by JOHN TORINUS, chairman of Serigraph Inc.
Calling all entrepreneurs and early-stage investors: Some $10 million in 2008 investment tax credits are still available for new Wisconsin companies.
The state Department of Commerce has two pots of money: $5.5 million for angel investors in new companies and $6 million for early-stage seed capital funds. Each has $5 million uncommitted for this year.
In the first three years of the program, the 25% credits were largely spoken for, proving that the stimulus has been doing what it was supposed to do. Call it a success.
Call it shakedown cruise too, because much has been learned in the initial years, and there is much more that can be done to stimulate entrepreneurial ventures in the state.
A Department of Commerce Web site shows 85 deals that were done from 2005 to 2007. The 2008 deals, which are not yet posted on the site, would bring the total to 95, a department spokesman said.
Of the 85 certifications, the Madison area won 52 and the Milwaukee region, 16, with the rest going to other parts of the state.
The biotechnology sector won 36 of the 85; information technology, 16; and medical devices, nine.
There were several advanced agriculture approvals, but none that I could identify in advanced manufacturing — even though state guidelines specifically target those two sectors.
In short, the new program has been a bonanza for Madison and the bio-medical sector. It’s been a help in other parts of the state.
The department has apparently set up its own approval parameters to favor companies with profiles that are more “R” — research — than “D” – development. Some that I would classify as technology companies in the Milwaukee region have been turned down.
With its huge treasure of academic R&D, Madison is positioned for a majority of the credits. It’s great to see that engine of prosperity in Dane County.
More in need
But the truth is, Milwaukee in particular and other parts of the state need the economic stimulus more. Unemployment in Dane County is almost nonexistent; the city of Milwaukee has the seventh-worst poverty rate in the nation.
So, where do we take Act 255 from here? A task force is forming to make recommendations to the governor and Legislature. It includes representatives of the Wisconsin Biotechnology and Medical Device Association, Competitive Wisconsin and Thrive, the south-central Wisconsin regional development organization. It has done some preliminary work and has developed some ambitious and sensible advancements. Here are some major, preliminary ideas:
- Raise the annual pool of tax credits from $11.5 million for angel and venture investors to $50 million — which, at 25% in credits, leverages $200 million in new investments in Wisconsin start-ups.
- Increase the eligible investment cap per start-up from $4 million, a pretty small deal in the venture world, to $8 million.
- Expand eligibility to include a full range of technology sectors in the exporting clusters of the state. That would help in Milwaukee and the rest of the state.
- Allow the credits to be used by the state’s thriving insurance industry against its gross premium taxes.
- Permit a rollover of capital gains if they are reinvested in a new Wisconsin financing round or new venture.
- Tap into the New Markets Tax Credits Program, which directs billions of federal dollars into impoverished communities, with some add-on credits for Wisconsin deals.
These concepts track with Gov. Doyle’s Accelerate Wisconsin, which passed the Assembly in the last legislative session but failed in the Senate because his fellow Democrats there didn’t understand how acutely Wisconsin needs this kind of stimulus.
The 95 funded companies won’t all make it, but the ones that do will more than repay the state treasury for the investment credits.
And they have the potential to replace the hundreds of jobs lost each month this year in manufacturing.
A $50 million pot of credits will draw $200 million in capital. It would be a bold start to the $1 billion in annual angel and venture investing that the task force believes the state really needs.
John Torinus is chairman of Serigraph Inc. of West Bend. Contact him at torcolumn@serigraph.com