7.7.17 | John Torinus Blog | John Torinus | Original Publication

The Startup Economy

Erik Iverson sees Wisconsin poised for the same kind of boom that Seattle experienced in the late 1980s and early 1990s.

He is the new managing director of the WARF (Wisconsin Alumni Research Foundation), a position he took over about a year ago after five years running the Infectious Disease Research Institute In Seattle and 7 1/2 years as a leader within the Bill and Melinda Gates Foundation in Seattle.

As he drove from Madison to Milwaukee on I-94 to speak to the Wisconsin Venture Capital Association (WVCA), he wondered why the grassy median had not given way to a rail line with trains whizzing back and forth between the two cities. That is the kind of convenience and infrastructure that Seattle added to accommodate a burgeoning work force.

The Seattle boom, propelled by the likes of Microsoft, Amazon and Facebook, saw explosive growth. It continued into 2017 with 68 major building projects under way.

Seeing the foundation for a similar technology-based expansion in Wisconsin, Iverson urged the Wisconsin startup leaders to stay ahead of the looming needs for millennial workers. Plan ahead, he said, for light rail and affordable housing.

Iverson opined Seattle had “lost its soul” as the boom drove prices for modest homes to $700,000 to $800,000, caused maddening traffic congestion, squeezed the arts community out of it traditional spaces and lessened the city’s diversity.

“It’s incumbent on us to keep our soul” as growth accelerates, he said. “Let’s get ahead of it.”

One seasoned business man said Iverson’s vision had swung him from negative to positive on the debate over rail infrastructure Wisconsin. Seattle’s light rail cars are jammed.

Iverson’s bullish optimism for Wisconsin, not just Madison, served as a tonic for the band of venture capitalists who have been working hard for several decades to rev up the startup ecosystem across the state. The startup dynamics have improved sharply here over the last 15 years. For instance, venture capital investments are double what they were five years ago. The state is now dotted with incubators, accelerators, mentors and entrepreneurship education programs.

But veteran venture investors in Wisconsin see the need for lots more capital to meet the demand brought by a growing base of entrepreneurs. Joe Hill, who is retiring in the fall as the head of the technology transfer office at the Medical College of Wisconsin, said his team has to raise money outside the state for long-term biotechnology deals like drug development.

And there is near unanimous agreement that there is an urgent need for expansion capital for young firms. They are in what’s called “the valley of death.” Unable to get bank loans or Venture A Round money, they often go back to their angel investors and ask them to double down.

Iverson made it clear that WARF is ready to lead the way out of that valley and in other dimensions of startup investing.

Among the concepts he floated at the WVCA meeting were:

• WARF loan guarantees to stimulate banks to lend to startups that are taking off.
• Non-dilutive grants to mature technology projects with the aim of spinning them into the commercial world.
• Direct investments alongside venture funds that take the lead. He has created a new $10 million seed fund that can fly syndicated or solo on investments of $25.000 to $150,000. And a venture fund of $50 million for syndications.
• Creation of a new position of Chief Venture Officer.

Iverson is clearly a man on a mission. Other indications that he will lead boldly across the state:

• “I want to de-risk technologies for you.”
• “I want (WARF) to go far.”
• “Let’s keep this dialog (with investors) going and match up opportunities.”
• Wisconsin has “a ways to go” on a risk-taking culture. “It’s something we have to embrace.”
• “It is critical to have our policy makers on board.”
• It’s an essential condition that there is “a collective sense of giving back time, talent and treasure.”

A common denominator in Iverson’s message is the need for collaboration, including relationships with the technology transfer offices at MCW, Marquette and the University of Wisconsin – Milwaukee. He is engaging technology movers and shakers at UW –- Madison, his main mission, but also across the state.

He promises to match their efforts by “moving at WARF speed.”