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March 18, 2015

The Social Fabric of Madison's I&E Scene

A Q&A with Forrest Woolworth, Co-founder & Director of Capital Entrepreneurs

Q: What is Capital Entrepreneurs and how did it get started? 

Forrest Woolworth
A: Capital Entrepreneurs (CE) is a community group for Madison area entrepreneurs. We started the group back in 2009 as a way to bring together the then fledgling entrepreneurial community. It's since grown to over 300 member entrepreneurs, and has acted as the "social fabric" that ties much of the Madison entrepreneurial ecosystem together. The core events still remain our monthly socials, but CE also helps organize a number of key entrepreneurial events that have emerged in the ecosystem including the Forward Festival, Startup Weekend, and Build Madison.

Q: What is the state of the Madison startup community? 

A: We've done a yearly survey of our member companies for the past 5 years, and 2014 was the most impactful year yet for the Madison startup scene. The survey has been a great way to see how the entrepreneurial ecosystem has grown over time and helped quantify that impact. Last year, Madison startups created 175 full time jobs (and now employ over 500 people) and tech startups alone raised $44M in funding. A lot has been building in the startup community over the last few years, and a whole ecosystem of workspaces and support resources has emerged to form a burgeoning ecosystem. Read the 2014 Madison Startup Scene Recap.

Q: How does StartingBlock Madison fit into the ecosystem? 

A: StartingBlock Madison has now been in the works for the last 2 years. StartingBlock will be a 50,000 sqft entrepreneurial hub in downtown Madison that will bring together startups, entrepreneurial resources, and provide a long term home for the Sector67 hackerspace and the gener8tor startup accelerator. The project has received significant funding commitments from American Family Insurance and the City of Madison, and is now in the final fundraising stage to bring the project to reality. The goal is to help minimize many of the pain points in the lifecycle of a startup, and ultimately give startups the best chance of success. StartingBlock builds on the momentum that has been growing in the Madison entrepreneurial ecosystem, and is a key piece of infrastructure that will truly take our entrepreneurial community to the next level.

Q: What do you like best about Madison’s I&E ecosystem? 

A: Everyone in the ecosystem is so passionate about making it a better place. What's emerged has been built by entrepreneurs, for entrepreneurs and is a real grass roots effort. When you get a bunch of passionate entrepreneurs together, good things happen.

Q: Where do you see Madison’s I&E ecosystem in the next 10 years?

A: We're at a critical tipping point right now. We've built a solid foundation, and a burgeoning entrepreneurial ecosystem has emerged over the last few years. It's critical that we capitalize on this opportunity both at the grass roots level and also at the civic and business community leadership level. We are well positioned to see even more success if we do things right, and Madison can truly be a top spot in the country for startups and a global leader in innovation.

Madison Startup Weekend

April 10-12, 2015
MG&E Innovation Center, Madison



Ever wondered what it takes to be an entrepreneur? Participate in Madison Startup Weekend -- part of a global grassroots movement of active and empowered entrepreneurs who are learning the basics of founding startups and launching successful ventures. Whether entrepreneurs found companies, find a cofounder, meet someone new, or learn a skill far outside their usual 9-to-5, everyone is guaranteed to leave the event better prepared to navigate the chaotic but fun world of startups.

Register now for the best weekend of your life!

March 17, 2015

gener8tor Ranked a Top 15 Accelerator

Congratulations to gener8tor -- the Madison and Milwaukee based startup accelerator -- for earning a Top 15 spot in the 2014 Seed Accelerator Rankings Project! 

More than 150 accelerators around the U.S. were ranked based on metrics including valuations, fundraising, exists and survival. The programs also had to meet the formal definition of an accelerator program: fixed-term, cohort-based, with educational and mentorship components, culminating in a public pitch or demo day. With the addition of so many new programs, the pool for this years ranking had grown considerably. The competition was fierce and snagging a spot anywhere in the top 20 is a sign of distinction. 

Learn more.

March 4, 2015

Wisconsin Business Development: Connecting Small Businesses to Capital

Q&A with Diane Pasley, Vice President, Wisconsin Business Development Finance Corporation

Q: What are the origins of the Wisconsin Business Development Finance Corporation (WBD) and the types of programming you make available to businesses?

A: WBD was formed in 1981 as a non-profit Certified Development Company. We were certified by the U.S. Small Business Administration (SBA) to deliver the SBA 504 loan program. We partner with a lending institution and take a second lien position on fixed assets (real estate or equipment). We offer a 10 or 20 year fully amortized fixed rate loan to provide long term financing stability to small business owners.   We also help preserve working capital by requiring a lower down payment for existing businesses with as little as a 10% borrower contribution.  Over the years we have expanded our product offerings by forming affiliate companies.  Wisconsin Business Growth Fund is an affiliate that provides New Market Tax Credits (NMTC).  Our initial allocations of $65 million of NMTC have been fully deployed.  We do have a pending application for $45 million of additional credits.  Allocation of those credits will be announced in May/June of this year.   WBD Service Company provides packaging services to our lending partners to help them obtain a 7A loan guaranty on their bank note.  We are an approved SBA 7A lender service provider, but we also provide other packaging services for other guaranty programs.   This affiliate does provide some back office support services for small lenders and other non-profit lenders. The WBD’s final affiliate is the Lincoln Opportunity Fund, a non-profit Certified Community Development Financial Institution (CDFI) that provides loans as well as services to small businesses throughout Wisconsin with a focus on low income communities. We were recently designated by the SBA as a Community Advantage direct lender for loans of $250,000 or less.

