State investment incentives aimed at luring ‘angels’ to start-up companies

State investment incentives aimed at luring ‘angels’ to start-up companies

MADISON – Like most states, Wisconsin has long offered specialized tax credits to expand or lure traditional businesses, but it has lacked credit programs aimed at leveraging seed capital for the state’s technology start-ups.
That’s about to change. Act 255, a tax-credit package that passed the Legislature this spring and that is being refined through an administrative rule process this summer, will provide a welcome step in a new direction when it takes effect in 2005.
Listening sessions are being held this month in Milwaukee, Chippewa Falls, Appleton and Madison on Act 255, a bill that promises to create tax credits for so-called “angel” investors, create a technology commercialization grant and loan program, and establish entrepreneurial centers in several Wisconsin locations.
The new law includes $30 million in tax credits over 10 years for angel investors, people who invest in promising yet risky early-stage companies, and another $35 million for professionally managed investment funds that also support early-stage firms. Although the package will produce a relatively modest $6.5 million per year in tax breaks for those investors, that’s more than what existed in the past.
Gov. Jim Doyle and some lawmakers wanted more – a lot more – but a larger package encountered opposition in a Legislature that is still feeling its way when it comes to technology-based economic development.
Much of the credit for passage of Act 255 goes to Commerce Secretary Cory Nettles, Doyle’s top economic adviser, and state Sen. Ted Kanavas, R-Brookfield. Both men reached across partisan lines to lobby for Act 255 after a larger venture capital bill bogged down.
Nettles has argued long and hard that Wisconsin must find a way to engage investors who may want to invest in start-up companies, but who don’t want to shoulder all of the risk themselves. Act 255 includes a 25 percent state tax credit, which could prod some investors into taking the plunge. The tax credit alone probably isn’t enough to spur investment, but it could make the difference in a close call.
Kanavas is an entrepreneur who has launched and built technology companies – and who recognizes that Wisconsin needs a tax credit program that can encourage others to do the same.
“We need to change the way people perceive these opportunities in Wisconsin,” Kanavas told the Milwaukee Journal-Sentinel. “People are more willing to invest in opportunities like this in California than in Wisconsin. The intent is to get people off the sidelines.”
The passage of Act 255 cannot be the first and last step by the Legislature to help build Wisconsin’s new economy. The next session may find lawmakers locked in another debate over what happens next. For now, however, getting Act 255 ready for its Jan. 1, 2005, enactment is most important. The administrative rules for the law are being written by the state Department of Commerce, which wants to hear ideas on how the law can best be implemented.
The first listening session was held July 8 in Milwaukee. Other sessions will be held 10 a.m. Thursday (July 15) at Chippewa Valley Technology College, 770 Scheidler Road, Chippewa Falls; 10 a.m. July 22 at the Bordini Center of Fox Valley Technical College, 1825 N. Bluemound Road, Appleton; and 10 a.m. July 29 at the MGE Innovation Center, 510 Charmany Drive, Madison.
In addition to holding these sessions, Commerce will post information and accept comments on Act 255 through its website at www.commerce.wi.gov/Act255.
Most jobs in today’s economy are produced by small businesses – and many of those small businesses have a technology base. They are the high-tech manufacturers, business services and health care firms of tomorrow. Through Act 255, some of them may get a head start on prosperity.
_______
Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.
*****
The opinions expressed herein or statements made in the above column are solely those of the author, & do not necessarily reflect the views of Wisconsin Technology Network, LLC. (WTN). WTN, LLC accepts no legal liability or responsibility for any claims made or opinions expressed herein.