Wisconsin's high-growth economy: '07 predictions

Madison, Wis. - Wisconsin leaves behind an economic year in which some new investments were made, some old investments paid off, and the state's tech economy positioned itself to prosper in some emerging sectors.

With luck, 2007 should be even better, but the investment climate must remain warm and state policymakers need to turn a cold shoulder to ideas that would hurt Wisconsin's ability to compete in the global marketplace. What's in store for the New Year? Several themes that emerged in 2006 could carry over:

The Year of the Investor

Private equity investments (mainly, angel capital and venture capital) in Wisconsin's tech companies picked up steam in 2006. Final numbers aren't tallied, but it appears there were more angel and venture capital investments last year in Wisconsin than in 2005. State tax credits for investments in qualified tech companies and the creation of the Wisconsin Angel Network have helped; Gov. Jim Doyle and the Wisconsin Legislature will have the opportunity to bolster those credits in the coming session.

A symbol of the power of venture capital investments was CDW's $175 million purchase of Berbee Information Networks, a Madison-area firm that grew from a two-man shop in the basement of founder Jim Berbee to one of the leading IT services firms of its size. Investors will see a healthy return, the company will stay and even grow in Wisconsin, and some of the profits will likely be reinvested in other start-up firms. The Year of the Stem Cell

Despite political threats, Wisconsin's status as a research center for human embryonic stem cells was enhanced in 2006. University of Wisconsin-Madison researchers grew cells with no animal products, an important step toward broader clinical trials. Challenges were voiced to stem-cell patents held by the Wisconsin Alumni Research Foundation, but that's probably a sign that commercial applications are closer than ever.

The Wisconsin Institute for Discovery was launched with $150 million from WARF, the state, and Badger alums John and Tashia Morgridge, giving Wisconsin the foundation for a multi-disciplinary research center unlike anything else in the Heartland. The re-election of Gov. Doyle and political changes at the Capitol confirmed that Wisconsin voters want to continue safe and ethical stem-cell research.

In 2007, keep an eye on companies that are beginning to arise out of stem-cell research. In December, Stemina Biomarker Development was launched and CellCura, a Norwegian firm that makes products that assist in stem-cell research, announced it was moving to Madison. With five stem-cell companies on the books, Wisconsin is building the critical mass it needs to maintain its leadership. While stem cells are only a part of the biotech industry in Wisconsin, it's a part that helps put the state on the map.

The Year of the Biofuels

Wisconsin will never catch the likes of Illinois and Iowa when it comes to production of corn-based ethanol, but that's probably okay. The state's potential lies with high-energy ethanol made from cellulose, which comes from wood, wood waste, and other plants. It's renewable and fits well within the state's existing natural resources as well as its research base at the UW-Madison, UW-Stevens Point, UW-Green Bay, and the U.S. Forest Products Laboratory in Madison. Some companies are taking biofuels to the next level. For example, Virent Energy Systems in Madison is making hydrogen from sugar derived from plants, and using that hydrogen to power a renewable energy system.

Biofuels and bioproducts play to Wisconsin strengths while spreading the technology revolution to rural Wisconsin. It would be easy to become over-extended, but public and private players so far appear to be walking that fine line between optimism and caution.

The Year of the Knowledge Worker

Wisconsin start-up firms need more investment capital to grow, but they also need the right workers. Some state leaders pounded away at the theme for years to little or no avail, but now educating workers for the 21st century “Knowledge Economy” has become a public and private priority. One state initiative, the proposed Education Tax Credit, would make it easier for private firms to attract and retain good workers.

Forget free tuition for college grads that promise to stay for 10 years: It's too expensive and would likely only keep those who wanted to stay, anyway. Let's focus on getting non-college-bound high school kids into technical colleges, providing grants and loans for targeted college students, and getting working adults into continuing education classes.

If the main measuring sticks are tech-based research, patents, investments, companies, and jobs, Wisconsin made moderate progress as a Knowledge Economy state in 2006. But the hard (and smart) work of preparing for even tougher competition must continue in 2007.

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