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July 28, 2015

Madison equipped to become a startup city

Excerpted from Madison Magazine
By Brennan Nardi

(Left to right) Eric Oakland of TruScribe, Gregory St. Fort of 100state,
Heather Wentler of the Doyenne Group and Matt Younkle of Murfie.
In case you haven’t noticed, a startup scene is surging all across Madison. Ideas are taking shape at coffee shops and on campuses, in coworking spaces and accelerators. Emerging new companies and academic spinoffs are launching products and services. They’re attracting consumers and clients and finding and growing resources to give their dreams a go. If local entrepreneurs and civic and business leaders capitalize on the city’s size, location and unique culture—and make inclusivity a priority—Madison has all the makings of becoming a startup city.

If you’re looking for evidence that your mother’s or father’s Madison, Wisconsin (think hippie college town, good local food, great protests), has become a bonafide startup city, you have to talk to a lot of people experimenting in this emerging space. There weren’t many startups a mere five years ago, or even three, but that’s not the case anymore. That’s a very good turnabout because startup density is a leading indicator of what’s known as an “entrepreneurial ecosystem.”
The evidence gathered is now crystal clear: Communities that notice and nurture emerging businesses will be the best places to live, work and play well into the future. What that means is whether you are in Wisconsin or California, Madison or Manhattan, such an ecosystem can be fertile ground for a variety of entrepreneurs, from software developers and brewpub owners to insurance agents and cancer drug researchers. Despite the perception of Madison as a domain of the public sector, the reality is quite the opposite. Between eighty and ninety percent of the job growth here is happening in the private sector, according to the U.S. Bureau of Labor Statistics. “It’s an important phenomenon,” says Dan Kennelly, economic development specialist for the city of Madison. “We are almost carrying the state on our shoulders.” And those companies that start small could one day be the next Oscar Mayer, American Girl or Epic but will sport new-age names like Murfie, ConfPlus and adorable.io—just three local brands in the local startup marketplace.

July 22, 2015

Qualified New Business Venture Program
Powers Wisconsin Start-Ups

Excerpted from Wisconsin Economic Development Corporation's 2014 QNBV Report

Research consistently shows that the vast majority of net job creation comes from young companies. In 2003, the Wisconsin State Legislature created the Qualified New Business Venture (QNBV) Tax Credit Program with the goal of helping startup and early-stage companies with proprietary technology raise the funds they needed to grow. State issued tax credits would serve as an incentive for investors to contribute to these companies’ development, and in turn, this private investment would help young, promising companies attract grant funding and funding from other outside sources. These companies would then leverage this investment to raise funds far beyond what would otherwise be available to them.

In 2014, the QNBV Program marked its 10th year of helping create an environment conducive to new business development and attractive to investors -- with a total of 298 QNBV certified companies in the state responsible for creating more than 1,000 full time and over 200 part time jobs to date. Participating companies have raised a total of $1.2 billion in funding with the help of $80.3 million in state tax credits. In 2014 alone, 21 companies received QNBV certification and $51.1 million in investments were attracted by promising companies in the state, offering investors $12.8 million in tax credits.

The factors that encourage entrepreneurship are complex, but the public sector can play a role in making entrepreneurship easier when conditions are right. Companies developing new technologies and innovative products are at a distinct disadvantage when it comes to attracting capital--they are viewed as exciting and are often spotlighted as the next big thing. But they are also risky, and in the current lending market, banks are reluctant to provide loans to startups and investors are understandably cautious. This is where the QNBV Program comes in. Investors receive a Wisconsin income tax credit equal to 25 percent of the value of the investment made in the certified company, which offers an immediate return on their investment ($0.25 on every $1.00 invested often received as a tax benefit in the same year as the investment), thus reducing the risk profile of the investment.

Over the years, the program’s eligibility criteria has gradually broadened, and the mix of participating companies has evolved--the IT sector in particular has seen strong growth in the number of companies that qualify for the program and the volume of qualified investment. Other industries with strong QNBV representation include biotech, health tech and manufacturing--all sectors that demonstrate leadership in the Madison Region. QNBV-certified companies from these sectors are developing pioneering medical solutions, creating novel materials, engineering next generation products, building cutting-edge software and solving energy problems. They are also the companies that are driving future economic potential. Wisconsin needs these entrepreneurs and risk-takers to move its economy forward, and WEDC is proud to assist them through the QNBV Program.

