Wisconsin: Bringing Business Home

Income in rural counties of Wisconsin lags 20 to 40 percent below urban areas.

Income in rural counties of Wisconsin lags 20 to 40 percent below urban areas. In addition, according to James Miller of the US Department of Agriculture (USDA), “Non-innovative, routine production, natural resource and low wage labor dependent companies are attracted to rural areas. Most rural areas will find it difficult, if not impossible, to counter the strong tendency of high technology industries to concentrate in metro areas.”

This is the trend the Northwest Regional Planning Commission (NWRPC), an Economic Development Administration (EDA) funded district in Spooner, sought to reverse. The result: the Wisconsin Business Innovation Corporation (WBIC), a nonprofit corporation whose mission is to link market opportunities, technology and enterprise formation and growth to create higher skilled jobs, economic diversification and wealth in rural areas.

When their 1989 manufacturer directory was updated in 1996 and 1997, Executive Director Bruce Davis realized there was a problem. There was no net gain in the number of manufacturing companies, only 30 additional employees and per capita wages were lower. Well-paying full-benefit jobs were being replaced with six to eight dollar an hour jobs with minimal benefits.

The key was finding start-up and early stage technology-based businesses that could be location-influenced with financial and technical assistance.

Despite the assumption that the new economy will be based on the Internet, WBIC is convinced the future is more focused on biotechnology with a special emphasis in science-based agriculture and high-tech wood products. The next question was how to convince companies to relocate to northwestern Wisconsin. The key was finding start-up and early stage technology-based businesses that could be location-influenced with financial and technical assistance. WBIC had a technology seed fund capitalized through a USDA grant and gap financing revolving loan funds (RLF) capitalized with EDA and USDA Intermediary Relending Program dollars to assist businesses. Seeing growth and higher wages in biotechnology jobs, WBIC began to put together tools for bringing companies to its region, an array of technical, financial and business support services along with capital and real estate critical to enterprise formation and growth. These include: an electronic knowledge service; financing resources that include a community-based venture fund; established contacts with federal laboratories and universities; good relationships with local bankers and access to local money; technical and market assessments of new products and technologies; commercialization strategies and business planning; technology transfer agreement with federal laboratories, USDA, Agricultural Research Service; international technology transfer and marketing through centers in Germany, Sweden, Austria and Finland; and the Northwest Enterprise Center Network of business incubators.

Their venture fund is not a typical venture capital fund, but more like a community-based fund or an angel investor fund. According to Davis, “Our three million dollar investment is starting to pay off. We assist the company during its first stages of growth, then we dilute our ownership through a pre-arranged exit strategy. We have become angel investors. We believe this is the right way to accomplish the goals we have set for ourselves.” Building businesses while they are relatively small does not take as much financial assistance. For many small businesses, the main limitation is money, so WBIC has put together tools and resources to combat the lack of venture capital in rural Wisconsin.

The theory is that for every 10 businesses invested in, three will lose, three will break even, three will make money and one out of ten will be very successful.

Currently they are working with 25 to 30 companies, the majority of which are biotech-related, with potential job creation in excess of 1,000 jobs. In addition to making an equity investment in companies from the Venture Fund, the WBIC has received stock in exchange for technical assistance. According to Davis, the WBIC is banking on being able to provide value to these early stage ventures via technical assistance that results in accelerated growth and profitability for the company. WBIC shares in this upside value of the company at the time it redeems the stock, which normally occurs within six years through an acquisition, internal repurchase of stock, or an initial public offering. Davis sees a few obstacles with a focus on start-up and early stage companies. Many entrepreneurs they are working with are great inventors, but less experienced at running successful businesses. These businesses need time and expertise to gain successful business acumen necessary to grow into a profitable venture that can compete in the new economy.

The theory is that for every 10 businesses invested in, three will lose, three will break even, three will make money and one out of ten will be very successful. Only time will tell if this theory is correct, but the prospects so far are good.

By Melissa Levy, Digest Managing Editor

For more information, contact Bruce Davis of NWRPC at (715) 635-2197

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