Young companies in Wisconsin are drawing an increasing amount of financial backing, generating more income and ramping up their hiring.
More than 800 companies that received support from WEDC’s entrepreneurship and innovation programs over the past three years reported a combined $1.26 billion in revenue and new financing in 2021, and a total of 6,772 jobs among them.
That’s a 42% increase in new capital and a 52% jump in jobs over 2020, according to WEDC’s 2021 Entrepreneurship and Innovation Report on Program Activity, which summarizes combined data from the fiscal year that ended June 30, 2021 and the calendar year that ended Dec. 31, 2021.
“Most important to me are the trends in investment activity in early-stage companies. There’s been a lot of growth over the last five years and that correlates with a pretty significant increase in the number of jobs,” says Chris Schiffner, WEDC senior technology investment manager.
Contributing to the increase were a few giant investment rounds raised by companies that have moved beyond the early stage. For instance, Madison-based Fetch Rewards, a consumer loyalty and rewards app that started in 2017, closed on $210 million in April 2021 and has since raised another $240 million in 2022. SHINE Medical Technologies, whose Janesville plant will produce nuclear isotopes for medical use, drew $150 million from investors in 2021.
Overall, of the 814 businesses that received some type of financial benefit through a WEDC program over the last three years, 441 of them—more than half—were recipients in 2021 alone.
“That shows we are also increasing our reach to entrepreneurs across the state. We have good success stories from all around Wisconsin,” Schiffner says. “Madison has the most mature ecosystem for entrepreneurs as far as service providers and networking opportunities but Milwaukee is quickly developing that. And there is a significant increase in activity in Green Bay and Appleton. So, we have our main hubs of activity, as well as smaller groups around the state.”
QNBV boosts odds for tech funding
One of the most effective programs has been the Qualified New Business Venture (QNBV) Program, Schiffner says. Initiated in 2005, the program helps startups raise investment by providing tax credits to investors who put their money into certified companies—which are primarily technology-based. As of 2021, the QNBV Program included 277 companies.
“Over time, we’ve probably certified close to 700 young businesses. Now an investor isn’t prone to investing in a company if it is not QNBV-certified. It has become a landmark program,” Schiffner says.
In 2021, 44 new companies gained QNBV certification, and a total of 190 QNBV-certified companies reported receiving investments, debt funding and grants that added up to a combined $764 million and provided $12 million in tax credits to investors.
The QNBV companies traditionally create high-paying, highly skilled jobs. Results from 2021 showed the 277 companies in the program provided a total of 8,654 jobs, including a net increase of 2,836 new jobs in Wisconsin. The average salary for a full-time employee at those businesses was $74,651—more than 50% higher than the annual median Wisconsin income of $47,350.
Partner grants target wide scope
While the QNBV Program focuses on tech companies, Entrepreneurship Partner Grants are aimed at a more diverse range of businesses. The grants deliver funds to economic development organizations and communities, and it is up to those recipients to conduct their own programs designed to offer the type of assistance that will most benefit their local startups.
Initiated last year as an evolution of the previous Seed Accelerator and Entrepreneurship Support Grant programs, the new program operates as a competitive grant with three separate application periods. One of its requirements is a match of at least $1 from the nonprofit, community or development group for every dollar issued through the WEDC grant. A panel of reviewers selects the top candidates for the funding.
“One of the criteria is how businesses will be helped by the funding,” Schiffner says. The applicants can offer programs such as business accelerators, technical assistance or business counseling. For example, a minority chamber of commerce may want to provide five hours of counseling to 40 or 50 entrepreneurs, while an accelerator may work with four or five businesses, providing intensive training during a 12-week session.
In 2021, the Entrepreneurship Partner Grants and its predecessor Entrepreneurship Support Grant Program distributed $1.1 million to 24 projects that assisted 340 businesses statewide. That included 1,445 technical assistance sessions, 40 grants, the creation of 16 podcast episodes and the formation of three new mentor groups.
More options for assistance
Several other WEDC programs also support entrepreneurship in various ways:
- Technology Development Loans provide funds to young businesses working to launch high-tech or innovative products and services. Twelve new loans, totaling $3.4 million, were issued in 2021 to early-stage companies that were then able to leverage another $13.6 million in outside funds.
- The Capital Catalyst Program helps organizations or communities establish seed funds to invest in local startups. It provided $1.8 million to communities in 2021, which triggered $971,649 in investments to 33 businesses.
- The SBIR Advance Program helps pay for activities that are not covered by federal Small Business Innovation Research (SBIR) grant awards, such as market research, patent development and business model creation. Administered by UW-System’s Center for Technology Commercialization (CTC), the program assisted 120 companies—including 17 new ones—with $1.5 million that helped the companies secure another $10.8 million in outside funds.
- Entrepreneurial Micro-grants, also administered by the CTC, help companies develop business plans and proposals to seek federal SBIR and Small Business Technology Transfer grants. They helped 117 entrepreneurs and 33 businesses land $14.5 million in federal grants in 2021.
- Seed accelerators supported by WEDC in 2021 helped 55 new businesses, providing $329,147 in funds.
- Start in Wisconsin, an online platform with centralized resources and networking for entrepreneurial support organizations, expanded to statewide access.
Schiffner says Wisconsin has room to grow, as far as its entrepreneurial community—especially in comparison to nearby powerhouses in Chicago and Minneapolis. But as that growth occurs, decisions will have to be made about how best to support it: by attracting more companies or attracting more people?
“The workforce is virtualizing. If you don’t have to work in a factory or an office, most people are comfortable working at home now. A lot of companies are hiring people who are not in this state and allowing them to work remotely,” Schiffner says. “But if WEDC is investing, job creation will have to be in Wisconsin to have a true impact on the state’s economy.”