Visit http://inwisconsin.com/entrepreneurs/assistance/qualified-new-business-venture/ to learn more about the state’s QNBV program.

July 21, 2015

Spotlight on Madison Region QNBV Companies

Middleton-based Lucigen has grown from one employee to its current 53 employees since its founding in 1998, with many employees initially coming to Wisconsin to attend the state’s educational institutions. The company has raised more than $2.6 million in eligible investments over the last decade. “Thanks largely to the QNBV Program, Lucigen has been able to secure the investor funding needed to advance development of the ClariLight molecular diagnostic assay platform,” says CEO Ralph Kauten.

PerBlue was created by two UW-Madison students who decided to turn their passion for video games into a business. The two friends developed a mobile role playing game (RPG) that would utilize smartphones’ GPS. Mobile gaming -- unexplored frontier back in 2008 -- is now a $20 billion global market. PerBlue now has 25 full time employees, and its games have been played by more than 10 million people around the world. The company has raised three rounds of funding so far, and QNBV certification was instrumental in enabling that, says COO Forrest Woolworth. “We’ve been able to reach more investors, and they’ve been able to justify writing larger checks because of the tax advantages offered by the QNBV Program,” he says.

July 7, 2015

Madison Region Claims a Winning Position in the Gaming Industry

A Q&A with Games Learning Society's Kurt Squire, Co-Director, and Brian Pelletier, Director of Project Development & Creative Director 
 
Q: Can you explain what Games Learning Society (GLS) Studios is all about? How do you relate to UW-Madison and Learning Games Network?

A: GLS Studios is really an informal placeholder structure that we set up to communicate to partners that we have a learning games studio on the UW-Madison campus. Most (but not all) of the game developers are employed through Learning Games Network (LGN), a non-profit focused on games for learning that does a number of sub-contracts to UW. LGN is kind of a unique structure. It's a non-profit we started a few years back to help academic projects maximize impact. Academic centers aren't set up to make commercial quality learning games or to really get games out of the lab and into people's hands. LGN is set up to do both.

LGN currently has offices in Cambridge, MA and Washington, DC, which is really helpful for us, being based out of Wisconsin. The Cambridge office is very connected to the learning technologies investment and development communities in New York and Boston, and the DC office has great connections to federal agencies. It's all really designed to help us get ideas and projects out of academics and into the world.

As an example of how it works: we might get a federal grant going to the UW-Madison to build a game on environmental issues. LGN has a sub-contract in that grant to build out key parts of the game. LGN staff in Boston and DC have strong relationships with textbook companies and investors, and are able to begin pitching deals for offshoot products.

In this case, the copyrights are all owned by UW faculty, since the work originated at UW. We're in the process of establishing licensing arrangements right now for those properties. Recently, the East Coast LGN offices have generated projects that they contract development to in the Madison office. We're really excited that we'll be getting our first revenue generated projects that will help underwrite the entire research and development enterprise here in Wisconsin. We're still working out the bugs as we go, but so far, it's been a really great way to leverage what we have in Wisconsin (a robust R&D center) and to make up for some of the "penalties" we take being removed from the coasts.

Q:  Can you describe your experience going through an accelerator program in San Francisco?

A: The co.lab is an accelerator for educational technology companies, particularly around games. It’s located inside Zynga’s headquarters in San Francisco. We learned a lot about the strengths and limitations of our product, as well as the current state of the market. One thing that became clear (and we could learn from locally) is that having a robust community made up for many of the deficiencies of being a small, grant funded team. They were tremendously helpful with interface feedback, quality assurance, and generally giving a critical take on the product. We think Wisconsin would benefit tremendously by having similar services.

Q:  How would you describe the gaming start-up scene in the Madison Region?

A: The gaming start-up scene in Madison is nascent. On the one hand, it's more robust than most any in the Midwest (or anyone not on the East or West Coast), and you can point to successful companies like Filament, PerBlue, Flippfly or Candlelight Interactive as interesting, diverse companies. Two big reasons for that are anchor company Raven Software and the UW -- which have both been tent poles in attracting talent and springboards for launching companies.

