Report: Madison’s tech employment numbers grew by 6.2% amid pandemic | Business News

By Lynn Sommers Last updated Mar 8, 2022

Emilie Heidemann | Wisconsin State Journal

Madison gained more technology sector jobs in the first few years of the pandemic than in the prior half decade, according to a new report published by Washington DC-based research think tank Brookings Institution.

While tech employment numbers grew by 3.6% between 2015 and 2019, that figure was 6.2% by 2020, the report states. Madison had over 15,000 tech workers in 2015 — in 2020, that number was just under 19,000.

The factors influencing that acceleration — locally and nationally — are the rise of remote work during the health crisis that “spawned new hopes for the spread of tech jobs into the heartland,” according to the study, which adds “maybe the long-awaited spread of tech into the rest of the country is happening at last.”

For decades, the availability of tech jobs has remained “highly concentrated” in a short list of coastal cities, including San Francisco, Seattle and New York. A reverse trend of decentralization is likely to occur, the report states, as tech employment growth slowed in some of the country’s largest metro areas” and “increased in other midsized smaller markets, including smaller quality-of-life meccas and college towns” like madison

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The Brookings study comes as the Wisconsin Technology Council recently released early numbers from its “Wisconsin Portfolio” report, which is slated to publish in full this spring. The Council report has so far charted 111 deals financed last year by early-stage investors, “with a relative handful of those deals accounting for $600 million” of the $810 million total, which is a record for the state.

“Over the six-year period beginning in 2016, Wisconsin early stage companies have raised more than $2.5 billion,” the Council said in February. “There were $276.2 million in early stage investments in 2016, $231 million in 2017, $300.7 million in 2018, $454.4 million in 2019, $483.6 million in 2020 and at least $810 million in 2021.”

Driving those investment numbers were Madison tech companies, including software giant Fetch Rewards, nuclear technology company SHINE Medical Technologies, data business VedaData, electronic health records integrator Redox and software company DataChat, which accounted for about $475 million of the state’s total.

The Madison area and southeast Wisconsin made up about 75% of all deals uncovered, according to the Council report. Health and information technology represented about two-thirds of investments.

Meanwhile, “Wisconsin is still well outside the nation’s top 10 states when it comes to angel and venture capital,” a fact only partly linked to population size. Midwest neighbors like Minnesota recorded $1.34 billion in 2021 deals. Colorado, a state with roughly the same number of people as Wisconsin, reported $6.5 billion in 2021 investments.

Madison versus other metros

The Brookings report defines the tech sector as a “six-industry subset of the nation’s advanced industries,” including workers in the fields of computer and electronic component manufacturing, software publishing, data, information services and computer systems design.

It analyzes 195 of the nation’s largest metro areas, and categorizes them as either a “superstar,” “rising star” or “the rest” based on how established they are as a tech hub.

While Madison is grouped in with “the rest,” the city’s growth is worth watching, said Brookings report author and research fellow Mark Muro.

Several previous Brookings reports have outlined Madison’s potential as both a potential tech and artificial intelligence powerhouse, particularly because of educational institutions like UW-Madison and large employers like Epic Systems Corp.

The seven superstar metro areas, by comparison, are characterized as cities that dominated the nation’s tech growth in the early 2010s and in the years leading up to the pandemic. That’s partly because of each metro’s reputation as being highly accommodating to tech workers in terms of amenities and overall quality of life.

San Francisco and San Jose together generated almost 20% of the nation’s entire new tech employment during the pre-pandemic period, increasing their share of the sector’s total nationwide employment by 1.2%.

But the superstars overall saw their 4.9% pre-pandemic annual growth rate slow to 2.9% in 2020, according to the study.

“Rising stars Atlanta, Dallas, Denver, Miami, Orlando, San Diego, Kansas City, St. Louis, and Salt Lake City also powered through the first year of the pandemic to turn into positive growth and add a combined 14,000 tech jobs while slightly increasing their aggregate share of the nation’s tech sector,” the study states.

Dallas, Atlanta, Denver, and St. Louis all added tech jobs at annual growth rates in excess of 3%. St. Louis saw its tech growth rate increase from 3.9% over the 2015-19 period to 4.8% in 2020.

Decentralization trends

The wider-spread acceptance of remote and hybrid office models in the tech sector could “with time, allow greater dispersion of workers” and activity, the study forecasts. The report illustrates hybrid work as commuting to a physical office two or three days a week.

“This level of commuting could limit full exits from established hubs to new locations, though it might well support tech workers shifts to nearby high-amenity satellite towns,” the study states.

New technologies themselves, which disrupt their respective industries at first, spread out geographically as they mature and as more people move to adopt them.

“Given that, the current emergence of new technologies and projects in the sector — ranging from artificial intelligence and quantum computing to … the metaverse — may well forecast more years of concentration in the established hubs,” according to the report.

Students at UW-Madison interact with virtual world during a lab exercise hosted by EduReality, a company startup that produces virtual reality education materials in Madison.

JOHN HART, STATE JOURNAL

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