Shayna Hetzel
Thank you, Mr. Chairman and members of the committee for the opportunity to speak to you today about how Wisconsin can support and grow innovative new businesses.
Small businesses and high-growth startups are both essential to our economy, but they have very different needs. Most small businesses grow steadily over time. As Deputy Secretary Rikkers pointed out, these businesses create jobs and provide stability in communities over the long term.
High-growth startups have a different life cycle. They aim to bring to market an innovative product or service – or even create a new sector – and then scale up rapidly over a 10- to 15-year period.
These startups require significant early investment – even at the conception stage, and long before they become profitable and have reliable annual revenue. By their very nature, they depend on venture capital investors willing to take big risks on new, mostly unproven ideas in exchange for a stake in the company. Their investment pays off when a company is acquired, merges, or issues an IPO – commonly referred to as an exit. Early-stage investors see anywhere from seven to nine of every 10 companies they invest in not reach a meaningful exit.
In a modest entrepreneurial community like Wisconsin’s, we do not yet have the density of capital or of startups that exist in places like the east and west coasts. Outside investors are often hesitant to take early risks on young Wisconsin companies. As a result, programs like the Qualified New Business Venture tax credit have played an important role in stimulating early-stage investments in our state.
This QNBV program provides state income tax credits to those who invest in certified Wisconsin startups, making these investments more attractive by reducing some of the risk. In the six Assembly districts represented by this committee, WEDC supported 23 startups and their investors during calendar year 2023.
These QNBV-certified startups attracted more than $14.7 million in investment capital, more than 61 percent of which came from out-of-state investors. If Wisconsin is going to compete regionally – or nationally or globally – we need to attract that level of outside investment to increase our regional reputation and keep these Wisconsin businesses growing in our state. In terms of economic impact, those 23 QNBV startups produced more than $5.7 million in revenue and generated nearly 70 jobs with an average salary of $63,000. This is a meaningful contribution to our state – and to your communities.
WEDC also offers other programs to assist high-growth startups raise needed capital, such as Technology Development Loans. These loans often supplement funding from angel investors or first-check funders, helping founders build their product, gain customers, and reach key milestones — without giving up too much control of their company too soon.FreMarq Innovations from Merrill is one of our Technology Development Loan success stories. Founded in 2014 with no employees, the company received a $250,000 loan as part of an early funding round, helping them develop their energy-efficient construction products and deliver a prototype.
Three years later, after a second $200,000 loan FreMarq had grown to 33 employees and over $5 million in revenue, leveraging additional private investment and bank financing. With both loans fully repaid by 2020, FreMarq has continued to expand, reaching $7 million in sales in 2023 and growing its international presence through WEDC’s ExporTech and International Market Access Grant programs. Their success highlights how targeted state support can help high-potential startups scale, create jobs, and drive innovation.
If we want our state to keep producing companies like FreMarq, we must ensure they have the access to capital to move from idea to a full-scale reality and from a small team to a thriving company.
This is not just about rankings and ratings and numbers. It is about real jobs, real opportunities, and the long-term prosperity of Wisconsin. We are seeing fewer new businesses launch, and the ones that do are creating fewer jobs per startup than before. These are warning signs requiring action.
Last year, Wisconsin took a major step forward when Governor Evers and WEDC established the Wisconsin Investment Fund, the biggest public-private investment in Wisconsin start-ups and entrepreneurs in our state’s history. The fund started with $50 million in federal funding from the State Small Business Credit Initiative, which is to be matched on at least a 1:1 basis by private partners for a total of $100 million.
The Wisconsin Investment Fund has the potential to become a self-sustaining source of capital for Wisconsin start-ups. As the businesses that receive these investments start to grow, the value of the fund will grow with them. This growth this will create new opportunities to help even more businesses expand. In fact, even at the earliest stages we’re seeing promising indicators. Since the launch of Wisconsin Investment Fund just nine months ago, venture partners have invested more than $8 million in Wisconsin start-ups. Those deals received $16 million in concurrent private funding and today those companies are collectively valued at $152 million.
It will take time and strategic investments for us to realize our potential. But I would caution anyone who might be so inclined to bet against Wisconsin. Our state’s history has shown we can produce innovations that change the world. We have world-class universities, forward-thinking corporations, and an incredible workforce with the skills and drive to succeed.
The question is how quickly we can act to make it happen. If we focus our efforts and resources, we can build a stronger, more competitive Wisconsin that not only keeps pace with our peers but sets the standard for innovation and entrepreneurship in the Midwest.
Thank you.
