Sunday, July 25, 2010

PS 427: Wisconsin: Land of Beer, Cheese, and…Startups

After more pessimistic posts on Wisconsin's economic climate, here is a visible positive post on the startup culture in Madison and vicinity.



Wisconsin: Land of Beer, Cheese, and…Startups


Can Wisconsin really compete with the Twin Cities, Chicago or Silicon Valley?

If you were recruiting talent to a startup here, how would you do it?

What aspects of the state would you promote? Which would you try to ignore?

How can state government make Wisconsin more attractive to your employees?

12 comments:

  1. When looking at the business climate Wisconsin has to offer, it is important to recognize that the atmosphere for entrepreneurship in the state is beginning to grow into a very marketable asset. Among many other things, there are two huge benefits for doing business in Wisconsin that stick out quite prominently. First, the prime location of Wisconsin on the map makes its position on the map as one quite lucrative for business. Especially with Madison’s place on I-90/I-94, it placement between the key economies of Chicago and the Twin Cities allows business to be carried out between both regions; combine the two economies together and you have the second largest economic metro area. With Wisconsin as the connection between these cities, it is primed to reap many of the benefits. Another benefit of Wisconsin’s location is that Milwaukee is on Lake Michigan and as a result has sea access via the St. Lawrence Seaway. Thus shipping the products of manufacturing start-ups would be easily accessed. The second very marketable asset of Wisconsin is the UW system. With Madison being one of the largest recipient of federal research dollars, the university would be attract businesses with the idea of receiving large amounts of aid. Because of the large amount of research dollars invested, local start-ups could pluck the best talent right away.

    The best parts of the state to promote to businesses could center the ecological heritage of Wisconsin. With efforts like the Clean Energy Jobs Act or green investment, Wisconsin has shown that it is committed to becoming a leader in environmentally-friendly technology. The future of green technology in the US looks very promising and by promoting the state’s commitment the talents of start-ups can be enticed to come in order to fill the niche of the overall growing industry.

    Personally, I believe that if I ran a company, the ability to gain research grants and other assorted benefits would easily entice me to the state. By keeping my cost of business down, while also protecting workers and the environment I would easily be tempted to set up operation.

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  2. Scott AbromowitzJuly 25, 2010 at 4:06 PM

    I actually really liked this article, as I read TechCrunch for fun daily. The article really offers a positive viewpoint on the enterprising ability of Wisconsin businesses; specifically being 7th in venture capital. As such, I do believe Wisconsin is capable of competing with these areas if it offers attractive business incentives to invest - the quality universities in the state also are a plus. The fact that there is also much less congestion in the state can be a benefit to - rent in Chicago and Minneapolis is likely much more expensive than that of Wisconsin - specifically Madison.

    Further, if I were recruiting talent to Wisconsin I would highlight the state's progressive nature and the items the government is trying to offer to spur development. I would like the above posting state how Earth Day was started by a Wisconsin governor and tell how the farming background of much of the state can be utilized to one's benefit for green jobs. I would also cite companies such as Microsoft and Google have locals in the Madison area - Epic Systems as well.

    I would probable ignore the weather of the state as it could be a possible drag on some and the budget shortfall the state is bound to face. I would highlight all the stated things about green jobs and the successful companies in the areas, the university system and affordable housing and living.

    For the government to make Wisconsin attractive to business, it must exploit in a positive manner its ability to illustrate how Wisconsin receive much capital funding and the state's universities offering profound research. The state should also form closer ties with the business communities by following many of the suggestions of the articles about business we have read throughout the course.

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  3. I don't find it surprising that Madison has become "the startup capital of the Midwest." It is based around a large university with many bright students; the city itself is known for being politically active and innovative. It's a great environment for creativity and academia to fuse, which I think is a natural breeding ground for new ideas, which, mixed with ambition, can make for new business.

    On many levels, Madison can compete with other cities. It is relatively large and has a wide range of potential clients for whatever age-range a startup would target. At the same time, while Madison's population is larger than that of many other cities, and particularly college towns, it can't compete in size with Chicago or LA. It also can't compete with the resources either of these cities have that could work to the advantage of a startup. Then again, a smaller community could be a boon to the business because word-of-mouth would travel faster and there is less potential for competition. It definitely varies depending on the nature of the business. If the business is predominantly web-based, enticing entrepreneurs to base their company in Madison will depend largely on the attractiveness of the city in terms of quality of life. I don't really know anything about business, so forgive my educated guesses on what factors in to a decision like this.

    If I were recruiting talent to a startup here, I'd try to emphasize the things that I like the most about Madison and the resources it has to make it competitive with a larger city. While other cities probably have their own organizations that encourage networking and mentoring, I would highlight the successes of Capital Entrepreneurs and MERLIN Mentors and encourage the entrepreneur to meet with them. I think it would also require a bit of PR; if people believe that Madison is an up-and-coming location for new businesses and an avenue out of the dour economic times, they will want to seize on the opportunity. I think it's also important to recruit talent during the summer, when Madison is unbelievably beautiful and pleasant, rather than during the winter when the weather is brutal and the city is icy and gray.

