Wisconsin a Land of Innovators, Not Just Cheeseheads

12/16/13Follow @XconomyWI

Wisconsin: the land of beer, brats, and, yes, cheese.

Ask a random person on the streets of New York or San Francisco what they know about Wisconsin, and that might be the sort of answer they would give. In my experience, folks on the coasts sometimes can’t even point out Milwaukee or Madison on a map.

Wisconsinites are sick of hearing the same old stereotypes about their state. Even this native Michigander grows tired of it. In my young career as a reporter in the Badger state I’ve seen firsthand its pockets of innovation, from my time reporting on business and healthcare in the central Wisconsin city of Marshfield—population 19,000, but home to a well-respected research and medical institution, Marshfield Clinic—to covering manufacturing and technology in Milwaukee, the state’s largest metropolitan area and economic engine. (The above photo depicts the renowned Milwaukee Art Museum facing east over Lake Michigan.)

At a certain point, the question becomes: Is Wisconsin doing enough to establish itself firmly in the national discussion on innovation?

We here at Xconomy believe it warrants inclusion. As editor of Xconomy’s new Wisconsin bureau, I plan to dive deep into the state’s innovation economy, shining a spotlight on the interesting stories that deserve to be told. I will also examine the weaknesses holding the region back from being mentioned in the same breath as America’s foremost innovation hubs.

Wisconsin has its challenges. For starters, it ranked third-worst nationwide for entrepreneurial activity per capita in 2012, tied with Michigan, according to an April report by the Ewing Marion Kauffman Foundation.

One of the obstacles cited by local entrepreneurs, investors, and trade groups is a lack of available capital. Wisconsin has built a robust angel investment environment over the past decade, aided by a tax credit and a statewide angel network, but venture capital remains scarce.

Various government-backed VC proposals totaling between $200 million and $400 million failed to pass the state legislature in recent years, according to the Milwaukee Journal Sentinel. This year, state lawmakers approved a bill to invest $25 million in a venture capital fund that would leverage another $50 million in private VC money.

The legislators who wrote the bill admit that pot of money is just a start. But let’s not kid ourselves; those tens of millions are dwarfed by funds on the coasts that number in the billions with a “b.”

Starting a business inherently brings risks, so I also wonder how much the conservative Midwest culture holds back startup activity in Wisconsin. Entrepreneurs and even some investors have told me they wish this state embraced failure more, instead of treating like pariahs the entrepreneurs with failed startups on their resumes.

In any case, this Midwestern state isn’t in the same league as hotbeds on the coasts when it comes to startup formation and mega-investment deals. And Milwaukee at times suffers from an inferiority complex born of frequent (and perhaps unfair) comparisons with its much larger neighbor 90 miles south, Chicago.

But the Badger state has a strong history of innovation that continues today.

Consider this: Harley-Davidson (NYSE: HOG) started in a 10-by-15-foot wooden shed in Milwaukee 110 years ago. It’s now the iconic American motorcycle manufacturer, with a global brand so strong that the pope has blessed its products, as I reported for The Business Journal Serving Greater Milwaukee.

Warren Johnson, a college professor in Whitewater, WI, invented the first electric room thermostat in the 1880s. The business he founded, Johnson Controls (NYSE: JCI), is now Wisconsin’s largest publicly traded company—$42.7 billion annual revenue, $34.5 billion market cap, 168,000 employees worldwide—and a world leader in advanced car batteries and energy efficiency products and services for buildings.

Not to mention the entrepreneurs who put Milwaukee on the map in the 1800s, brewers like Frederick Miller, Frederick Pabst, and Joseph Schlitz.

Some of Wisconsin’s most influential innovations in more recent decades originated in and around the state capital of Madison. James Thomson, a University of Wisconsin-Madison cell biologist, created the first human embryonic stem cells. Computer scientist Judy Faulkner founded a top electronic health records software company, Epic Systems, and became a billionaire.

I’ve only lived in Wisconsin for a few years, but from dozens of conversations with entrepreneurs, researchers, and tech geeks, I get the sense that the next generation of Wisconsin innovators believes that with a great idea and that good, old-fashioned Midwest work ethic, they too can leave a mark on the world.

Life sciences and biotechnology are among Madison’s strengths, with the state’s flagship university playing a key role in feeding the innovation pipeline.

Madison, WIUniversity of Wisconsin-Madison research and researchers have formed the nucleus for companies like Cellular Dynamics International (NASDAQ: ICEL), which was co-founded by Thomson and completed a $46.2 million initial public offering this year, and Propeller Health, which has raised more than $6 million from California investors for mobile products that help people manage chronic respiratory diseases.

Meanwhile, Milwaukee has long been the state’s economic engine, but like other Midwest industrial cities it is still trying to recover from thousands of manufacturing job losses in recent years, a broader trend that has particularly devastated the inner city. Advanced manufacturing will remain crucial for the region even as it evolves, but industry, academia, and government are beginning to form more partnerships and invest in clusters like energy, power and automation, and water technology.

I plan to keep a particularly close eye on the water sector and whether it can live up to the hype of some anointing it the Moses that could lead Milwaukee’s economy to the promised land in the 21st century.

To wit: The Water Council is a Milwaukee-based group that wants to make this region the world’s epicenter for water technology research, education, and economic development. Its accomplishments thus far include opening the Global Water Center in a renovated building near downtown Milwaukee, with tenants including water technology startups, research and development teams from more established companies like Badger Meter (NYSE: BMI) and A.O. Smith (NYSE: AOS), academic researchers, and government and support organizations. Partners in the effort include University of Wisconsin-Milwaukee, which in 2009 launched the nation’s first graduate school for studying fresh water, and University of Wisconsin-Whitewater, which created the nation’s first water business institute.

It’s companies and projects like these that helped convince Xconomy’s editors that we should be on the ground in Wisconsin. And even though observers won’t mistake Milwaukee or Madison for Silicon Valley or Boston, members of Wisconsin’s startup community would likely be the first to say they don’t necessarily want to be compared with anyone else—they want Wisconsin to forge its own innovation identity.

I’m thrilled to have an opportunity to follow that process up close and help drive the conversation about Wisconsin’s innovation economy locally and nationally, while asking the tough questions every step of the way.

Will Wisconsin raise its level of entrepreneurial activity?

How should it go about boosting the flow of venture capital, and is that really the main hindrance to growing its startup community?

Can Wisconsin foster a culture of embracing risk-taking and failure as much as success?

Who will step up and be Wisconsin’s William Harley, Arthur Davidson, and Warren Johnson for the 21st century?

I don’t know the answers—yet. But I do know that Wisconsin is much more than brat and cheese eaters, beer drinkers, and Green Bay Packer lovers. And by the time we’re done here at Xconomy Wisconsin, you will, too.

Jeff Engel is the editor of Xconomy Wisconsin. Email: jengel@xconomy.com Follow @XconomyWI

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