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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.