Startups Still Abandon Wisconsin, But Growing Cluster Keeping More Here

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strong college programs like computer science at UW-Madison, and the fact that salaries for software developers and engineers here are a fraction of the rates in Silicon Valley. It has also become easier to lure C-suite talent to middle and late-stage companies in Wisconsin because there’s a more robust group of employers they could jump to if the venture fails, Still says.

“I think it’s reached the point where CEOs need not necessarily worry that if something doesn’t work out with a company, that they automatically have to pull up their family and move elsewhere,” he says.

And while VC funding still remains a concern, Wisconsin has grown a healthy network of angel groups, thanks in part to a state tax credit passed in 2005. Several new in-state VC funds are also ramping up, and some Wisconsin startups have successfully raised later-stage funding rounds from investors outside the state—without relocating their companies.

“I think that there’s less pressure today than five or 10 years ago for companies to move simply because of the investment dollars,” Still says. “That doesn’t mean it doesn’t still happen, I just think it’s not as prevalent as it was in the past.”

Propeller Health, the Madison-based startup that has developed a cloud-enabled device for monitoring respiratory diseases, has raised $8 million from a group of investors that includes Palo Alto, CA-based The Social+Capital Partnership; Oakland, CA-based Kapor Capital; and the California HealthCare Foundation. Propeller has 29 employees at its Madison headquarters, plus seven more sprinkled around California, Nashville, and Chicago, CEO David Van Sickle says.

Van Sickle previously worked as an epidemiology service officer for the Centers for Disease Control and Prevention in Atlanta. He moved to Madison for a Robert Wood Johnson Foundation fellowship, and says he was excited about living there because UW-Madison is a leader in respiratory and population health research.

He co-founded Propeller in 2010 and says that so far, its location hasn’t really affected the business.

“With digital tools and constant collaboration, the fact that some of us contribute to that effort from here or there just hasn’t been a barrier to our progress,” he says.

The same goes for JAMF Software, which is proving that IT companies can thrive in smaller cities with tech centers that are even less developed than Madison and Milwaukee. JAMF was founded in 2002 in Eau Claire, WI, a city of about 67,000 people about 90 miles east of Minneapolis.

JAMF, which develops enterprise management software for Apple products, has attracted $33 million in VC and grown to 150 employees in Eau Claire, with another 100 at its Minneapolis headquarters and small offices of about a dozen people in New York, Amsterdam, Sydney, Hong Kong, and Cupertino, CA.

“I don’t believe that just being in a location is what makes you successful,” founder and co-CEO Zach Halmstad says. “The people you have around you and how you act toward them, and how you act toward your customers, is more important than where you are.”

For JAMF, the Midwest’s central location is a plus because it has customers nationwide, Halmstad says. He has also found Midwest-bred employees to be quite loyal. “I haven’t seen significant reasons why we shouldn’t be in Wisconsin, why we shouldn’t be in Minnesota,” Halmstad says.

Another reason to stay put? Auspicious Wisconsin startups are bigger fish in a smaller pond here, Allstop says.

Even though there might be fewer startups leaving Wisconsin these days, and there’s arguably a more compelling case for them to stay than there was even five years ago, it’s inevitable that some companies will continue to move away. And disappointed locals shouldn’t denounce those startups for that choice, observers say.

“Every company has to make a decision that’s in that company’s best interests,” Kirgues says. “To offer a blanket explanation of why you should stay or go misses a lot of the nuance that explains really what’s going on.”

Kirgues prefers not to play the “what if?” game with cases like SurveyMonkey and others.

“There is a little bit of a hangover from having missed out on these opportunities over a decade ago,” Kirgues says. “But I think it’s important to be looking out the front window and not out the back mirror.”

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

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