Those who regularly follow economic dynamics in Wisconsin (present geek included) are accustomed to seeing steady underperformance when it comes to comparing the state and the region to other parts of the country.
A recent forecast by the state Department of Revenue is no exception to the rule. Analysts for the tax-collection agency are predicting lower personal income and employment growth in Wisconsin for 2025–27 versus the United States as a whole. On the other hand, state income and job growth predictions for the same period largely line up with the Great Lakes region.
Two other statistics suggest a different Wisconsin gap not as evident in seven other Midwest states. Those economic performance shortfalls are business starts and venture capital investments.
New business starts of all types — from barber shops to biotechnology firms — have generally declined statewide since 2001, according to statistics from the Wisconsin Economic Development Corp.
Using data from the Kauffman Foundation’s Early Stage Entrepreneurship Index, a WEDC report noted that 0.22% of the Wisconsin population start new businesses of all descriptions compared to the U.S. average of 0.34%. Wisconsin also trails in the number of jobs spawned by those new businesses — 3.6 jobs per 1,000 people versus 5 nationally. The one-year “survival rate” for new businesses in Wisconsin is only slightly better than the U.S. average.
Again, the Kauffman numbers don’t distinguish between types of businesses. What makes for a profitable bakery doesn’t guarantee success for an artificial intelligence startup.
Still, it is worth asking why those trends are so stubborn. Is it cultural, meaning people in Wisconsin are somehow more risk-averse than Americans elsewhere? Are there more barriers in Wisconsin to starting a business than evident in other states?
Both could be part of the answer, but the same WEDC report suggests there are other factors at play. Fortunately, they come with possible solutions.
The state underperforms its neighbors in terms of venture capital “deals,” total venture dollars invested, and venture capital dollars per capita. Wisconsin is sixth out of eight, seventh out of eight, and eighth out of eight, respectively, in a cohort that includes Illinois, Minnesota, Iowa, Ohio, Michigan, Indiana, and Missouri.
In some cases, state governments in neighboring states have offered incentives to attract venture capitalists from the East and West coasts, with Michigan and Ohio being two prime examples. As it returns to work, the Wisconsin Legislature should consider a bold public-private program built along the lines of the Michigan and Ohio venture capital funds.
It’s not just money, however. Some states do a better job of converting research breakthroughs into startup and emerging company successes. As the 2024 “Empowering the Wisconsin Idea” report noted, the UW–Madison is sixth in the nation in research and development spending but not as vibrant in fostering startups. Other universities with R&D budgets comparable to Madison are the University of Michigan, Ohio State University, the University of Minnesota, and the University of Washington. All four generate far more startups.
In fact, all but three of 14 universities examined by the report were tied to more startups – including some with a fraction of the UW–Madison’s research budget.
Recommendations from the head of WEDC’s Entrepreneurship and Innovation division suggest there is another reason for Wisconsin’s low startup rate: There aren’t enough talented, risk-taking founders on hand.
In a recent meeting, Shayna Hetzel of the WEDC told members of the Wisconsin Technology Council that an emerging approach to improving “founder density” should involve:
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Supporting industry clusters with high-growth potential across the state with public-private partnerships;
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Collaborating with colleges and universities on entrepreneurship programs and priorities; and
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Partnering on more opportunities and events that draw startups and investors from across the Midwest.
The answers to Wisconsin’s startup shortage are complex and likely tied to other factors much harder to control, such as an aging population. Whether you live in a small town or a major city in Wisconsin, however, you should care about how many young companies are born and how many survive infancy. Those startups may grow up to be the major employers of tomorrow.
