three $200 million-plus deals. Propeller was the only exit from the past five years to exceed $200 million, we found. One key caveat: most of the purchase prices we’ve tracked over the past decade weren’t disclosed, so there may have been more big deals that occurred.
“I think that’s a big issue for Wisconsin companies,” says Bram Daelemans, director of investor networks at the Madison-based Wisconsin Technology Council, a nonprofit that runs programs to connect investors and entrepreneurs, and lobbies state lawmakers on science, technology, and workforce issues. “We don’t brag enough about our exits when they do happen.”
The data matter because Wisconsin leaders have ramped up public and private sector resources for entrepreneurs in recent years. These efforts include the launch of more venture capital firms, some seeded with money from a new state-backed fund of funds program; startup accelerators and incubators; and entrepreneurial networking groups. Exits are a common—and highly visible—measuring stick for such initiatives. They’re the desired outcome for venture capital-backed startups, they can raise the profile of a local startup scene, and the wealth they create can deepen the pool of local entrepreneurs and investors.
Although Wisconsin’s exit activity doesn’t hold a candle to places like Silicon Valley and Boston, its trajectory is worth following. As coastal innovation hubs struggle with talent wars and skyrocketing real estate prices, there’s growing talk that America’s heartland could generate the country’s next wave of thriving innovation hubs.
The exit data and other reports indicate that by many metrics of startup success, Wisconsin is playing catch-up. Locals are probably tired of hearing about it, but it’s hard to ignore three consecutive years sitting at the bottom of the Ewing Marion Kauffman Foundation’s national ranking of startup activity.
Nevertheless, there are signs of progress. Venture capital investments in Wisconsin companies, like the rest of the country, are generally trending upward: total annual deal value surpassed $200 million for the first time in 2014 and remained above that mark in each of the following three years, according to Wisconsin Technology Council data. The state kept that streak going in 2018, per the latest data from PitchBook and the National Venture Capital Association. By comparison, annual VC investments in the state dwelled below $100 million from 2003 through 2009, then rose above $100 million for the next four years, according to Tech Council research. The number of startup investment deals has also, for the most part, been on the rise in recent years, Tech Council data show.
As for recent exit trends, business leaders Xconomy spoke with found reasons to feel encouraged. But there’s still plenty of room for improvement, they say.
“Both Milwaukee and Madison could stand to step up their game,” says Kathleen Gallagher, executive director of the nonprofit Milwaukee Institute, which aims to help advance the region’s high-tech business community. “We need more and bigger exits, preferably with some IPOs sprinkled in. The question, of course, is how best to drive connectivity between and support our most promising entrepreneurs.”
There was only one initial public offering by a Wisconsin high-tech company between 2014 and 2018: Brookfield-based Connecture, which develops Web-based software to run online health insurance marketplaces, raised $53 million in its 2014 IPO. In the years after, Connecture struggled financially, and in April it was taken private again by private equity firm Francisco Partners.
Gallagher, a former Milwaukee Journal Sentinel reporter who covered startups and venture capital in the state, thinks it’s notable that 13 of the 33 exits over the past five years came from the Milwaukee area, compared with 19 from the Madison area. (The lone deal from outside those two areas was the sale of Green Bay-based IOD to HealthPort in 2015). That’s a better performance by Milwaukee than some might have expected, given the perception that Madison has a much more robust startup scene.
“What’s most surprising here is that Milwaukee deals represent nearly 40 percent of the total over the last five years,” Gallagher says. “That’s not the narrative we’re used to hearing.”
Wisconsin has developed a “much more vibrant ecosystem overall than has ever existed in the past,” argues Tom Still, president of the Wisconsin Technology Council.
“I think back to when the Tech Council Investors Network was founded as the Wisconsin Angel Network, which was ’05,” Still says. “There were literally, like, a half dozen funds or networks that we could pinpoint. Today, there are about three dozen.”
Still says he’s not disappointed by the state’s recent exit activity.
“I think this has always been a matter of delayed reaction,” Still says. “Stuff that happened in the early 2000s to 2010 or so didn’t immediately pay off. It was more of an incremental process. And I expect that’s been the same through the last five years.”
Troy Vosseller also calls for patience. He’s a co-founder of Wisconsin-based Gener8tor, which runs a network of startup accelerator programs in the Midwest and beyond, some of which make equity investments in young companies. Founded in 2012, Gener8tor is part of Wisconsin’s recent wave of venture investors and startup support organizations. Vosseller says three of the local startups acquired during the past five years participated in a Gener8tor program:
