For the past few years, the prestigious Kauffman Index of
Startup Activity has ranked Wisconsin at dead last for new business
creation. It’s gotten so bad that some economic development officials
have taken to calling it the “Coffin Report.”
But that study is flawed, data guru Tom Chapman of the Startup
Champions Network told a “Madwaukee Talks” event Wednesday afternoon
at the Foley & Lardner office in Madison. Chapman also runs a
consulting firm in Omaha and teaches at the University of Nebraska.
“The Kaufman Index says Wisconsin is 50th, but I don’t think that’s
correct,” he said.
But he added Dane Stangler, the person who came up the index, isn’t
“He’s really smart, but it’s just that he used a small segment of data
from unemployment surveys. And it has gaps,” he stated.
Chapman was skeptical of the Index, so he created what he believes is
a more accurate model. This model surveyed every SBA loan in the
country for the last eight years. He then compared it to Badger State
When he crunched the numbers, Wisconsin ranked sixth nationally from
2010 to 2017, creating $1.4 billion more than expected within the SBA
“That is awesome and definitely not 50th in startup activity,” he said.
Chapman also had high praise for Madison’s efforts to support
entrepreneurs and he lauded the Wisconsin Alumni Research Foundation
for its efforts to turn university spawned technology into new
Milwaukee, he noted, is a different kind of city, but “it’s working
on” giving more backing to entrepreneurs.
“Madison really sparkles when you look at the data,” he said, noting
that software and healthcare are the area’s strong points. “Whenever
I look at models for Tier 2 and 3 cities, Madison always shows up at
the top of the lists” with cities like Austin and Boulder.
Of the top 52 cities ranked by population for new businesses in a
Startup Champions Network list, Madison came in at No. 8 for 2017, he
said. San Francisco was the leader, and Seattle came in third. He
also praised Madison for the number of female entrepreneurs, but said
the city is lacking in new businesses run by people of color.
Chapman said Small Business Innovation Research grants, venture
capital, angel networks and other sources of funding, as well as
efforts connecting startups to potential customers, are important.
“But the entrepreneur is at the center of all this,” he said.
“Unfortunately, there aren’t very many of them who are good at
starting high-gross companies.
“Gallup says from 1976-2000, the U.S. increased GDP by $8 trillion.
Some 90 percent of that was created by 1,000 people, and 522 of them
were immigrants… We should be paying more attention to that.
“But at the end of the day, the real competitive advantage for cities
like Madison and Milwaukee is to unlock one, two or five more
“It’s not enough to get 10,000 people to start small businesses.
That’s not bad, but singular metrics of how many businesses you
started doesn’t always indicate the vibrancy of your entrepreneurial
Chapman said Madison has many things going for it when it comes to
helping scientists and others starting companies, but both Madison and
Milwaukee fall down when it comes to sustaining jobs. Madison came in
at 14th (behind Des Moines) and Milwaukee 26th.
And he lamented figures that show that when Madison startups become
successful, they often leave the state and take jobs with them.
He also said new companies tend to focus on selling their products and
services within the state. Instead, he argued, they should be
connecting with customers outside the region to be more successful.
Though Madison and Milwaukee are different economically and
culturally, he said the cities need to cooperate to foster economic
growth and entrepreneurship.
“You need to work together and be humble,” he told his Madison
audience. “Because if Milwaukee sparkles, everyone wins.”
–By Brian E. Clark