On the other hand, we lack many of the formal and informal networks that larger cities have. The indie scene thrives on informal, grassroots events, and I think that only now are we beginning to realize that we have the critical mass to sustain such a community.

Q:  Have you or any of the companies involved with your organization benefited from any resources or programs offered to start-ups in the region?

A: We've benefited tremendously from folks like Rock Mackie & Sangtae Kim, who are involved in the Wisconsin Angel Network. On a few occasions, when we've had an opportunity to go after a big project, we've had members of this network help us do things we couldn't any other way. Former post docs, students, and staff have had companies supported by individuals in that network as well.
But most importantly, regional resources and programs are VERY big for us in terms of attracting talent and projects. Without them, we'd be at a real disadvantage in terms of convincing partners that Wisconsin is a worthwhile place to invest in.

Q: Do you see gaming companies experiencing workforce and/or capitalization challenges in our region?

A: From my perspective, being in the gaming scene in Madison for over 22 years, I see many challenges in this regard. The workforce challenges are multi-faceted involving experienced and new talent. I have recruited and hired over 45 people while at Raven Software and LGN. When recruiting for Raven, Madison lacked local experienced talent due to the limited number of game companies in town that would otherwise create a talent pool to draw from.

My nationwide searches brought talent in from outside the state, but it was often a tough sell due to the limited well-funded companies in town. When a prospect viewed Madison when deciding whether to move their family here, they wanted security with other options in town if Raven didn't pan out for them. There weren't any. It was a big risk to make that move and many turned down the offers sighting that there wasn't a robust gaming sector in Madison. However, many moved to Madison to get away from the high priced coasts to settle down and buy a house they could afford in a city that Money Magazine has listed many times as one of the best to live in.

As for new talent, we have four excellent higher education schools in the area that graduate many aspiring and highly skilled students. The challenge for students is the lack of gaming companies in town who can hire them. These high-tech jobs are found out of state and thus we struggle with brain drain. The other issue being these highly trained and skilled workers take low skilled jobs out of their field of study or only as short term contract gigs that ultimately can't support them in the long term.
The capitalization challenge from my knowledge is there are very few gaming companies who are seeking out investors in Madison for funding. I can only assume there are investors willing to fund this proven lucrative business sector, but with little movement from companies seeking funding, the opportunities are missed.

More local support to help educate the many independent gaming companies in Madison about growing their business could help create a more robust gaming scene. Games are now a part of human culture. According to Lewis Ward, International Data Corporation's research director of gaming, "Games downloaded to smartphones/tablets worldwide will nearly double to more than 60 billion between 2014 and 2018.” These download numbers fuel the increasing game revenue numbers as reported from research firm DFC Intelligence, predicting the worldwide game software market would reach $100 billion by 2018. Games can be independently published and distributed worldwide from anywhere. Why not Madison? With the recent swell of independent gaming companies in Madison, there is the potential for huge growth in this high-tech, high-skilled gaming sector. The challenge is in educating and supporting the Madison indie game developers.

Q:  How are you involved in putting together the GLS Conference in Madison?

A: We are now on the 11th annual GLS Conference, which brings together hundreds of leaders in academics, industry and government in Madison to chart the future of the sector. We've grown from just a few dozen folks to a vibrant international network. We see it as a real accelerator for the region.

This year GLS conference attendees can rub shoulders with gaming industry leaders like John and Brenda Romero, as well as researchers and faculty from top tier game programs like Carnegie Mellon University, University of Southern California, and Rochester Institute of Technology which fuel the industry. In fact, it's fun to look back at the program and see where many of the folks ended up. As an example, our first year featured sessions with Doug Church, who is now working on Virtual Reality at Valve and spearheaded a major initiative at Electronic Arts with Steven Spielberg. Cory Ondrejka, who led programming on Second Life and then went on to be VP of Mobile at Facebook was also featured the first year.

For a few days in the summer every year, we bring some of the brightest minds in technology and gaming in the world to Madison in a fun, accessible, relaxed atmosphere. It fosters lasting relationships that we hope will help position Madison as a leader in these sectors for years to come.