28 Oct Why Wisconsin Lags Behind the U.S. and Minnesota
Editor’s Note: “FORWARD VISIONS” Today we begin three weeks of special articles, interviews and columns that will appear on the Wisconsin Technology Network (WTN). This series called, “FORWARD VISIONS” is designed to stimulate awareness, discussion and debate that will help to illustrate some of the great thoughts and technologies surrounding Wisconsin’s Health Science and Technology Recognition Week, November 1-7. WTN will publish EXCLUSIVE articles and commentaries on the current and future state of Wisconsin’s technology and life science industries by thought leaders including Carl Gulbrandsen, WARF, Congresswomen Tammy Baldwin, Dean Paul Piercy, UW-Madison-Engineering, Tom Still, WTC, Paul Shain, Berbee, Dr. Paul Nagy, Medical College of Wisconsin, Rebecca Ryan, Next Generation Consulting, Toni Sikes, Guild.com, Laurie Benson, Inacom Information Systems. State Senator Kanavas, John Byrnes from Mason Wells and more. Please make sure to visit wistechnology.com daily for latest news and installments of WTN’s VISION SERIES, as updates will be posted regularly, and between newsletters.
The Wisconsin Technology Network has received from NorthStar Economics an advance copy of its 60-page report, which contains a primer for Wisconsin companies seeking information about risk capital available in the state. David Ward and his team have agreed to exclusively excerpt their report in four-installments on WTN over the next three weeks Today’s first installment is:
Why Wisconsin Lags Behind the U.S. and Minnesota
After more than a decade of strong economic growth and prosperity, the Wisconsin economy began to soften noticeably in 2001.
The current slowdowns of the Wisconsin and U.S. economies began with a worldwide manufacturing recession, which preceded and was exacerbated by the 9/11 terrorist attacks and then further adversely impacted by the stock market swoons.
Wisconsin is best characterized as a leading manufacturing state. But, after leading the nation for a decade in manufacturing employment growth, Wisconsin has lost more than 64,000 manufacturing jobs¹ beginning even before the global manufacturing recession began. These economic performance declines have significantly contributed to the current $3.2 billion state general fund deficit of the 2003-05 Wisconsin state budget.²
The truth is that Wisconsin’s real economic decline – not only employment and per capita income growth rates, but critical broader economic trends compared to its neighboring states – began more than 20 years ago.
Wisconsin has, for instance, been suffering a serious “brain drain” for years – losing more college graduates than are attracted to work in the state. Experts identify calendar 1979 as the year when the modern entrepreneurial economy began in the United States. Interestingly, since 1979, both neighboring Minnesota³ and U.S. economies have been achieving considerably better economic performance than has Wisconsin – opening gaps in personal per capita income that are threatening to widen even further.
Due partially to Wisconsin’s deficiencies attracting and retaining educated workers, income levels per capita for the state have been sliding further behind national and regional averages.
The impacts of these trends upon the state’s economy have been disturbing. If currently projected per capita income growth rates prevail, the state’s comparative economic future threatens to become worse.
Wisconsin has been unable to attract sufficient professional and college-educated workers to its workforce – unlike Minnesota or Illinois, for instance – because Wisconsin doesn’t currently offer as many exciting career opportunities as its neighboring states. “The issue is one of a lack of economic opportunity”, concluded a comprehensive study of Wisconsin employment trends, Wisconsin’s Economy in the Year 2010, prepared by the School of Business, University of Wisconsin-Madison.(4)
Why is the availability of venture capital so important for Wisconsin’s future economic growth? Where does Wisconsin rank?
Since the inception of the American venture capital industry in 1946, professional venture capital has had a little-known but profound impact on the U.S. economy.
Venture capital has played a critical, indeed catalytic role in the modern American entrepreneurial process: helping to realize many new marketplace value creations that trigger and sustain economic growth and renewal. The cream of the venture capital investment crop(5) – startup financings like Digital Equipment Corporation (1957) and Apple Computer, Inc. (1975) – and hundreds of similar firms have been noted for their value creation through technological and market innovations and entrepreneurial genius.
With exceptional frequency, venture capitalists have been at the vortex of innovation through providing the scarce risk capital needed to fuel business inception and early growth. These financing activities have made possible entirely new industries: semiconductors in the 1960s, microprocessor-based ventures in the 1970s, and biotechnology and cellular communications in the 1980s.
In terms of higher-income job creation, innovative products and services, competitive vibrancy, and the dissemination of the entrepreneurial spirit, the contributions that have been made by venture capital have been indispensable to the U.S. and global economies.
A 1998 report prepared by the National Venture Capital Association (NVCA) states that a typical 5-year old venture-backed company has:(6)
Generated nearly twice as many jobs as its non-venture-backed peers
Grown sales by 66.5% per year
Created new jobs at a rate of 40% per year
Produced high-skilled positions four times greater than the general economy
To better serve local entrepreneurs – while creating new wealth and quality jobs for their citizens – most state governments have initiated programs that deliver, encourage, or facilitate the development of in-state seed and venture capital resources. Wisconsin has only taken cautious steps. According the National Venture Capital Association, the national average for annual state per capita venture investing was $776. Wisconsin’s per capita figure? $31.
End Note: This excerpt has been published with the permission of NorthStar Economics. Dr. David J. Ward, PhD is President of NorthStar Economics and co-author of the report. He completed a thirty-one year career in the University of Wisconsin System in July 2000. Ward held teaching positions at the University of Wisconsin – Green Bay and the University of Wisconsin – Oshkosh. James Patterson is a senior associate with NorthStar Economics. He served as the principal investigator and co-author of the. The 2003 NorthStar Guide to Growth and Venture Capital for Wisconsin companies that is now available for online purchase online at www.northstareconomics.com for $25 plus shipping and handling.
Related Article: Growing Venture Capital in Wisconsin 10/16/03