Earlier this week, I was happy to attend a talk by Madison's Economic Development Director, Mr. Tim Cooley. He pointed out what a lot of us in "the biz" already know: Wisconsin's problem isn't a shortage of talent, infrastructure, or ideas, but rather a shortage of capital. We don't have enough people - venture capitalists, investment firms, etc - willing to invest in all of the startups going on here.
The situation is getting better, particularly for "big name" industries such as biotech and e-commerce. And, part of the reason for that is the recent (2005) investment tax credit passed by the state to give an incentive to invest in these kinds of companies that is now starting to pay some dividends. This is a 25% credit on funds invested into "Qualified New Business Venture". Obviously, this begs the question: what is a Qualified New Business Venture and does your company qualify? The rules are as follows:
To be certified as a Qualified New Business Venture by the Department of Commerce, businesses must be able to answer "Yes" to the following six questions:It is my belief that brewery startups would qualify as "Qualified New Business Ventures" under this definition. There are two issues that would determine eligibility: 1)"pre-commercialization activites" and 2) "proprietary new product or process". The second is easy: recipes are trade secret, hence proprietary. Easy peasy. The first is a little more difficult: "Pre-commercialization activity".
1.Are you seeking private equity funding for pre-commercialization activities related to the development of a proprietary new product or process in Wisconsin?
2.Have you been in business for no more than 10 consecutive years?
3.Are your principal administrative offices located in Wisconsin?
Does at least 80% of your payroll go to people employed in Wisconsin?
4.Do you have less than 100 full-time equivalent (FTE) employees?
(FTE=Total number of hours worked per year multiplied by total number of employees divided by 2,080 hours)
5.Do at least 51% of your employees work in Wisconsin?
6.Since its inception, has your business received, in aggregate, no more than $10 million of private equity investment in cash?
Some organizations define pre-commercialization activity as things like market analysis, research and development, and product testing. On the other hand, "Commercialization Activities" are generally understood within the product life-cycle to assume a product is available for the general public. So, "pre-Commercialization" would be anything prior to "available to the general public". In the software universe, the equivalent of "beta" testing would be "pre-commercialization".
So, let's apply that to the brewing industry for a moment. What does "pre-commercialization" mean in a brewing context? Beta testing? What is beta testing? Well, how many batches do you think it takes to perfect a recipe, to do market analysis on the success of a recipe to determine acceptance, and then roll out the product to a wider market?
I'd argue that most brands take at least 2 years, if not 5, to become fully refined. Take, for example, O'so's Picnic Ants Saison - last year's version was very, very different from this year's. And not in a "rotating brand" kind of way like "Stone Anniversary" or something. Rather, this year's is a refinement, based on market analysis and product testing, research and development, beta testing; call it what you like, but it is no different from the 5 years that GMail sat in beta to refine it for general consumption.
So, I would argue, any brewery that otherwise meets the other definitions would be engaging in "pre-commercialization" activity by limited release of new brands to refine proprietary recipes. So, what's "limited release"? Good question. GMail was in beta for 5 years and it counted as "limited release" because you had to be "invited"; given the multiple millions of email gmail.com addresses before it came out of beta, I'd argue "limited release" is a pretty fluid definition. Or, for a more local option, look at perBlue's Parallel Kingdom - it qualifies. Alice.com qualifies and it has thousands of users - far more than drink, say, BrewFarm beer.
Yet another way that the brewing industry is similar to the software industry ... So, I think it's time to add "breweries" to the list of things that Wisconsin is known for. Oh ... wait ...