22 Feb How MG&E bets on small companies for the long term
When it comes to economic development in Dane County, Madison Gas & Electric has followed a small-market blueprint over the last 20 years as it works to nurture entrepreneurial activity in the hope that today’s prospects turn into tomorrow’s major league employers.
For MG&E, it’s part of an overall corporate strategy that sees value in creating the right conditions for entrepreneurs by providing financial support with the prospect of no immediate financial return, says Phyllis Wilhelm, director of economic development for the Madison-based utility.
“Most economic development organizations and communities have a business retention, expansion and attraction strategy,” Wilhelm explains. “It wouldn’t be an efficient use of our resources to go to focus on trade shows and advertise in Crain’s.
“Our strategy has been working with startups, growing your own and retaining what you have here, and building on your assets and your strengths by helping them grow and expand. These are less mature startups that have promise to become the next TomoTherapy.”
Incubators spur growth
The roster of successful Madison companies that have their roots in MG&E-supported business incubators includes names like Sonic Foundry, Virent Energy Systems, Third Wave Technologies, Panvera (now Invitrogen) and a host of others.
“MG&E has been an incredible partner with our startup companies,” observes Andrew Cohn, a spokesman for the Wisconsin Alumni Research Foundation, which licenses research from the University of Wisconsin for commercial development. “At the business incubator, where a number of companies get started, they couldn’t get started without MG&E’s assistance.”
A number of companies that use research first developed at the University of Wisconsin are housed in the MG&E Innovation Center, including the WiCell Research Institute, a WARF subsidiary which does stem cell research.
“I’ve been in biotech and tech companies going back over 20 years, and they have been very unique in the market in their economic development efforts,” adds Russ Smestad, president of Mirus Bio Corp, which makes research reagent products that enable discoveries in life science. “MG&E was a an early pioneer in recognizing and promoting economic development within the high-tech sector.”
Madison has eight business incubators, and MG&E provides a level of financial support for a majority of these facilities. MG&E is a sponsor of the Genesis Enterprise Center on the south side of Madison, an area that has not been known for having much economic opportunity.
MG&E was also involved in establishing the first incubator in Madison, the Madison Enterprise Center. The retro industrial building on the east side is leased by MG&E to Commonwealth Development for $1 a year. Sonic Foundry started out there years ago, and Virent also had its beginnings there before moving on another east-side high-tech incubator, the TEC center.
At the MG&E Innovation Center, which was established in 1989, the utility recognized early on the need for providing lab space for biotech startups. Through the years, MG&E has helped tenants of the center deal with facilities issues and financing. Platypus Technologies, a life-science nanotechnology firm, is one of the graduates of the Innovation Center. It has since moved on to the New Venture Center in Fitchburg, which MG&E also supports.
“MG&E has helped by establishing the infrastructure,” says Ralph Kauten, president and CEO of Quintessence Biosciences. “They have been instrumental in introducing us to a number of people that have resulted in us getting press attention, including acknowledgment in Forbes Magazine, getting us on the Nightly Business Report, and, introducing us to people who have become investors in the company. They introduce you to people that help with exposure to the press, the public, and to investors.”
Kauten says he has traveled around the country enough to know that having a high-tech incubator is important for the creation and rapid startup of small companies: “I came back from a trip recently, heard a story about efforts to develop high-tech clusters. There’s a number of things that we have here that we might overlook, or take for granted. Certainly the MG&E Innovation Center is a very key element in that.”
Supporting VC funds
MG&E is a charter member of Venture Investors of Wisconsin, a venture capital fund, and is part of the Debt Venture Fund, which is administered through the Madison Development Corp.
“This is a way that we can invest,” Wilhelm says. “We don’t have the time to do all of the due diligence that is necessary. So, we become an investor through an accredited venture capital company.
“We were finding that there were a lot of companies that needed a lot of bridge financing for anywhere from $250,000 to $500,000,” Wilhelm says of MG&E’s participation in the Debt Venture Fund. “These are companies that need to keep their research going. This is kind of a Silicon Valley-type model for companies that are more risky and high-tech.”
MG&E is leveraging its relatively small size as a utility and the unique profile of the greater Madison economy, with a major research university, the state capitol and a highly educated workforce, in an effort to partner with the community for the greater good, Wilhlem says. “We can engage with the community in a different way than if we were a major corporation,” she says.
One of those efforts is the Dane County Collaboration Council, which is an attempt to pull together a private-sector-funded regional economic development authority. MG&E CEO Gary Wolter serves as co-chair of the collaboration council. Currently, there is no marketing plan or brand image for Madison or Dane County, not to mention a cohesive recruitment or retention strategy, Wilhelm says.
“It’s a matter of at least getting on the radar screen, because currently, there is no one entity,” she says. “This is a leadership collaboration to grow Dane County’s economy.”
MG&E’s economic development team is also involved in the Biomedical Collaborative, which is an effort to create a biomedical cluster by leveraging the strengths of the area’s nationally recognized researchers in partnership with existing health care providers and the biomedical business community. The goal is to establish a network for biomedical innovation and comprehensive health care while attracting venture capital and creating new businesses.
“I don’t think I’ve been on an economic development committee that hasn’t had a representative from MG&E on it,” Cohn says. “And, that is a real commitment by a private company to the growth and health of this community.”