, its recommendations are generally broad, such as incentivizing early-stage investment by increasing the state Qualified New Business Venture Program’s 25% tax credit and working with the Department of Workforce Development on programming to address shortages in the high-skilled technology workforce.
One clear initiative: WSC came out of the gate lobbying state legislators to support bills that would prevent small businesses from having to pay millions in state income tax liability on Paycheck Protection Program loans, despite those loans being tax-free at the federal level.
Wisconsin’s policy environment and startup ecosystem “hasn’t really seen change” in the past three decades, said Cordio, pointing to the state’s persistent lack of venture capital. WSC’s success in recruiting startup representatives as members indicates they want their voices to be amplified, he added.
“We have dozens of startup founders and if you look at who’s engaged in the Tech Council, I think our membership doesn’t really overlap,” Cordio said. “If you look at our board and who’s on theirs, it’s a very different group of people.”
WSC’s board members include founders of startups such as Fiveable, FrontDesk and gener8tor. The Tech Council’s 50-plus member board includes executives from large legacy companies such as GE Healthcare, Rockwell Automation and AT&T, and representatives of universities, venture funds and economic development groups.
While Cordio believes both organizations are beneficial to the state’s overall ecosystem, WSC’s niche is to advocate for the interests of startup founders and investor groups, whereas the Tech Council focuses on a broader portfolio of issues, he said.
“We’re not competing against another organization. We’re competing against the status quo of what’s happening to support entrepreneurs and innovators in Wisconsin,” Cordio said.
Tech Council president Tom Still agrees Wisconsin needs more venture capital, especially for maturing companies raising Series A funding to scale and grow. He and former Tech Council chairwoman Toni Sikes, who is the co-founder and CEO of Madison-based CODAworx, say the proposed $100 million VC fund would help close the gap.
The culture and business climate of the state in the early 2000s led to a slow start for Wisconsin’s startup ecosystem relative to its neighbors, Still said, adding that the state did not recognize the benefits of young companies and their ability to produce jobs at the time. The state’s Legislature has historically been cautious in its financial support of startups, which has also contributed to the sector’s relative lag, Sikes said.
However, the Tech Caucus, a new informal committee of the Legislature created to keep lawmakers apprised of tech economy trends, is evidence that Wisconsin’s culture is changing, said Sikes.
“I think the $100 million (VC fund) is recognition that we need to play catch-up and I’m super excited about it and I think it’ll make a big difference,” Sikes said. “But I do have some frustration and I know the Tech Council has been out there working hard to change the climate for a long time and it’s finally happening.”
Still also believes there is value to the Tech Council having a large board composed of various stakeholders, which can help establish balance even when there may be conflicting interests, he said.
“We’re called Wisconsin Technology Council for a reason,” Still said. “It’s meant to be an organization that can help from the startup level on up to much more mature levels.”
Wisconsin startup companies raised a record $454 million in venture capital in 2019 while a five-year rolling average of venture dollars raised in the state shows a 68% increase since 2015.
Madison-based venture firm HealthX Ventures also closed its second fund last month, raising $55.55 million with 99 investors, one of several indicators that Wisconsin’s investor capacity is growing, Still said.
While these metrics show progress, the state still lags in measures of high-growth businesses. Wisconsin has less than 1% of all U.S. venture capital, which is widely considered to be an indicator of a high-growth ecosystem.
There were 24 technology IPOs in the U.S. in 2020; Wisconsin had none of them, according to Crunchbase.
Meanwhile, experts say more than just policy changes are needed to boost the sector.
Wisconsin’s biggest issue is a lack of support for entrepreneurs on the front-end, said Tom Chapman, an ecosystem building consultant with Omaha-based Chapman & Company who has worked with individual entrepreneurs and organizations within Wisconsin’s startup sector.
Having additional voices that advocate for startup growth is positive, Chapman said. However, it’s difficult for an organization the size of the Tech Council to effectively advocate for the entire ecosystem, while policy recommendations, WSC’s sole focus, are not nearly as impactful as figuring out what’s keeping entrepreneurs from turning their side-hustle into a full-time company, he said.
“Wisconsin has a lot of noise from their nonprofits and service organizations that does not always manifest in support for businesses,” Chapman said. “There’s a lot more in-fighting in conversations across all of Wisconsin … about how to do this better or that better and it feels like they call me rather than talking to entrepreneurs.”
Encouraging entrepreneurship at a young age and reinforcing entrepreneurship as a path to generational wealth, whether it be starting a Main Street or a high-growth business, would have a more immediate and long-term impact on the ecosystem than changes in policy, Chapman added.
“I think there is a perception within government that doing what these organizations want is going to fix the underlying problem of startups,” he said. “The answer is it will not.”
