13 Jun Visions: Broderick says Wisconsin should be in top third in venture capital
Editor’s note: Dan Broderick is the chief executive of Broadwell Ventures, a new venture capital firm that was spun out of Mason Wells. This interview was conducted during the Wisconsin Entrepreneurs’ Conference, and after a NorthStar Economics report said that Wisconsin angel investing surged by 54 percent, to over $100 million, in 2006, and after the Wisconsin Legislature’s Joint Committee on Finance failed to provide requested funds for a new Venture Center.
WTN: Although incremental progress has been made, why does Wisconsin, with all of its sophisticated science, still lag so far behind other states in attracting venture capital?
Broderick: There are really several ingredients that need to be present for the venture capital market to take off. There is human capital, there is technology, there is venture capital, and I think Wisconsin does great with technology, but where we fall back a little bit is in human capital, particularly on the business side of things, and venture capital.
The Midwest, itself, functions as a marketplace, and the marketplace is inefficient in part due to distance. Right now, Wisconsin is lagging behind some other states in the risk capital and human capital as well as the efficiency of dealing with distance. The major airport is in Milwaukee, it’s hard to get to Madison, and I think that hurts Madison, whereas if you look at what’s going on in Cleveland, it’s easy to get to Cleveland from the east coast in particular. One, it’s further east. Two, it has a big airport, and you can get there and back in a day, and you don’t have to fly through Chicago.
I think those kinds of logistics hurt Wisconsin. I also think that Wisconsin, itself, in some ways has a reputation, earned or not, of being a high-tax state. In general, some people on the coasts and elsewhere hear that, and consciously or subconsciously factor that into their decisions of where they are going to spend time.
WTN: Do you think we’re taking the right approach in trying to build the angel infrastructure first, believing that will lead to more venture capital?
Broderick: There is more than one way to get there and angel money, especially smart angel money – and I think it’s smarter today than it was in the Year 2000 – can help drive investment. It moves companies further along and helps them hit some milestones – hopefully, the right milestones – but I think that’s one good approach. I think there are a number of approaches that should be taken and can be taken, and angel is one of them.
WTN: Are there any missing links that you can see with our approach to growing angel investment?
Broderick: No, I think the angels are doing fine. I think what Lorrie Keating Heinemann (secretary, Department of Financial Institutions) and what Joe Kremer (director, Wisconsin Angel Network) created with the Angel Network was a really good idea. Some of the angel networks that are forming have good leadership right now – the Golden Angels Network and Wisconsin Investment Partners, Dick Leazer’s group. These are good groups.
WTN: What do you make of the recent angel investment report that said Wisconsin early-stage companies had raised $102 million in angel investments?
Broderick: That number seemed high to me, but without the benefit of seeing the data and sorting through it, I don’t have much of an opinion on it. It felt high, but that’s all I can say.
WTN: The Legislature’s Joint Committee on Finance recently failed to pass $2 million the governor had sought for a “Venture Center” (although it could still be restored later in the budget process). Based on your knowledge of outside investors, does this necessarily harm the state’s ability to attract venture dollars?
Broderick: First, I don’t know how well that particular concept is known outside the state, other than what Secretary Heinemann has done as far as her research on how to structure this deal. She’s talked to a lot of people. If it doesn’t go through, those people will probably know, like BioEnterprise in Cleveland. I think it sends a signal to those who know that Wisconsin isn’t interested in entrepreneurship and venture capital formation.
From a practical standpoint, I think the Wisconsin Venture Center was a good idea. Is it critical? Is it crucial? Is it a have-to-have? Probably not, but if you look at the results that BioEnterprise has achieved, it could have been a very, very compelling engine in the Wisconsin venture economy development. It wouldn’t have been the only engine, but it could have been very important.
WTN: On the other hand, the Legislature did repeal of the shareholder wage lien law last year, perhaps helping Wisconsin shed its image among investors as a “fly-over state.” Has that been overstated, or is that right on the money?
Broderick: I don’t know if that was THE compelling reason that it was a fly-over state. I think what the Legislature did on the shareholder wage lien law was a good decision. That was something we pointed out in 2000, when Mason Wells was just forming its venture fund. So that was a good decision, but I don’t think that’s the only reason we were a fly-over state.
WTN: In terms of attracting venture capital, what is a realistic, best-case scenario as to where the state should rank among the 50 states?
Broderick: We should be in the top third to the top quarter. There are some states where it doesn’t make any sense to have any venture investment, or much of it, but Wisconsin should be in the top third at least. At least.