Scale Up Milwaukee, Aided by $350K From WEDC, Aims to Prove Itself

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much of the broader public discussion about U.S. entrepreneurship and innovation, particularly the kind of high-growth, technology-driven startup companies that interest venture investors and have been championed by leaders around the country, from the White House on down.

Brad Feld, a well-known venture capitalist with Boulder, CO-based Foundry Group, suggests that getting a strong startup community in any given region depends first on a core group of active entrepreneurs. Other entities, including governments, investors, and big companies, can play a role as “feeder organizations,” Feld says, “but in the absence of a critical mass of entrepreneurs, the startup community won’t ever develop into anything meaningful.”

And as the Milwaukee Journal Sentinel noted in an article on Scale Up last year, the program’s focus on existing businesses contradicts an often-quoted study by the Kauffman Foundation indicating net job growth comes from startup businesses.

At the heart of this conceptual friction is Dan Isenberg, a professor of entrepreneurship at Babson College, just outside of Boston. He argues that high-growth firms are actually older (15 years or more, in many cases), and more often found in legacy industries like manufacturing, food services, and construction, rather than information technology and life sciences.

Scale Up is based on a model for stimulating business growth developed by Isenberg, which he’s employed in similar initiatives in Colombia, Brazil, and Denmark. Milwaukee is the first U.S.-based test city.

Scale Up’s focus on existing businesses, some in not-so-sexy industries, will have a greater impact on company revenue, job creation, and the local tax base in a relatively short amount of time, Isenberg said.

“It’s saying, where can we get the fastest and most tangible return on the social investment?” he said.

Scale Up Milwaukee logoScale Up is meant to complement existing initiatives in Milwaukee trying to nurture startups, such as gener8tor, Startup Milwaukee, and BizStarts Milwaukee, Schupper said. Scale Up supporters think the Milwaukee region needs an “all of the above” strategy, not an “either/or” mentality.

“Those startups, once they get going, they’re going to need an ecosystem that is going to help them grow,” Schupper said, comparing it to professional baseball’s farm system. “Ideally, [the initiatives are] going to feed off one another. Ultimately they’re all going to help contribute to this sense of, Milwaukee’s a great place where I can build my business, I can grow my business, and I can impact the community.”

Outside observers are interested to see how the Milwaukee experiment plays out. The Kansas City-based Kauffman Foundation, Ohio-based JumpStart, and U.K.-based Nesta all have contacted Scale Up to learn more about the initiative, Schupper said.

Yasuyuki Motoyama, a senior scholar in research and policy at the Kauffman Foundation, said it’s virtually impossible to accurately calculate Scale Up’s direct impact on companies’ sales. But Scale Up’s public-private partnership structure is encouraging because it brings business minds to the table, and it’s a better approach than having government invest directly in companies, which Kauffman research has concluded rarely achieves strong returns, Motoyama said.

Milwaukee’s entrepreneurial climate won’t change overnight, but it can be boosted within several years, Motoyama said.

“Silicon Valley spent 20 to 30 years forming their version of a regional ecosystem,” Motoyama said. “In that sense, in five or six years can you completely transform Milwaukee? I don’t think that should be the expectation.”

[WEDC, the Greater Milwaukee Committee, and gener8tor are all Xconomy Wisconsin underwriters.]

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