All about the Benjamins: A Wake-up Call to Wisconsin Entrepreneurs, Venture Capital to the Rescue
“Ideas are easy. Implementation is hard.” – Guy Kawasaki, CEO Alltop/Venture Capitalist
On paper, the State of Wisconsin is home to a host of innovative entrepreneurs equipped with the skills and ideas necessary to create sustainable startup companies that will play a vital role in the improvement of state and local economies in the years to come. In practice, however, Wisconsin ranked a dismal 50th in startup activity in 2015 by the Kaufman Index, a third-party indicator of new business creation in the United States.
All too often, one ever-present barrier to an entrepreneur’s dream becoming a reality gets in the way: money. Shepherding a startup company through its infant years can be a daunting task, with so many front-end business expenses and so few opportunities to generate early-stage cash flow. Luckily for Wisconsin entrepreneurs, there is green on the horizon.
Venture capital consists of seed funding from a wide array of investors provided to startup companies with high growth potentials in exchange for preferred stock options or other forms of equity in the company. Venture capital is a largely untapped universe in Wisconsin, but one that is brimming with potential for new and developing businesses. In fact, data compiled by the National Venture Capital Association indicates that only one Wisconsin company took advantage of venture capital investments in the first quarter of 2016.
2013 Wisconsin Act 41 provided for the establishment of the Badger Fund of Funds, a state-sponsored venture capital investment fund that has committed $25 million to Wisconsin businesses with a minimum of $5 million in additional funding from the private sector. The Fund is designed to assist local startups establish a foothold in the marketplace and is not limited to any particular industry. In fact, the Fund has recently established a local subsidiary that will service the Fox Valley Area. The Winnebago Seed Fund is based in Neenah, Wisconsin and is comprised of a $4 million commitment from the Badger Fund of Funds as well as additional capital from local investors.
The City of Oshkosh is also home to its own investment fund for area startup companies. Angels on the Water, LLC consists of a local group of private investors who pool capital and make investment decisions through an Investment Committee. Angels on the Water focuses on technology-driven businesses and is preparing to invest $10 million in Wisconsin startups through its next funding venture.
Additional incentives to private investors exist under the 2003 Wisconsin Act 255 tax credits. Wisconsin’s Qualified New Business Venture (QNBV) program allows qualified businesses to claim up to $8 million in tax-eligible cash equity investment and places no caps on the amount of tax credits investors may claim. This is yet another incentive program designed to foster startup activity in Wisconsin.
Through these new Wisconsin programs, local entrepreneurs have an unprecedented opportunity to tap into investment funding designed to help fledgling businesses thrive. Business owners and private investors alike have new incentives to generate capital, and in turn, stimulate state and local economies. Establishing a new business venture in Wisconsin requires the assistance and guidance of an experienced attorney. John M. Kelly, Attorney at Law, LLC possesses over 42 years of experience in the creation and implementation of all types of business organizations in Wisconsin. When your livelihood is on the line, there’s no need to go it alone.