Guest Columnist - Paul Jadin
Posted: January 20, 2012
Over the past year, the Wisconsin Economic Development Corp. (WEDC) has had numerous requests from businesses for assistance in creating jobs. The state's available economic development tools satisfy a majority of those requests.
Non-refundable tax credits are by far the most used investment tool by WEDC. However, even when credits are refundable, as they are under our broadly popular Enterprise Zone Program, they still are not a good fit for start-up companies. Getting to the point where a business can use the credits is problematic, because they lack sufficient capital to create the initial jobs that are required to use the credits. It's a classic Catch-22 - Companies need capital to create jobs but can't access state assistance until the jobs are created.
Wisconsin needs a vehicle for responsible, strategic and rapid deployment of early-stage investment capital to spur enterpreneurial business and job growth opportunities. We must recognize that our primary job growth will come from growing the number of businesses in the state, but we do not currently have adequate resources to incent the creation of business because of a critical shortfall in early-stage investment capital.
The Angel Investment and Venture Capital Tax Credit programs are designed to encourage investment in small, high-tech businesses that have high growth potential, but they are targeted to angel investors, angel investment networks and venture capital funds that invest in these designated companies.
WEDC has researched capital investment programs across the country and has proposed a hybrid portfolio approach to early-stage investment. The concept is to support businesses throughout their continuum from research, to market, to expansion.
There is a tremendous amount of new business activity going on in Wisconsin that doesn't fit into the traditional venture capital financing mold. Wisconsin lacks the availability of early-through-expansion-stage equity capital.
Wisconsin has 1.84 percent of the nation's population but attracted only .55 percent of the nation's venture capital investment ($70.9 million). If Wisconsin had captured that same percentage of total venture capital investment as the nation as a whole, Wisconsin could have received $450 million. This could have leveraged the creation of more than 259,000 jobs, instead of 60,000 venture-backed jobs created over time.
WEDC is working with the Legislature and others to develop and implement programs to get capital into businesses that will grow and prosper in Wisconsin. Thirty states already have capital investment programs because they realize that new businesses are the foundation for new jobs. Wisconsin needs a similar program tailored to our state's specific needs and resources dedicated to keeping our best and brightest talent and business growth opportunities within its borders.