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Wisconsin Startups See Growth in Investment Levels in 2016

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Wisconsin Startups See Growth in Investment Levels in 2016

137 companies raise more than $276 million in 2016

Aaron HagarBy Aaron Hagar, vice president of entrepreneurship and innovation at the Wisconsin Economic Development Corporation

Investment in Wisconsin’s startup scene has nearly doubled in the past five years, according to a new report from the Wisconsin Technology Council. Companies across numerous industries are finding the investment they need to drive more innovation, launch products and grow their teams with some of the best and brightest minds from Wisconsin and across the globe.

Despite a national trend of slight decreases in venture funding over the past year, Wisconsin saw a significant increase in early-stage investing from 2015 to 2016. In fact, the latest Wisconsin Portfolio Report from WTC revealed that 137 early-stage companies raised capital in 2016, marking a 7 percent increase over the previous year, and approaching twice the number of companies that raised capital in 2011.

The total amount invested in Wisconsin startups also has grown, reaching $276 million in 2016, up 31 percent from $210 million in 2015. In contrast to past years with large investment totals, 2016 did not have one or two very large deals boosting the results. Rather, a larger number of companies brought in investments over $10 million compared to prior years indicating that investors are seeing more good opportunities in Wisconsin.

In addition to increased funding overall, 53 startups brought in $1 million or more in funding in 2016─an increase of 15 percent from 2015 and 39 percent from 2014. The average deal size also increased, reaching $2 million in 2016, up 25 percent from the year before. Investment rounds larger than $1 million are often sourced from sophisticated investor networks and funds rather than earlier rounds supported by “friends and family” investors. These sophisticated investors can also bring networks of contacts and valuable insight to companies as they bring their novel or disruptive technologies forward.

The Wisconsin Technology Council’s report mirrors the results that we have seen from other sources and our internal program analysis. For example, companies enrolled in the Qualified New Business Venture (QNBV) Program reported raising more than $281 million in new funding in 2016. Data from the Pitchbook platform shows that Wisconsin companies attracted more than $275 million in early-stage funding. While there are some differences among the three data sources, the overarching theme is that Wisconsin’s early-stage environment is improving and companies are finding more of the capital they need to move their innovations forward.

These emerging companies represent a wide variety of industries, including biotechnology, information technology, water, energy, nanotechnology, manufactured products, health technology, and food and beverage. Wisconsin has clear strengths in certain industry sectors as well as strength in its variety of opportunities, which allows for new ideas that cross industry barriers to take root. The opportunity for collaboration and cross-pollination in Wisconsin bodes well for the state’s economic future.

Above and beyond investment numbers, early-stage companies also tend to provide high-wage jobs. Over the past nine years, companies in the QNBV Program have reported average salaries of around $75,000. And while the total number of jobs supported by QNBV companies—more than 1,800—is significant, it is equally important to recognize that these early-stage companies have not yet achieved their full growth potential. So, while the present-day economic impact of these companies is important, it is the long-term impact that we should be most excited about. After all, the next Epic, Johnson Controls, or Jamf Software may have just raised its first dollar.

Buoyed by the ability to attract capital, an increasing number of entrepreneurs and innovators are recognizing that Wisconsin is an attractive place for startups. From an educated workforce, to an excellent quality of life that is a draw to top-notch talent, to cost-effective resources and more, Wisconsin is becoming a destination for entrepreneurs seeking personal and professional fulfillment.

Aaron Hagar is vice president of entrepreneurship and innovation for the Wisconsin Economic Development Corporation, where he leads a team of dedicated professionals with strong relationships within the state’s entrepreneurial community to quickly advance and develop efforts to support Wisconsin’s startups, innovation-based businesses and everyday entrepreneurs