Header Banner

Quite the Undertaking: When It Comes to Entrepreneurship, No Place to Go but Up

A recent study places Wisconsin 50th out of 50 states in fostering new enterprise. Kevin Quinn, dean of the Schneider School of Business & Economics, tells us what we can do to boost the state's startup activity.

The Kauffman Foundation, a well-respected organization that promotes entrepreneurship (among other worthy causes), publishes an annual index of startup business activity that has, for the past two years, ranked Wisconsin dead last among U.S. states.

As in Eddie the Eagle, but without the uplifting biopic.

Digging into the index’s components shows that the Badger State has the lowest percentage of adults choosing to become entrepreneurs. Of those, a very high percentage of them start a business not because they see opportunity, but because they are out of other employment options – only Alabama does worse than Wisconsin on this score. Furthermore, the portion of all firms that are startups is lower in Wisconsin than in any other state except West Virginia. Not surprisingly, Wisconsin consistently sees less than 1 percent of the $75 billion or so that venture capitalists annually put into 7,500 or so startups across the United States.

There is a flip side to this bleak tally – Wisconsin startups tend to survive longer than most. The state ranks 10th in the nation, and top among Midwestern states, in survivorship, with about four in 10 startups formed in the mid-2000s making it through the next decade. However, this success is best interpreted as an unhealthily strong distaste for risk on the parts of both entrepreneurs and on funders. The same solid Midwestern prudence that kept Wisconsin from going too crazy during the housing boom is toxic to the development and maintenance of a successful startup ecosystem. Furthermore, at least based on my own observations here in northeastern Wisconsin, those with ideas and those with funds tend to talk past each other. A healthy startup ecosystem requires a common language for, and an understanding of, how venture capital works on both sides.

The problem is not so much that we don’t have enough tech here to promote startups, but that we harbor poor conditions for any startups – tech or otherwise. This traps us in a bit of a vicious circle. In robust entrepreneurship communities, the downside of your startup failing is manageable – close the doors on one idea on a Friday, and you are likely to be at work on another within days. Moreover, you can learn very quickly from your own mistakes as well as those of others if you bump into like-minded entrepreneurs on a daily basis. In a thinner ecosystem, if your nascent business goes under, that can lead to a long spell of unemployment – further depressing your incentive to risk turning a great idea into a great business.

This has real consequences for even established businesses’ ability to attract and retain young talent to our region. The economic and social dynamism that springs within a community that hosts a solid startup environment is exactly what makes it a destination for young, energetic people of all kinds. They bring with them solid demand for cultural experiences that can benefit all of us – better restaurants and nightlife, financially healthy museums and libraries, upgraded housing stock – even more interesting fashion – and ultimately, a stouter tax base that can better fund schools, parks and roads. This is the virtuous circle – by paying attention to nurturing these elements in our communities, we can attract those who appreciate and support them, thereby spawning even more of it. Everyone wins.

Fortunately, there is a growing awareness of the problem. I am very encouraged by a number of informal groups of talented like-minded millennials proactively seeking each other out to exchange ideas. The Schneider School has begun partnering with some of these groups, and with government, other educational institutions and the local venture capital community, to help build the entrepreneurship culture. We also are connecting these partnerships with St. Norbert’s undergraduate and graduate students through new co-curricular programs, such as our first “Shark Tank”-style pitch contest that was held in December.

If the next Steve Jobs – or Ron Popeil – is one of our students, we want to show her the path toward turning the next iPhone – or Pocket Fisherman – into good employment for our friends and neighbors. This will be an important element in keeping our young people home in Wisconsin, and in making our communities more dynamic places to live and work. Even for our students who do not plan to be risk-taking startup mavens, changes in the nature of work likely to occur between now and 2050 mean that the ability to entrepreneur oneself and one’s ideas will become an ever more essential professional tool. We are charged with getting young people to not only survive the Uberizing job market, but to thrive in it. Making sure that they have entrepreneurship opportunities is an important part of that job.

 

Jan. 30, 2017