The head of Wisconsin Economic Development Corporation (WEDC) says the state’s “entrepreneurial spirit” is reflected in the 42 percent boost in new businesses formed during the pandemic.
“It’s actually really exciting, because you could imagine that in the face of a pandemic, folks would retract, right?” WEDC Secretary and CEO Missy Hughes said in a recent interview. “They would say, ‘I’m not going to do anything new, I’m going to stay safe in my job, I’m going to stay safe where I am.’ But instead, what we’re seeing is a real entrepreneurial spirit.”
The number of new business formations in Wisconsin leaped 42 percent between 2019 and 2021, from 50,277 to 71,151, according to figures provided by the Department of Financial Institutions.
Within that two-year timeframe, the larger jump was seen between 2020 and 2021, with an increase of 24.3 percent. Between 2019 and 2020, the increase was 13.8 percent.
By comparison, the year-over-year increases going back to 2011-2012 ranged from 3.2 percent to 8.4 percent, the DFI figures show.
Federal figures provided by the National Federation of Independent Business show both employer establishment “births” and “deaths” in the state have largely been increasing over the same period. While the number of new employers rose over the first three quarters of 2021, the number of those shutting down saw an increase in mid-2020 — briefly exceeding the number of new companies — before falling below 2019 levels later in the year.
Meanwhile, DFI figures show the total number of registered business establishments — or “active entities” — in the state has risen from just over 365,000 in 2012 to over 530,000 in 2021. Between 2019 and 2021, when the spike in new business formations occurred, that number increased from about 471,000 to about 530,000.
Wisconsin Technology Council President Tom Still says the increase in business activity is “consistent with some other trends” the group had been tracking during the pandemic.
“As people lost or left previous jobs because of COVID’s effect on the economy or their families, they often looked to other means of paying the bills,” Still said in a statement. “For many, that meant starting their own business, using skills and talents they already had but had not previously put to work for themselves.”
Matt Cordio, the co-founder of the Wisconsin Startup Coalition, notes the state has “long struggled” with forming new businesses. But he says the economic uncertainty created by the COVID-19 pandemic “in addition to record levels of available venture capital and private equity” helped drive this sharp increase.
“This is exciting news for Wisconsin as startup companies create net new jobs in the economy,” he said in a statement. “Policymakers should work to foster a supportive environment for these new companies by investing in talent attraction, workforce development, and creating a more attractive tax and regulatory climate in the State.”
Hughes agreed greater availability of venture capital in Wisconsin is playing a role, as well as the pressures of the pandemic putting more people into “problem-solving mode.”
“This is what we want to see, right? We want to see this trend upwards of businesses being created, because it shows activity in the economy and shows folks taking the initiative to start something new and to see if it works out,” she said.
Still also pointed to “rising investor interest” around startups in Wisconsin. He noted angel and venture capital deals totaling over $852 million in 2021, eclipsing the $483 million total seen in 2020.
A Wisconsin Economic Development Corp. spokesman said the DFI numbers also show the state “generally has done a better job” of investing pandemic stimulus money into small businesses. He pointed to a report from the Center for Budget and Policy Priorities that ranked Wisconsin first among U.S. states for investing pandemic funds as a share of total funds into the business, and second for investing in academic development.
“We’ve put close to probably about $600 million into assisting small businesses here in Wisconsin, and I think that’s one of the things that we’re starting to see it bearing fruit,” he said.
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