Maybe we’re not so bad at startups

Conflicting studies raise doubts about state’s “worst in nation”rating for new companies.

By Bruce Murphy, Urban Milwaukee

UWM Innovation AcceleratorIn the world of venture capital, Wisconsin barely exists.

As a recent analysis by City Lab found, about 60 percent of all venture capital funding startup companies in the United States goes to just four metro areas: San Francisco, San Jose, Boston, New York, Los Angeles, San Diego. “The top ten metros alone account for more than three-quarters (77.6 percent) of all venture capital investment across the United States, while the top 20 account for more than 88 percent,” the story noted.

In short, when it comes to the startup economy, most of America is simply flyover country. As City Lab notes, “Venture capital investment is found in just half of America’s 366 metro areas.”

Just a teeny trickle of the nation’s venture capital money drips into Wisconsin: of $58.8 billion raised nationally in 2015 the state got just $87.8 million.

The dearth of venture capital for Wisconsin, we’re told, means fewer startup companies and less commercial innovation, an anemic “new economy” and fewer jobs. And so we’ve seen lots of stories and chest beating about the problem.

While I don’t doubt we have a problem, I’m not convinced it’s quite as bad as we’ve been told. Is Wisconsin really the worst state in America, as the Ewing Marion Kauffman Foundation has repeatedly found? We’re worse than Mississippi? Worse than West Virginia? That’s hard to believe.

Key factors in this ranking were that “Wisconsin ranked last, with 170 of every 100,000 Wisconsin adults becoming entrepreneurs per month, on average,” Milwaukee Journal Sentinel writer Kathleen Gallagher reported, and “Wisconsin had 100.6 start-ups per 100,000 people, better than West Virginia’s 81.4 start-ups per 100,000 people, but still in the bottom 10 states.”

But there is another way of looking at the issue that the prophets of doom, like Tom Still, president of the Wisconsin Technology Council, tend to deemphasize. A typical column by Still clucks about the state’s last place ranking, but in passing notes that when startups do arise in Wisconsin, they are more likely to survive. “The U.S. Small Business Administration reported in mid-2014 that Wisconsin has a 10-year new business survival rate of 41%, the highest survival rate in the Midwest and 6.5 percentage points ahead of the U.S. average,” he wrote. Read more …

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