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Friday, November 16, 2012

Tom Still: Diversity of startups reflects evolution of Wisconsin economy


By Tom Still
The lineup at the annual Elevator Pitch Olympics in Madison featured some companies with potentially life-saving technologies. One young firm had developed motion-detection sensors that adjust for squirmy patients inside medical imaging machines. Another had invented a new way to cultivate pancreatic stem cells. A third startup was focused on genomic-based treatments for cancer.

In a quick-pitch contest judged by a panel of veteran investors and a business-savvy audience, none of these young companies won.

They were outscored by a company that uses 3-D technology to help people buy eyeglasses; a startup with “omni-directional,” no-tip luggage; and a company that connects pressure-sensitive mats to software to measure customer behavior in stores and trade shows.

Welcome to Wisconsin’s evolving startup economy, where traditional powerhouses such as medical imaging and biotechnology are making room for companies in other sectors.

For years, most babies in the state’s entrepreneurial crib were named “Bio-this” or “Gen-that,” a reflection of the fact that emerging biotechnology companies were the darlings of angel and venture capitalists.

Young life science companies are still being born in Wisconsin, but the nursery is making room for startups that resemble other fathers and mothers in the state’s economic family. The company lineup at the Nov. 13-14 Wisconsin Early Stage Symposium followed that trend.

In addition to 16 companies in the 90-second Elevator Pitch Olympics, 26 other startups delivered longer presentations to potential investors. They included:

* Two companies that are using different technologies to help fisherman find and catch fish – and even brag about it later using social media.

* A firm with web-based and mobile platforms to help parks and recreation agencies better manage everything from reservations to events to volunteers.

* Another web-based company helps golfers reserve tee times, invite friends to play, track scores, establish a handicap membership, build a profile and communicate with their golfing buddies.

* A company that is building a revolutionary diesel engine for light aircraft – and another that has developed software to improve how pilots train for severe weather.

* A firm that builds adaptable construction and farm equipment that can perform the functions of small loaders, excavators and scissor lifts. It can replace multiple pieces of equipment with a single machine.

* A firm that has developed hardware, software and wireless technologies to help physical therapists and personal trainers monitor and instruct clients.

* A company that has found a way to replace rare earth metals commonly used in electric motors.

While the event still featured plenty of emerging firms with breakthroughs in biotechnology and medical devices, the mix of companies revealed that innovation is taking place across a broad spectrum of Wisconsin’s economy.

It also reflected the 2012 reality of angel and venture capital economics. Not all investors have the money or the patience to stick with a biotech company from lab to marketplace, especially when the hurdles include patents, clinical trials and federal regulatory approvals. Some prefer to invest in companies that will mature sooner, either in terms of product sales or an “exit” that will bring a return on their investments.

Angel groups and venture capital firms that were almost exclusively biotech-focused five years ago are diversifying their portfolios. It’s an investment philosophy that reduces risk and creates a portfolio with a blend of vintage years, with some companies maturing in three years or less and others taking five to seven years to ripen.

Perhaps most important, the diversity of startups at the Early Stage Symposium chipped away at the perception that biotech firms are Wisconsin’s only favored sons and daughters.

Some lawmakers have resisted supporting the idea of a state-leveraged fund to increase investments in startup companies, suggesting it would be a Madison-centric effort. As more companies emerge in sectors such as advanced manufacturing, mobile apps and recreational sports, however, it will become evident that all of Wisconsin will benefit.

Iristocracy.com, the company with the 3-D approach to buying eyewear, is a Madison company, but Novo Luggage’s young owner is from Shawano and Scanalytics, the customer behavior company, was started by UW-Whitewater students.

What screams “Wisconsin” more than fishing, golf, camping, engines and motors? It has taken time, but the state’s startup economy is producing ideas and companies that build on all of its historic strengths rather than a few. For investors and state policymakers, that’s a much safer bet.

-- Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.

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