31 May The impact of ACT 255 on the future of high-tech investment in Wisconsin
Act provides $6.5 million a year for 10 years in tax credits
MADISON – The future of venture capital and investment in Wisconsin was discussed at an economic development breakfast panel discussion presented last Wednesday by the UW-Madison Small Business Development Center at the MG&E Innovation Center. A panel consisting of investment specialists, from both the public and private sector, discussed the implications of new tax-credit legislation, Act 255.
State Secretary of Commerce and panelist Cory Nettles said the act is intended to create high-end jobs and operate as the impetus to jump-start investors “parked on the sideline.”
Tax credits of 25 percent of an investment in a company certified by the Department of Commerce will be made available to investors through the legislation. These credits equal $3 million per year for angel investors and $3.5 million per year for investors in certified early stage seed funds for the next 10 years. This total of $6.5 million is intended to leverage $260 million in emerging high-tech and other qualified companies.
“It was clear to us, based upon the activity we were seeing across the country, but also based up on the strength of our intellectual property, that it was time for us to get focused on venture capital legislation in Wisconsin and do that through Act 255,” Nettles said.
He went on to say the legislation is in the early stages of rulemaking, where the intricacies of the bill’s wording will be worked out. Nettles added that he plans to have the act ready for review when the legislature reconvenes in winter.
State Rep. David Ward, R-Fort Atkinson, defended the importance of venture capital legislation during 2004’s inflexible budget period by saying it will help retain intellectual capital, which will boost the state’s economy.
“We need to create an atmosphere that keeps the best and brightest minds that we have here in the state,” Ward said.
Panelist John Torinus, chief executive officer of Serigraph, felt the tax credits may be helpful to investor communities within Wisconsin, but are not a cure-all.
“If this network of angels across the state is going to get done, it going to need a couple things. I think Act 255 will be a stimulus … and there’s got to be some leadership, probably out of Commerce. Maybe it has to happen on a regional basis instead of a micro basis,” Torinus said. “Act 255 can’t hurt, we’ll just have to see how much stimulus this has for getting angels organized.”
General manager of WiSys Technology Foundation, Elizabeth Donely, also called for a statewide collaboration to help build momentum around new technologies and businesses. She said angel-investment flow surrounding start-up companies would gather speed if networks began to overcome geographical separation.
Panelist Joseph Hildebrandt, partner at Foley & Lardner, cited a study to illustrate the timely element of the bill.
“The day [Act 255] was passed, Competitive Wisconsin came out with a report that the venture capital per worker in Wisconsin was below the average in the nation in spite of all of our intellectual property and ideas … it was 90 percent below the average in the nation,” Hildebrandt said. “What we have been lacking for a long time is early stage and seed capital. … This legislation is a great start.”
Kristin V. Johnson is the Associate Editor of WTN. She can be reached at firstname.lastname@example.org.