    There are a few things that are important to promote. First, living here is far less expensive than living in any other larger city. There is also a gigantic pool of qualified employees for the entrepreneur to hire, not the least of which is due to the university. Given the difficulty of finding a job, it is likely that many would be willing to initially work for lower pay.

    The only thing I can think of in terms of state activity would be for the state to create some type of bond program. I could have incentives for startups to purchase them for the company as a whole or for individuals who relocate to Wisconsin as a result of the start up to purchase them at a special rate. It would increase the cash flow to the state and reward the business down the line for doing so. I'm not entirely sure how bonds work, particularly for business, but I know that with personal savings bonds, you purchase one for half the price of its worth and after a number of years, it reaches maturity. Since I'm shaky on specifics, it would be a sort of a 'you help the government out now, and when our budget is back in shape and able, you'll be rewarded with X." X being an amount of money or any advantage that would attract people to the idea.

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  4. Another thing I neglected to mention is the possibility of Madison receiving the Google fiber network. If this ends up being the case, the viability of business in the region becomes all the more attractive.

    I think the biggest thing the state legislators can do is fix the budget but also think of future growth. By making a public committment to this effect, businesses would have a strong reason to run operations in Wisconsin.

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  5. Recruiting startups to Wisconsin seems like a fairly daunting task. Actually, recruiting startups anywhere in the midwest appears to be far more difficult than the coasts. Like you mentioned, even if Wisconsin does enter the conversation of potential startup locations in the midwest, it is typically overshadowed by the powerhouse states like Minnesota and Illinois, featuring the Twin Cities and Chicago.

    Yet, there are some redeemable qualities about the state that help separate it from other business zones. Milwaukee hosts both a private and public university, and has a major league baseball stadium and a variety of centers for the arts. All of these provide direct contact to potential users of any new product that starts here in Wisconsin. Also, Madison plays home to over 40,000 young people at its university - inviting new businesses to tap into that market.

    Even in the more rural parts of Wisconsin, there is room to sell to startups. By capitalizing on the Clean Job trend, the state will be able to use its natural beauty, lakes and streams to attract new companies. The Clean Job Act would be a nice incentive also.

    Speaking of incentives, every time a state reduces its capital taxes or provides financial incentives for new ideas and new companies, a line of potential businesses will be knocking on our door. As a state, we need to prioritize, and if luring new businesses to Wisconsin is our primary objective, then we need to take the time and introduce legislation that pulls companies off the coasts and into the midwest.

    The last thing we can do as a state is protect what companies we already have, especially Harley-Davidson manufacturers. Even though the company made a load of money last year, we need to make sure they stay in the state for decades to come. It's such an easy source of revenue for Wisconsin.

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  6. Recruiting start-ups may seem like a daunting task, however, Wisconsin has been able to prove that it has the climate and innovation to welcome start-ups. There are many older start-ups that have made Wisconsin their home, but many new ones are popping up too. I think the major factor that allows a start-up to be successful is how creative the idea is. I don't think the business is as likely to be successful if there is something else like it already thriving in the state's, or even the nation's, economy.

    There is actually a good article in today's Milwaukee Journal Sentinel about venture financing and how there is a big boost of them in Wisconsin. Wisconsin start-ups have pulled in almost $108 million in the first half of the year!! $50 million has been brought in by the state's health care start-ups.

    Here is the link: http://www.jsonline.com/business/99248819.html

    Health care innovations as well as biotechnology and becoming more immersed in the Clean Energy trend that is sweeping many other parts of the nation.

    Wisconsin has great universities in Madison and Milwaukee that are known for inventions, intellectual innovations, creativity, and diversity in people and thoughts/opinions. This is especially true for UW-Madison. The simple reputation of our alma mater is sometimes enough to lure in talented people with great potential.

    The state government is able to provide incentives to lure in businesses by passing laws that may help them out. For instance, like Dan said, reducing capital taxes will bring in other businesses. It may be difficult for the legislature to pass such laws because so many people are interested in protecting the "late-stage" businesses we already have for the betterment of our poor economic climate. However, the future of Wisconsin is in the hands of the birth of new industries. In the words of Bob Dylan, "times they are a changin." (I know its pretty cliche, but it fits). :)

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  7. When it comes to the first words that come to mind when thinking about Wisconsin, startups is definitely not on the top of the list. However, I think this is a great start to the innovative and economic environment in the State. After reading through some of the companies mentioned, I think Wisconsin is the perfect place to focus on clean energy. In addition to the great facilities and minds that a world renowned research institute like the UW brings to Madison, I also think that our economic culture can help us compete with larger cities such as Chicago and Twin-Cities. Heavy taxes in Chicago and the Twin Cities could help Madison lure some great start up companies to our very own city.
    I think the fact that Madison was voted just above Boston, MA with institutions such as Harvard and MIT is a very attractive honor to help recruit talent to Madison. In addition, when it comes to alternative energy, the agricultural aspect of the state is one area I would really promote. The emphasis on corn and other alternative means to energy can really be beneficial to some of these startup companies. One downside to the State is definitely the lack of quality investors. While places like Chicago and New York have loads of wealthy investors ready to pour money in, it is definitely harder to get exposure in places like Madison.
    Finally, I think our State government could do all sorts of things to make Wisconsin more attractive to employees and start ups. Easier taxes on new companies and some sort of tax rebate could be two options to explore. In addition, more funding to research departments at the UW or UWM could also make Wisconsin more attractive. What better place to build a start up for water treatment than in the same city as the new UWM Water Treatment Plant? I think that Start Ups in Wisconsin is a great way to insure that our State and City stay relevant for years to come.

