Treps

Kauffman Foundation Policy Director Jason Wiens talks to local business leaders and officials outside after an evacuation of the University Research Park onThursday at the Mayor's Summit for Entrepreneurship.

PHOTO BY ERIK LORENZSONN

The closing speaker at the Mayor's Summit on Entrepreneurship in Madison Thursday looked equally amused and bewildered as he began his presentation.

"I don't think I've ever delivered closing remarks in a rainy parking lot before," said Jason Wiens, a director of policy for the Kauffman Foundation, standing next to Mayor Paul Soglin and addressing a crowd of economic development leaders and startup gurus outside University Research Park on the city's west side.

A large jet of flame had erupted just minutes earlier directly outside the windows of the conference room hosting the summit. The blaze, which had sprung from a faulty propane tank, didn't cause any injuries. It did, however, force everyone to evacuate the building and stand in the drizzle.

It marked an abrupt end to a series of panels and presentations that spanned a diverse range of topics, but that often circled around one idea in particular: Some of the tools and approaches policymakers and business leaders look to when it comes to fostering entrepreneurship can, at times, be ineffective or unnecessary.

Take incubators — groups that help young companies grow by providing office space and other resources — and accelerators — which are similar, but which operate on strict timelines and expect participants to hit benchmarks. According to Kauffman analyst Evan Absher, one of the main presenters at the summit, it's a myth that either type of program is necessary for a thriving entrepreneurial ecosystem.

Madison hosts a handful of groups that could be described as business incubators, including the MGE Innovation Center at the University Research Park. The city is also home to a number of acceleration programs, gener8tor being the most well-known.

It's fairly common for policymakers and industry insiders to tout incubators as great tools to help startups survive during their early years and to spur economic growth. However, Absher said that a review of academic research shows incubators don't necessarily have a positive effect on young firms.

"(They) took two cohorts of firms that are similarly situated, one went into incubators and the other one did not, and they performed about the same," said Absher.

On top of that, he said, incubators can keep startups that are "meant to fail" afloat for longer than otherwise would, resulting in "zombie firms."

Accelerators are better than incubators at helping entrepreneurs, since they pressure a company to "graduate" and hit benchmarks, said Absher. However, he emphasized that like incubators, they offer no guarantee for entrepreneurial growth.

The president of the Madison Area Chamber of Commerce later agreed with that assessment.

"I think we have a world-class accelerator with gener8tor here in Wisconsin, but if local economic development officials think that the answer to their problems is to create an accelerator, then we're in real trouble," said Zach Brandon.

Troy Vosseller, the co-founder of gener8tor and a panelist at the event, later said that he thought Absher's analysis was spot on. An accelerator, he said, is "not a one-size-fits-all solution." He said he worries that other communities in Wisconsin may be over-eager to launch accelerators, simply based on the success of programs they see elsewhere.

"It would be like saying we need a baseball team — Milwaukee has one, so Madison needs one," he said.

Scott Resnick, the executive director of the planned entrepreneurial hub StartingBlock, emphasized that while many accelerators or incubators fall short when it comes to fostering young companies, there are others, that demonstrably prove otherwise. Gener8tor, he said, is ahead of the curve.

Another tool called into question at the summit was tax policy. Rhett Morris, the director of the nonprofit group Endeavor Insight, suggested that when it comes to attracting business, entrepreneurs often look at factors besides taxes and regulatory policies. Communities hoping to foster startup activity need to consider other factors instead, he said.

"If there's one thing we can do, it has nothing to do with regulations, it has nothing to do with tax incentives — it has to do with quality of life," said Morris.

Absher also said that many entrepreneurship-oriented tax policies often end up helping later-stage companies that don't necessarily need the funds as much.

Those ideas run counter to what has been the prevailing wisdom among Badger State policymakers. Gov. Scott Walker in particular has framed tax incentives as a key vehicle for attracting and supporting startups.

The state's main tax program targeting entrepreneurship aims to spur investment by giving tax credits to angel investors — affluent individuals willing to provide capital for young companies. Absher said that as a means of sparking investment, such credits aren't actually the best tool for the job. 

"No one says, 'I'm going to invest in a firm because it's a great tax credit,'" he said.

Not everyone at the event agreed with the perspectives on tax policy offered at the summit. John Biondi, an entrepreneur and the director of the Discovery to Product initiative at the University of Wisconsin-Madison, took issue with with what he described as the "pooh-poohing" of angel tax credits. He said that from his perspective, the credit has sparked a lot of investment in early-stage companies.

"The angel tax credit is highly used, and highly touted by angel groups in this state," said Biondi.

The state does also use a "fund of funds" strategy to promote growth, in which the government invests in funds that in turn give money to early-stage companies. According to Absher, that approach is a stronger option.

Perhaps the other main theme that Absher, Morris and other panelists at the event emphasized was the idea of "connectivity" or taking a bottom-up approach to growth by building partnerships between older entrepreneurs and younger ones, and promoting learning and mentoring opportunities within entrepreneurial networks.

Chris Meyer, the director of the Sector67 "makerspace" in Madison, said that the focus on community-building was a pleasant surprise for him. He said that while it may seem like encouraging partnerships and mentorships is an obviously good idea, it's one that doesn't necessarily get a lot of attention.

"It's one of those head-slappers," said Meyer. "But it doesn't actually come up that much."

Other topics in focus at the summit included the highly publicized report ranking Wisconsin last in the country in startup activity, and the value of institutions like universities and technical schools.

The city of Madison, in cooperation with the Kauffman Foundation, organized Thursday's event.

Erik Lorenzsonn is the Capital Times' tech and culture reporter. He joined the team in 2016, after having served as an online editor for Wisconsin Public Radio and having written for publications like The Progressive Magazine and The Poughkeepsie Journal.