Florence, Italy in the early 15th century was a textile manufacturing city of around 50,000 to 60,000 people. It was about one-fourth the size of Venice, Milan, Paris and London. A large portion of its economy and workforce depended upon the making and trading of wool. It was not considered at the time to be of any particular significance culturally or artistically.
Yet over the next century, it would become the epicenter of the European Renaissance and stage the rise of the most prominent artists and intellectuals of the era.
One reason: they found a generous and reliable financial backer in the Medici family. The Medicis were a band of Italian merchants who had risen to political prominence in Florence during the 13th and 14th centuries.
“This family rises from being a bunch of wool-makers to becoming the pope’s bankers, and then goes on to finance, in a period of 100 years, Michelangelo, Leonardo da Vinci, Donatello, Machiavelli, Galileo – these unbelievable names that set off the Renaissance,” said Joe Kirgues, co-founder of the nationally-ranked Milwaukee-based startup accelerator gener8tor. “Is it that all of those amazing people just happened to be born in that same city at the same time, or is there something about what they did as it relates to their money and their financing that allowed all these people who would’ve been anonymous in any other city to become, historically, some of the names we associate with being the best artists ever?”
“What macro things do you do to produce a city where good things happen?”
These are questions that have been weighing on Kirgues’ mind, he said, although the context in which he’s asking them is quite different.
Rather than artists, he and a handful of other entrepreneurs have been trying for the past several years to create a bustling ecosystem of technology startups in Milwaukee. But it’s been a difficult code to crack.
A similar narrative to that of Florence during the Renaissance began to play out in the San Francisco Bay area in the second half of the 20th century. Stanford University’s decision to begin leasing out land in the 1950s for use as an office park for high-tech companies, such as The Hewlett-Packard Co., laid the groundwork for a flood of innovations and tech startups that followed in the 1970s and 1980s.
Similarly, Bill Gates and Paul Allen’s 1979 decision to move Microsoft Corp. from Albuquerque, New Mexico, to the Seattle area transformed the economy of the Pacific Northwest. Once known primarily as a lumber, shipping and airplane manufacturing hub, the presence of Microsoft began attracting talented tech workers and, as a result, venture capital investors to Seattle. Now, it has a thriving startup scene and is home to other giant corporations, such as Amazon and Starbucks.
“In every case, it’s hard to look at it and not think the money had something to do with it,” Kirgues said.
Seeking reinvention
Enter Milwaukee: Lake Michigan, the U.S. Bank Center, the Milwaukee Art Museum, the Allen-Bradley clock, City Hall. Neighborhoods of century-old Cream City brick buildings, some renovated and others still vacant, line its rivers.
Beer made it famous and manufacturing made it prosper.
It’s a city of roughly 600,000 people in a metropolitan area of around 1.57 million, according to the latest U.S. Census Bureau estimate. It’s home to seven Fortune 500 companies, the Milwaukee Brewers, the Milwaukee Bucks and what is billed as the world’s largest music festival.
Over the past five years, a slew of construction projects have driven a downtown resurgence.
However, that resurgence has not been accompanied by significant job or population growth.
As the nation moves toward a knowledge-based economy driven by technology and the number of manufacturing jobs nationwide continues to erode, Kirgues and others in the city’s small community of local entrepreneurs and investors are confronting a stark reality: Milwaukee does not have the mechanisms in place to build and sustain a healthy startup scene. And that puts it at a competitive disadvantage.
Gener8tor is ranked among the top 16 startup accelerators in the country, according to the Seed Accelerator Rankings Project. Formed in Milwaukee in 2012 by Kirgues, Dan Armbrust, Troy Vosseller, Daniel Bader, Joel Abraham and Jon Eckhardt, it now also has offices in Madison and Minneapolis. Twice a year, the organization selects a group of five startups from a pool of more than 600 applicants from around the country to participate in its core 12-week accelerator program and invests up to $140,000 in each of them. It’s had some success.
The 49 companies that have completed the program have together raised more than $100 million in follow-on financing. A little more than half – about 53 percent – have raised more than $1 million in financing or have been acquired.
But so far, much of that success has come from recruiting entrepreneurs and startups from elsewhere. And aside from a few standouts – such as Bright Cellars and Lumanu, two startups formed by Massachusetts Institute of Technology graduates that moved to Milwaukee from Boston – most of the successful companies that come through the program move on to different locations.
Milwaukee has seen a relatively small amount of organic startup growth. There are two basic narratives behind healthy startup ecosystems in the Midwest, Kirgues said.
No. 1: A city lucks out and a recruited or organic tech startup emerges and becomes very successful (think Microsoft in Seattle). That startup grows rapidly and serves as a “lighthouse” organization, a beacon that attracts top-tier talent who eventually form a cluster of startups around it.
No. 2: A city’s top companies and business leaders come together to form an investment vehicle for startups that attracts out-of-state investment.
“Neither of those two working recipes for Midwestern startup ecosystems are functioning here (in Milwaukee) at the moment,” he said. “Nor do we have the research capability of Madison or Ann Arbor (Michigan).”
Matt Cordio, founder of nonprofit Startup Milwaukee and tech corporate recruiting firm Skills Pipeline, has a similar view.
He’s been trying to build a more cohesive, active startup community in Milwaukee for years, and recently organized the city’s first Startup Week, a week-long series of networking and educational events intended to foster connections among investors and entrepreneurs.
Cordio is frustrated with what he sees as the local business community’s over-emphasis on real estate investment and under-emphasis on startup investment.
“The biggest challenge in Milwaukee, I think, is there seems to be some risk-averseness towards the future and toward technology and startup investing,” Cordio said. “I hope that can change, because I think that if we don’t embrace technology as the future, how are we going to compete with the rest of the country? The last century was defined by manufacturing; this century is going to be defined by technology.”
There are many complex social, cultural and economic conditions at play when it comes to building a thriving industry cluster, and they are hard to nail down or replicate.
There are, however, strategies being employed to solve the startup puzzle that have been working in other cities around the Midwest with similar economies, histories and geographic features to Milwaukee.
“One of the most common misconceptions is that this is zero-sum,” Kirgues said. “We can all get wealthy.”
Michigan
In 2006 and 2007, Michigan was bleeding manufacturing jobs at a historic rate. The state had experienced its longest job-loss streak since the Great Depression – six straight years.
Business Leaders for Michigan, a group of top executives from 80 of the largest companies and universities in the state, including General Motors Co., Ford Motor Co., the University of Michigan and Michigan State University, began discussing job growth through entrepreneurism.
“The conclusion we reached was that Michigan was a region with great technology development, and a really talented workforce, but we were an underserved area in the area of startups and venture capital,” said Chris Rizik, chief executive officer and fund manager of the Renaissance Venture Capital Fund. “So we ended up being an exporter of technology and tech jobs when, really, we had the ingredients here to be a pretty robust startup community.”
They decided to put together a regionally-focused venture fund of private dollars called the Renaissance Venture Capital Fund. Rizik, who by that time had about a decade of experience in venture capital under his belt, would lead it.
But their goal wasn’t to invest in local startups. They wanted to have a larger impact.
“The idea was to create a fund of funds; a fund to invest in great venture funds around the country, with the idea that you could leverage a limited amount of money into a larger impact,” Rizik said.
He and the members of BLM thought they could do more good for the state’s economy if they attracted investment money from the outside – venture capital firms and angel investors from out of state who have historically had their eyes fixed on places such as Silicon Valley and the Pacific Northwest.
These investors seemed to be ignoring Midwestern…