On Angel Investors’ Wings

By JOHN TORINUS

Rep. Rob Hutton, R-Elm Grove, has drafted a bold bill that would raise the investment tax credit for high-growth startup companies from 25 percent to 50 percent. It deserves to be called the “George Mosher” law.

When I had lunch with George about a month ago, he had made some 240 angel investments. He could be called the godfather of the rebirth of entrepreneurship and angel investing in Wisconsin.

When George died last week, his capital was still at work in 130 ventures, mostly in Wisconsin. George and his wife, Julie, were also philanthropists after selling their successful startup in 2006.

They knew, though, that the biggest lever for greater prosperity in the state is the up-lift provided by entrepreneurs. They are the economic players who reinvent the constantly changing economy. All but a few of the great employers in Wisconsin, including their National Business Furniture, a catalog and on-line furniture company, started here.

Forget about Terry Gou and Foxconn and let’s as a state go with startup winners like Judy Falkner of Epic, Kevin Conroy of Exact Sciences and the late George Dalton of Fiserv.

We have done better with recruiting from out of state in the last couple of years, but it’s not a long suit here in the frozen tundra.

Hutton’s bill would set Wisconsin apart from all other states in promoting a robust entrepreneurial ecosystem. It would de-risk investments in high-risk ventures. Startups are never easy. Ask anyone who has done one.

There are several safeguards to using credits versus other forms of subsidies. First, it’s battle-scarred investors who would be putting in half the money – a far better bet than having bureaucrats making such decisions.

Second, the Wisconsin Economic Development Corporation, a private-public partnership, does the initial vetting to make sure the new companies have the potential to grow into significant companies. At that seminal stage, picking winners and losers is a tricky assignment. Ergo, we need lots of draft choices.

Importantly, the WEDC does an efficient job of processing the credits for investors.

Even with the predecessor Act 255 at 25 percent, which took effect 10 years ago, Wisconsin has risen from the back of the pack to about a quarter of a billion dollars per year in early-stage investing. We have come a long way since George Mosher began angel investing a dozen years ago. We are now in the middle of the pack for levels of venture investment.

Even though Wisconsin can boast a low unemployment rate of 3 percent, we still have work to do in proving our economic base. Our job growth rate has been low for a long time, and we lag on pay levels. We need new high-paying jobs. They will keep our kids and grandkids here for their careers.

New ventures are the high-paying-job creators. They diversify our economy away from an over-reliance on manufacturing and agribusiness.

Clayton Christiansen, who is among the best business thinkers in the land, has just made the same kind of case in a new book titled “The Prosperity Paradox.” He and two coauthors maintain: “By investing in market-creating innovations, investors and entrepreneurs inadvertently engage in nation building.”

George and Julie were such builders. The Moshers’ philanthropy has been notable. Bear in mind it was made possible by their entrepreneurship. Entrepreneurs write big charitable checks.

His protégé companies will live on and create good jobs. In addition, much of the proceeds as the ventures mature and exit will go to their foundation for more charitable giving. Their lives have built a virtuous circle.

This article provided by NewsEdge.