Gov. Scott Walker signed legislation Thursday to provide $25 million in taxpayer money to start-up companies, realizing a goal he has sought for more than two years.
Providing venture capital has had a rocky history in recent years. Bills to do that last session couldn’t get through the Legislature, and this year’s legislation has had its share of glitches, falling well short of the original amount sought by supporters.
Conservative critics in recent weeks have noted that though all of the money will go to Wisconsin-based companies, some of the resulting jobs might be created elsewhere.
Walker said the money will help spur economic development across Wisconsin and, if successful, will lead to the state providing more investment dollars down the road.
“We can plant even more trees going forward, that’s what this is all about,” Walker said. “I’m confident we’ll look back on this day and say this was something very positive for the state of Wisconsin.”
Surrounded by lawmakers and venture capital investors, Walker signed the legislation at MCT Inc., a Milwaukee start-up that makes high-end digital cutting machines.
MCT is the third company Nikolai Mikkelsen has founded in Wisconsin, but the first that will build its machines in the state, Mikkelsen said. It has 15 employees and hopes to grow to as many as 50 in the next 18 months, he said.
“This is a big day in Wisconsin,” said John Torinus, a general partner in the Wisconsin Super Angel Fund, which is investing in MCT.
Angel and venture investors who witnessed the signing praised Walker and the Legislature for eventually coming together to support the legislation.
“The broad-based, bipartisan support for this law shows that there is strong and widespread support for start-up companies in Wisconsin,” said Steve Lyons, president of the Wisconsin Growth Capital Coalition, which lobbied heavily for the bill.
The bill cleared the Senate last month 29-3 and got through the Assembly on a voice vote without dissent.
Walker set aside $25 million in the 2013-’15 state budget to fund the venture capital, but this latest legislation was needed to lay out how the money would be used.
Democrats such as Assembly Minority Leader Peter Barca of Kenosha supported the bill but said they thought it should have provided more funding to create jobs and should not have excluded some industries from receiving the money.
“I believe a more significant investment is required to bring investment capital into the state and grow our economy. And I am troubled that the new law discourages investment in biotech, one of our fastest-growing and most promising industries,” Barca said in a statement.
The legislation targets investments to five industries — agriculture; information technology; engineering; advanced manufacturing; and medical devices. Advocates said they saw those areas as best positioned to quickly create jobs. Social conservatives also helped keep the narrow focus of the bill, balking at the possibility of allowing state money to flow to biotech companies that use stem cell lines that come from destroyed human embryos.
Democrats argued that life sciences companies are an essential part of Wisconsin’s economy and should be allowed to vie for the money. But Senate Republicans voted down their amendment to make the bill industry-neutral.
Leaders in the life sciences industry contend the bill as passed will send a chilling message and create worries that lawmakers will exclude them from an existing tax credit program.
Wisconsin companies pull in less than 1% of the country’s venture capital. There have been signs recently that the funding environment is improving. Some have projected that, including the state fund, more than $100 million of new venture capital will be invested in state companies over the next few years.
The plan would use a “fund of funds” model that would see the state hiring a manager to invest $25 million in state money in at least four early-stage venture capital funds, which would have to raise private money to match the taxpayer funds.
Each of those funds, in turn, must invest all of the money received from the state in businesses that are headquartered in Wisconsin and employ at least half of their full-time employees here. At least half of the money each venture capital fund receives under the program must be invested in businesses with fewer than 150 full-time employees at the time of the initial investment.