Exit Strategy: Wisconsin Investors Seek Next Wave of Startup Wins

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Intermedix of Fort Lauderdale, FL, with operations—and jobs—again staying put.

“Once companies hit [a certain earnings threshold], chances are if they’re looking for an exit, the next ownership group, there’s a high likelihood it will not be based in Wisconsin,” Nunemaker said. “We weren’t looking for buyers in Wisconsin. It wasn’t even on our radar screen.”

Wisconsin startups aren’t always on the radar screen of big-time investors and large corporations on the coasts, but Lisa Johnson thinks they should pay attention to the ideas spawned in this region. She’s the vice president of entrepreneurship and innovation for the Wisconsin Economic Development Corp., the Madison-based quasi-public agency. Before that she worked on two startups during a 22-year private sector stint.

“Sometimes the Midwest as a whole gets overlooked, and I think there are a lot of [good companies] with technologies sitting here,” Johnson said. “There was a time when Washington [state] and Colorado were not that well known. They’ve done a good job promoting themselves.”

 The Aftermath

The success of an acquisition is initially judged by the number of zeros on the term sheet, but the aftermath of the deal can be more nuanced.

The location of a buyer isn’t always a primary concern for a company’s leadership team and investors, but it can impact the community, Nunemaker said. The loss of a corporate headquarters can result in a loss in corporate philanthropy, for example.

Not to mention a potential loss of jobs. Logistics Health CEO Don Weber made keeping the company and jobs in La Crosse, WI, his top priority in seeking a buyer in 2011, he told the La Crosse Tribune. He found that match in OptumHealth, based in Golden Valley, MN.

Meanwhile, Hologic’s acquisition of Third Wave in 2008 turned sour for the Madison-area economy four years later when Hologic announced it would close operations there, leaving 130 locals out of work, the Wisconsin State Journal reported. Those operations are being integrated into Gen-Probe’s San Diego facilities, which Hologic acquired in 2012 in a $3.8 billion deal.

“You’re going to find a buyer,” Nunemaker said. “The question is what impact that might have to the community at large.”

What’s more, a sale isn’t necessarily all positive for the startup’s founders or the startup itself. It can mean a loss of control for the original management team and often can make the company less nimble and aggressive, Johnson said.

Perhaps a lesson here is that exits are an important piece of the Wisconsin growth story—but only a piece. And, for that matter, an exit isn’t the only measure of a startup’s success.

Wisconsin has plenty of business owners who skipped the angel and venture capital route and decided not to sell their company after it started generating strong returns, Johnson said. She cited Promega, a privately held Madison life sciences company founded in 1978 by current chairman, president, and CEO Bill Linton. Promega has grown to more than 1,000 employees in 15 countries and more than $280 million in annual revenue, according to BioForward.

“There is that area of our economy [where] people build [a company] and they stay, especially a lot of your family-owned businesses,” Johnson said. “There are successes going on that aren’t always true exits but bring a lot of value to our economy.”

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