Q:  Is there a best time during the development/growth cycle for a business to approach WBD and what do you look for from them in order to access your programming?

A: We can lend to start-up or existing for profit small businesses.  For an existing business (more than two years old) where the real estate is not considered special use, the minimum down payment is 10%.  However, if the business is less than two years old or if it is a change in ownership, we require 5% more down payment, or 15% down.  If the real estate is considered special use we would need another 5% down.  Therefore, the down payment range is between 10% and 20% down.   We can also be flexible with what we consider the borrower's contribution as it doesn't necessarily have to be cash down payment.  Our main underwriting focus is the purpose of the loan and their ability to repay.  Therefore, cash flow and management are very important to us when considering the loan application.  A business plan with projections and detailed assumptions are essential.   However, we are willing to talk to any business owner and are happy to refer them to other resources if we are not able to help directly.  Therefore, it is never too soon to give us a call.

Q: Are there any particular sectors or industries you target for your programming?  Can you give us some idea of the sector concentrations in your portfolio?

A: We are able to lend to any for-profit small business.   This is a job creation program, but we are able to waive minimal job creation requirements if the project meets certain public policy goals.    Majority owned women, minority or veteran business owners fall into the public policy goals.  Rural areas, labor surplus areas and construction projects also meet community policy objectives, allowing us to waive job creation requirements.   Occupancy requirements are only 51% for the purchase of an existing building but increase to 80% overall for new construction.   The maximum SBA loan limits to any one borrower is $5 million.  However, manufactures or energy savings/renewal energy projects are entitled to $5.5 million per project.   Therefore, this program is very attractive to assist the manufacturing sector with virtually unlimited SBA 504 authority as they continue to grow and add jobs.  The chart below summarizes our loan portfolio by industry.



Q: What is your view on the current state of the economy in the Madison Region?

A: We have seen increased activity so it appears that the economy is getting better.  We are seeing more aggressive terms from our lending partners as their confidence in the economy and businesses improve. Also, we are getting more loan requests for construction projects which is also a good sign.

Q: A lot of comments are made about the lack of capital for deals in our area.  Do you have some thoughts you would like to share concerning the overall availability of capital in the region?

A: From what we are seeing, banks and credit unions have money to lend, and financing is loosening up. The SBA is also encouraging lenders to make smaller loans by waiving all of their fees on loans of $150,000 or less. The SBA program has also lowered fees for loans to veterans. As a Community Advantage Lender, we are now able to provide direct financing to small business owners who have a gap that needs to be filled that the lenders are not able to do directly. Therefore, overall we see access to capital opening up in this area and around the state.

Q: If people are interested, how can they get in touch with you?

A: They can contact me either via email at dpasley@wbd.org or by phone 608.316.7132.  You can also access information at our web site at www.wbd.org.

Western Container: A WBD Success Story

Western Container is a Beloit (Rock County) based manufacturer of spiral wound paper tubes and precision cores. They convert recycled paperbound ribbons into spiral wound cylinders for the winding, converting and packaging industries. Started in 1942, the company originally supplied paper caps to a highway and railroad flare manufacturer. The company grew to include the labeled can market during the 70's and 80's, supplying grated cheese, coffee creamer and sugar composite cans. In 1999 and 2000 the company expanded again, producing converting and film cores.

In September of 2013, owner Jeffrey Perrigo saw an opportunity to purchase a new winder and inline multi-knife cutter machine. With the help of an SBA 504 loan and financing through Gateway Community Bank, Jeffrey was able to purchase the new machine. With the addition, Western Container is now able to compete for larger jobs and be more competitive. The new machine also gives them a sixth production line and backup capability, when their other machines require maintenance, ensuring their orders will be filled on time. Utilizing the greater flexibility the new equipment offers, Western Container was able to hire four additional workers.

According to Jeffrey, the SBA 504 program allowed the company to spread its investment cost over a 10-year amortization, and lock in the interest rate for 40% of the project, for the same period. Wisconsin Business Development (WBD) and Gateway Community Bank were great partners in guiding the company through the complex process.

This was actually the fourth loan originated by WBD on behalf of Western Container.  The four loans totaling approximately $1.5MM, including three for equipment and one to accommodate a real estate expansion, have allowed the company to double sales, increase its workforce from 24 to 35 employees (a 45% increase) and expand its building from 30,000 to 47,000 square feet.  Western Container is currently seeking approval on a fifth loan for $450,000 which would allow it to add an additional 10,000 square feet to its building and hire 5 additional employees.