Wisconsin’s competitive edge in biotech is being threatened by “national headwinds” for the industry, according to a startup specialist at WEDC.
Shayna Hetzel, vice president of entrepreneurship and innovation at the Wisconsin Economic Development Corp., spoke yesterday during a meeting of the agency’s board of directors. Representing the Wisconsin Investment Fund Committee, she discussed national and state trends in startup funding.
“Between uncertainty with research dollars and commercialization pathways, regulatory concerns, clinical trials and sort of those components that are outside of the state’s control, all of that is making national investors a little more hesitant to biotech,” she said.
For now, this environment isn’t influencing in-state funds’ portfolios, she said. But she added it could have an impact going forward.
“It’s just something for us to keep an eye on over the next few quarters, to see if these headwinds sort of dissipate, or if they start to get in the way of our high-growth startups,” she said.
Meanwhile, she pointed to national signs that the venture capital market is improving, though she cautioned these signals aren’t cause for a “full celebration” quite yet.
“The challenge with that recovery is that it’s concentrated and highly selective,” she said.
She noted AI-based startup companies are commanding the majority of all investment funding so far this year.
At the same time, emerging fund managers are now raising less money than established fund managers for the first time in a decade. That means existing funds are growing while early-stage investors are struggling with raising their first, second and third rounds, she explained.
Still, startup “exits” are generally on the rise, she said. More investors are getting a return on their capital, according to Hetzel, who called it an early indicator of a bounceback in the venture capital space. This activity isn’t as dramatic as the large checks being written in the COVID-19 pandemic, but it represents the first uptick for expected VC activity since then, she said.
Wisconsin is seeing similar patterns, but state-level activity is lagging the national picture by several months or even quarters, according to Hetzel’s presentation. She noted that’s partly due to the state’s startup ecosystem relying on “angel” investors, or early-stage backers that provide funding typically in return for equity in the business.
She noted it “takes a lot longer to get your money back when you’re investing on day one” rather than after the startup has already been around for several years.
Plus, Wisconsin tends to have smaller funds compared to elsewhere in the country, meaning rounds often include out-of-state investors.
