Wisconsin again ranked low for startups by Kauffman Foundation

Wisconsin has again been ranked at the bottom of the pile for startups in the Kauffman Index of Startup Activity Report.

The report evenly splits the 50 states into “Large” and “Small” categories, ranking each list 1-25. Kauffman Foundation researcher Inara Tareque says that is done because “it’s not quite fair to compare a smaller state like Vermont to a larger state like California.”

Wisconsin falls into the former category, and was ranked dead last for startup activity in 2016 — the same ranking it received the year before.

Tareque says this low ranking can be largely attributed to the comparatively low number of new entrepreneurs, which is less than half that of California.

“That’s really taking a toll on Wisconsin’s startup activity for this ranking,” she told WisBusiness.com.

The rate of new entrepreneurs is slightly up, from 0.19 percent in 2015 to 0.21 percent in 2016. Startup density — which looks at the number of startup firms per 1,000 firms — was 59.1, up slightly from 2015.

The Kauffman Foundation also tracks the opportunity share of new entrepreneurs — the percentage of new entrepreneurs who started a business not because they were unemployed, but because they saw a market opportunity. This measure dropped nearly 8 percent from 2015, to 66.39 percent in 2016.

WEDC argues the Kauffman report’s reliance on only a handful of data points means it’s not comprehensive. The agency points to federal data showing high rates of business survivorship in Wisconsin as evidence of the state’s entrepreneurial health.

Aaron Hagar, WEDC vice president of entrepreneurship and innovation, says the startup ecosystem is “thriving” in Wisconsin.

“As WEDC works directly with both startups and our partners across the state, we see a tremendous amount of positive activity and synergy around entrepreneurship,” Hagar said. “In fact, we also hear from startups from other states that Wisconsin is doing a lot of great things to build the entrepreneurial ecosystem.”

According to Tom Still, president of the Wisconsin Technology Council, this report only represents “one measure of startup activity among several measures of startup activity.”

The Tech Council published talking points on the Kauffman analysis, referencing others such as CompTIA’s Cyberstates report, and the Milken Institute’s State Technology and Science Index, both of which found more promising figures on Wisconsin’s startup economy.

Still added that “there are other ways to judge the health of the economy,” pointing to the rising number of investments in recent years.

Based on data collected for the Tech Council’s upcoming “Wisconsin Portfolio,” there were 136 angel or venture investments in Wisconsin companies in 2016, compared to 128 in 2015 and 74 in 2012. And Still says those are just preliminary numbers.

“We may find there are more,” he said.

Tareque says Wisconsin’s relatively poor ranking could also be related to the state’s overall business culture.

“The Wisconsin environment might be more conducive to mom-and-pop shops,” she said.

As evidence, she pointed to the state’s relatively high ratings for small business density, business ownership, and business survival rate. The Kauffman Foundation ranked Wisconsin near the top of the large states for these measures in late 2016.

See the profile for Wisconsin: http://www.kauffman.org/kauffman-index/profiles?loc=55&name=wisconsin&breakdowns=startup-activity|overall,main-street|overall,growth|overall

See the Tech Council’s comprehensive talking points: http://wisconsintechnologycouncil.com/2017/wisconsin-technology-council-talking-points-2017-kauffman-index/

–By Alex Moe