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  8. There is not much left to be said, the previous posts have covered many of my thoughts. The two that I would like to reiterate are the progressive nature of Wisconsin and the University of Wisconsin.

    The university is a powerful resource. Just look at the plethora of biotech companies that have sprouted in and around the Madison area. This biotech sector was pioneered by researchers at UW. With the university on the cutting edge of this kind of technology it is not surprising that start-ups have flocked to be close to such a fantastic resource of information, capital (human and monetary.)

    If I were to start a company here the first element I would promote is the city of Madison itself. The city is not too large, and is easily accessible by car, plane and hopefully in the next several years train. Dane County Airport has flights going everywhere, and 90/94 runs right past Madison making it ideal for transport of goods and people. One major advantage that Madison has over areas like the Silicon Valley is much lower property taxes. In Silicon Valley employees of a start up often use shares in the company to purchase a home. They sell the shares as soon as the company goes public. If they were to live in Madison this capital could be saved and spent elsewhere (like in the local economy on fantastic local beers!) Additionally like has already been said the university is an extremely valuable resource. When looking for employees those coming right out of college are fine pickings.

    Local and state governments could introduce a variety of tax credits to try an entice businesses to start up. Targeted tax credits could be given to try give specific business sectors helps in growing, they would have to be tailored for the types of businesses that are coming to this area.

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  9. The one thing that troubles me though is that many people are touting tax credits as a way to entice start-ups. These are good and all and would be attractive to business but are they viable at this point with a projected $2.5 billion deficit?

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  10. Wisconsin can definitely compete.

    As others have already mentioned being located in the Midwest close enough to other cities such as the Twin cities and Chicago, but also surrounded by the Great Lakes has additional benefits. Now while Wisconsin has a reputation for cheese heads and being a mainly agricultural state I believe that Wisconsin is often underestimated. Referring back to an earlier article Wisconsin has many redeeming qualities that aren’t highlighted as often as they should be. “Wisconsin is ranked 3rd highest in ACT scores, 4th lowest in teen dropout rate, 8th lowest in child deaths, as 8th smartest state, and as 12th healthiest state” (Why the State Budget Matters). I’ll admit that this was a pleasant surprise to read because being born and raised in Oshkosh, WI it was often hard for me to see the big picture that encompasses all the benefits the state has to offer. If Wisconsin is looking to compete with other states in terms of expanding business then it should look into promoting the strong educational benefits that young adults in this state grew up on. Expanding on the major educational benefits is obviously the UW- school system. In the graduation address given by the Chancellor the time is taken out to make note just how large of a research facility we here in Madison. The tremendous funding that UW-Madison receives puts this state on the map of innovation.

    I believe that often the conflict lies within the environment of the state. While Wisconsin has an excellent education program and is a very family friendly state if college graduates aren’t captured around their commencement time it’s possible that the pull of big city life could deter from the ongoing expansion of talent startup here. Essentially if the government is going to make Wisconsin more attractive for further startup businesses it should try to downplay some of the exaggerated stereotypes. Don’t get me wrong, the agriculture industry is wonderful and everyone loves and good beer and a brat, but the promise for a future lies in the prospect that Wisconsin is flexible enough to harness both great agriculture and ground-breaking business.

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  11. Bryan, while I like to believe that the country views Wisconsin with the same optimism as I do for our great State, sadly, I know this is not true. Why would you choose Wisconsin for your start up when Florida has no income tax and great weather on the ocean! Or New York with the plethora of investors? While a tax break on start ups is not the most attractive option when running our deficit, I think that the risk is worth the reward. The idea is not to create a larger deficit, it is to promote innovation and start up companies within our State. Do you really think that Google hasn’t provided California with millions of dollars in taxes over the years? Imagine if Wisconsin was lucky enough to be home to any company HALF as successful as Google. I’m sure that the tax break that made Wisconsin the home to that company would be small compared to the amount of jobs and revenue that a company like that would bring.

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  12. I am going to play devil's advocate with Charles. Although I agree that a tax break could work, I like to bring up a few points. One, looking at the taxes for New York and Calfornia, they rank as some of the highest in the nation, yet they are home to very successful businesses. It seems that taxes are not the only indicator. Furthermore, out of the 7 states with no personal income tax, 3 are in the bottom half of the CNBC's ratings for best places to do business-including Florida. I think that taxes are not the only indicator to look at when considering the start-up viability of a state. Many other factors like the cost of living, transportation costs, etc., need to be considered in the overall picture. Focusing on not just tax breaks, but also on increasing other incentives.

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