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The Equity Factor

Tech Startup Accelerator Says Two Cities Are Better Than One

Milwaukee skyline

Gener8tor alternates between offices in Milwaukee, above, and Madison, Wisconsin. (AP Photo/Morry Gash)

The myth of the small team of inventors working alone in a garage or a dorm room may have some basis in truth, but it’s no accident that most of the world-beating technology ventures of the last decade or so have either come from Silicon Valley or New York City, or only blown up once moved there. Place matters to innovators, even in our flattening, global world. Great tech companies arise from great tech scenes, which concentrate talent, investors, know-how and the basic research that drives ventures — and a business in Wisconsin, Gener8tor, is stitching those elements together for not one, but two cities, Madison and Milwaukee.

“We love the fact that it is operating in both cities,” said Milwaukee Mayor Tom Barrett, “because Milwaukee is the economic hub of the state and Madison is the academic and ideas hub. So to have those two operating together is a real plus.” According to Madison’s economic development office, UW Madison does something like a billion dollars in research each year and its new chancellor has emphasized turning that research into businesses.

Gener8tor is an accelerator, a company that invests money and sweat equity in young companies in hopes of a long-haul return on the small equity stake it attains in exchange. Accelerators themselves are nothing new, but what’s interesting about this one is that with each new class of companies, it switches back and forth between Madison and Milwaukee. Every few months, a new crop of companies comes in for a program in which they learn about exploring revenue models, getting investors and acquiring customers.

Gener8tor co-founders Troy Vosseller and Joe Kirgues were successful entrepreneurs in their own right when each wanted to start an accelerator in their respective cities. But with perhaps neither city quite big enough to have all the pieces of a world-class tech scene, the two realized they might be more successful joining forces.

One venture firm executive in Wisconsin said that the concept of shifting between the two cities has had the effect of making the state’s innovation economy feel less like a Madison scene and a Milwaukee scene and more like one Wisconsin. As the cities rise with the rest, it’s begun to appear that embracing regionalism may be the right course for an area with a thinner population to make it.

Gener8tor’s bridge extends beyond its own accelerator program. For example, each city has social groups for entrepreneurs. Gener8tor joined both and then helped sponsor buses to send members of each group to the other city’s events. Over the last nine months, Vosseller said, the two scenes have come to know each other, though he acknowledges there’s still work to be done.

“I think there are still a lot of people that are in Madison that don’t associate much with Milwaukee and vice versa. That’s one of our actual goals is to break down that perceived barrier,” Vosseller said. [Disclosure: Vosseller was a student intern for one semester in a UW-Madison office where I worked from 2002-2005.]

Gener8tor’s regional-minded ethos even reaches to Chicago. Dan Reed, of American Family Ventures, a backer of the accelerator, explained that “each city has its own startup ecosystem, but Gener8tor operates in all three, making connections for individuals, startups, and investors in each city. Their efforts have certainly increased cross-pollination and awareness.”

Vosseller credits American Family with making a critical move that he hopes to convince other corporate citizens in the state to make: buying Wisconsin-made technology products, as appropriate. Through a Gener8tor program called “On Ramp,” startups can pitch software-as-a-service [SaaS] and other products to corporate leaders, not to get them to invest, but to secure them as customers.

Madison-based EatStreet, a restaurant delivery site targeting college students and also providing some key B2B services to restaurants, arrived at Gener8tor with a vision of reaching more cities — at least 100 within two years.

CEO Matt Howard said they didn’t know where to turn to raise the capital they needed to expand, and that joining Gener8tor was key, because they immediately had advisors filled with ideas for sales leads and investors. At one point, Howard said, there was danger they would move to Silicon Valley because of the trouble they were having raising money in the Midwest. Now, this year alone the company has gone from 2,500 to 11,000 restaurants. EatStreet closed a $3.7 million equity round in February, according to the SEC, keeping a company with around 80 employees (and growing) in the area.

Since Gener8tor launched in 2012, 23 of its alumni companies have raised $50 million in venture backing and created 150 jobs, according to Xconomy.

Of course, Gener8tor isn’t the first accelerator to operate in the cities. (In Madison, Gener8tor works in a large, open space on Capital Square. In Milwaukee, it has a plush space in Milwaukee’s 3rd Ward, right on the river.) Some have faded away. The question for places like these isn’t whether new companies will start there (they will) but rather will they stay there as they grow? Some have, like Epic Systems, but the pressure to leave in search of money, partners or tech talent will remain acute if the communities don’t collaborate to get ahead of demand.

Vosseller is conscious of the constraints on smaller places. He pointed out, for example, that consumer-facing businesses are a heavier lift in Wisconsin, where the smaller population makes achieving the “network effect” less likely. By unifying two populations with some key infrastructure assets going for them, Gener8tor may have made it more likely that its business model, and the region’s tech scene, can make a difference for the Upper Midwest.

The Equity Factor is made possible with the support of the Surdna Foundation.

Brady Dale is a writer and comedian based in Brooklyn. His reporting on technology appears regularly on Fortune and Technical.ly Brooklyn.

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