14 Nov Early-Stage Symposium measures Wisconsin's entrepreneurial climate
Madison, Wis. – Wisconsin start-up companies with dreams of becoming the next TomoTherapy or NimbleGen gathered this week at the annual Wisconsin Early-Stage Symposium, where the future of entrepreneurialism was addressed on several fronts.
The two-day symposium, held at Monona Terrace Community and Convention Center in Madison, is focusing on start-up companies that are trying to grow their business with federal grants and private capital.
They will have some unique opportunities to make their mark, according to Jeff Wacker, a futurist and director of corporate strategy for EDS. Wacker, who delivered a luncheon keynote, said we are on the verge of a fourth wave (he prefers monsoon) of information technology that is the successor to networked computing, where the killer applications or sparks were network computers, the Internet, and enterprise software. The fourth monsoon, so labled because it will result in both casualties and a fertile period of change, is characterized by the transition from sequential to parallel computing, and where the spark is computer simulation.
Like other monsoons, there will be changes, shifts, chaos, and no shortage of opportunities for entrepreneurs – in large measure because simulation will be used to more thoroughly test technologies and innovations. Wicker refers to this as “validating the probable.”
“There will be opportunities for smart people, even with minimal technology, to create innovative change,” he said.
Wisconsin success stories
In particular, two Wisconsin start-ups, one medical device manufacturer and one life-science toolmaker, have flourished in the networked computing era.
TomoTherapy, a University of Wisconsin-Madison spin off that began in the 1990s, manufactures and sells the Hi-Art radiation therapy system to treat different forms of cancer. The units have been sold worldwide, including now in the populous nations of India and China, enabling TomoTherapy to be on pace to generate more than $200 million in annual revenue this year, and net more than $180 million in an initial public offering of stock.
NimbleGen, which had filed for an IPO, was instead acquired by the Swiss pharmaceutical giant Roche. NimbleGen, a maker of gene chips for pharmaceutical research, had sought to raise $75 million in the IPO, but Roche acquired 100 percent of the privately held Madison company from shareholders for $272.5 million in U.S. dollars, enabling a more lucrative exit for investors.
TomoTherapy and NimbleGen are the kinds of success stories that could be difficult to replicate. In a recent survey, Wisconsin biotechnology executives identified access to capital as their most pressing concern. Wisconsin, which has gradually increased the share of angel investing through initiatives like the Act 255 tax credit program, still lags behind other Midwestern states in attracting later-stage venture dollars.
Entrepreneurs attending the symposium would like the state to accelerate those efforts. Howard Manske, chief financial officer for PDM Solar of Wausau, told a panel of state officials that Act 255 should be further expanded. The company is developing a solar air conditioning system – air conditioning is needed when it’s hottest, making solar a legitimate option to supply the energy to cool homes – and Manske is concerned with how much more capital is deployed for solar energy in states like California.
For anyone that makes an investment prior to being qualified for Act 255, he would like the tax credits to be applied to any subsequent investment, whether it’s the continuation of the first round or any subsequent round. He would also like to see the total credit raised for every qualifying company because some businesses probably will not seek additional through venture capital firms.
“Some of us will try to stay with friends and family, smaller angel individuals, or maybe some smaller angel groups, so we might not every qualify for a VC round,” he said, “whereas in the first two or three years of fund-raising, we may have three or four different rounds in there, but every one of them would be allowed to be credited that way.”
State Sen. Ted Kanavas, an architect of Act 255, said state support for subsequent rounds has been discussed, but it would have to be done in a way that doesn’t compete with dollars allocated to start ups. Kanavas, who would like more dollars committed to Act 255 and would like to establish tax credits for innovation, agreed that Wisconsin isn’t aggressive enough. Under the new state budget, the amount of angel and seed tax credit money, respectively, has been increased from $3 million to $5.5 million per year. So far, the Department of Commerce has qualified 76 companies for the program.
“I’m not happy with level of [investment] activity,” said Kanavas, who introduced a bill to increase angel money to $25 million over the next budget biennium. “I think there is more activity to be had.”
Outside-the-box executive recruiting
Another pressing concern is wooing top executive talent to Wisconsin, and quality management is another characteristic that is coveted by investors. NimbleGen has found some technology-enabled ways around that – including teleconferencing – to communicate with CEO Stanley Rose, who resides in Boston. Rose, who spends a great deal of time staying connected while on the road, wanted his residence to remain in Boston, but he was the best CEO to run a company like NimbleGen, according to Vice President and Chief Financial Officer David Snyder. Where Rose makes his home was less interesting to NimbleGen than the availability of his expertise, so the company found a way to take distance out of the equation.
Snyder, who is commuting to Madison from Chicago, advised entrepreneurs to think outside the box to recruit executive talent, and he noted that technology tools also could be used to tap local executive talent in a part-time capacity. “I’m very interested in taking advantage of highly educated, highly trained women that want to stay home and raise their families,” he said. “I think stay-at-home moms are one of the most under-utilized intellectual resources in the country.”
Taken for granted
The Early Stage event included a dinner ceremony honoring 51 Wisconsin companies that have secured federal research and development grants the past year. The federal grants, which ranged in size from just under $50,000 to more than $1.5 million, help early-stage companies develop and prove their technologies. If the technology has what investors consider a sustainable competitive advantage, the grants often are a prelude to angel and venture capital financing.
Mark Lee, a former astronaut and the chief engineer for the Institutes for Discovery project on the UW-Madison campus, spoke during the ceremony.