Does Wisconsin Need More Incentives for Venture Capital Investments?
As Early Investment Capital Falls Nationally, It Jumps 31% in Wisconsin
Bruce Murhpy’s latest commentary at UrbanMilwaukee.com ventures where few people (especially “angel investors”) dare to tread – by challenging the perception that Wisconsin lags in availability of venture capital for entrepreneurs and should allocate state funding to create more incentives for boosting the amount of such capital. His analysis was triggered by a January 17 Milwaukee Journal Sentinel (MJS) article, which reported that Wisconsin enjoyed strong growth in early investment capital in 2012 – with a 31% increase last year, even though the national venture capital pie contracted by 10%.
Murphy’s column critiques the MJS article and contends that it painted a “glass half empty” picture of venture capital in Wisconsin, but I think he concedes that the Milwaukee paper has accurately reported the statistics. He notes that a PolitiFact column in the Journal Sentinel reported that Wisconsin ranked 25th among the states in the amount of venture capital raised in the first three quarters of 2011 – which I think is better than many people seem to believe. That improved performance was before the big increase in Wisconsin last year, bucking the national trend.
If there is any fault in the recent MJS article, I’m not sure that it extends beyond the ambiguous headline (“Venture capital in at finish“). Nevertheless, I applaud Murphy for tackling the issue of venture capital and pushing back against the assumption that this is where the state needs to invest additional resources. That sort of questioning of legislative assumptions and proposals is essential to improve policy choices about the use of scarce dollars – considering that political contributions will sometimes trump rational policymaking, especially if journalists don’t help voters keep a watchful eye on the decisions.
I can’t claim to have studied the issue of venture capital enough to have reached my own conclusion about whether Wisconsin needs more (or less) public subsidies for early stage investments in private enterprises. However, as I observed in another blog post this month, I strongly believe that policymakers should first conduct a thorough review of the strengths and shortcomings of existing Wisconsin spending and tax breaks that are supposed to boost business startups, before setting aside more of the state’s scarce resources for that purpose.
An earlier Journal Sentinel article revealed that the Wisconsin Economic Development Corporation (WEDC) failed to let potential investors know which companies were eligible for the latest round of state investment subsidies, thereby negating the value of those subsidies. At a minimum, state lawmakers need to review existing subsidies and figure out how to ensure that the WEDC is effectively shepherding state dollars – before policymakers create yet another batch of subsidies to hand out to corporations.