Culture of investment thriving in Wisconsin
Published Tuesday June 30th, 2009
Capital markets New Brunswick Securities Commission turns to U.S. state as a prime example of fostering investment growth
New Brunswick has found a model for promoting entrepreneurship in a U.S. state whose economy has traditionally relied on farming, mining and forestry.
Wisconsin's love affair with startups and investors - which has transcended the business community and made its way to the state legislature - has had the New Brunswick Securities Commission and other interested parties playing copycat.
"They, at the peak of the dot-com boom, they discovered they were in 48th or 49th place. They said, jee, everybody else is doing well, why are we last?" said Rick Hancox, the executive director of the securities commission.
"There was a real recognition that they had to encourage that investment culture."
Hancox recently returned from a trip to the state, his second in three years, to see how its economy has benefitted from new investor and entrepreneur networks, research and development commercialization programs, aggressive tax reform and a governor's business plan competition.
"One of the things we saw in Wisconsin was from the government down - the governor, the two key departments "¦ They were very much aligned that this was the game plan," Hancox said.
New Brunswick has emulated some of Wisconsin's moves and added its own twists.
The state's work inspired the annual Fullsail Summit the securities commission began hosting in 2007 to bring together parties around an agenda to grow capital markets.
The New Brunswick Innovation Foundation's Breakthru business competition, which also started in the same year, is similar to the governor of Wisconsin's contest, now six years old.
And a more liberal small business investor tax credit - pushed forward by the province this spring - is working to achieve the same ends as its Wisconsin equivalent.
Hancox got turned onto Wisconsin years ago when commission employees had begun scouring the globe for examples of jurisdictions fostering investment growth.
After months of eyeing examples out of the United Kingdom and Australia, staff was continually pointed by experts to Wisconsin - a place where declining traditional sectors could not continue to be relied upon heavily to backstop the economy.
The story goes that staff in the departments of financial institutions and commerce began talking with lawyers working for small businesses, who identified a slew of barriers blocking startups from success.
Senator Ted Kanavas eventually drafted Act 255 in 2005, which offered generous tax credits to investors pumping money into "high-technology" companies in pre-commercialization mode.
In an interview, Kanavas said since the rules changed, about 100 firms have benefitted from the credits, spurring at least 1,000 new jobs.
"Our responsibility was to prove that we could make these companies flourish," Kanavas said.
Meanwhile the business community was lining up to take part and arms-length agencies were being formed to push Gov. Jim Doyle's "Grow Wisconsin" initiative beyond government.
Joe Kremer, who had worked at the legislature while Act 255 was being drafted, was later hired by a newly-formed Wisconsin Technology Council to link angel investors to early-stage startups.
Kremer, who has led the Wisconsin Angel Network since 2005, said that four-and-a-half years ago, the state had one angel network. "Now, we're up to 22."
The group's 2008 report shows the state posted a 28-per-cent increase in angel and fund investments last year - amounting to more than $15 million in 53 deals - even as angel investing was down by 26 per cent nationally.
Meanwhile, the university-led movement to commercialize research and development is encouraging startups to form.
Mike Helfman's Bubbling Springs Solar, Inc. got off the ground with the help of a business incubator run by the Stout Technology Transfer Institute on the University of Wisconsin's Stout campus.
The university provided the Menomonie, Wis. entrepreneur - whose company manufactures solar collectors - ample space at low cost under "favourable" conditions and offered research and development resources, Helfman said in an interview.
In exchange, Helfman provided job opportunities for graduating students.
"There's that interaction between the students, the staff and an operating business on the university," he said. "Three of my (newest) employees, two of them are ongoing students, one of them is a graduate."
Victor Boudreau, the new Business New Brunswick minister, said Monday he would be happy to sit down and look more closely at what Wisconsin has achieved.
Meanwhile, he rejects recent criticisms put forth that his government is focused more on attracting outside companies than on promoting the launch of startups at home.
"I know that sometimes it seems as though we're doing a lot to attract outside investment and jobs," he said. "But we also need to continue to work with our existing base of companies."
Boudreau said the NB Growth program, in its second year, has seen many successes at helping small- and medium-sized companies find financing.
"Access to capital is very often one of the main stumbling blocks of our small and medium-sized businesses."
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