[Editor's note: Being commissioner of the Minnesota Department of Employment and Economic Development (DEED) is not necessarily a high-profile job. But as DEED is flooded with unemployment insurance applications due to the economic fallout from COVID-19, Steve Grove is suddenly on the front lines touting state programs that can help people who have lost jobs or small business owners struggling to keep the lights on. Earlier this year, Twin Cities Business sat down for a conversation with Grove before coronavirus changed the world. But Grove did speak to the mindset that Minnesota startup entrepreneurs need to build businesses. His thoughts offer some ideas that can be deployed both during and after the virus crisis.]
Steve Grove had been with Google for more than a decade but wanted to get out of Silicon Valley. The Northfield native and his family moved back to Minnesota in 2018.
“I was always in the business development and strategy side,” Grove says. “Google didn’t have an office here. I had a global team that I led when I was at Google, so working remotely from here was doable. I worked from a co-working space.”
Grove started at YouTube, which had been acquired by Google, where he worked on creating partnerships with news, political, and nonprofit organizations to get more content on the site. After that, he jokes that he led the “illustrious Google Plus partnership team,” referring to the now-defunct social network. Then he was director of the Google News Lab.
Once back home, he volunteered for Tim Walz’s campaign for governor. After Walz won, the new governor floated a job offer. Grove wrapped up his work for Google in January 2019 to lead the state’s Department of Employment and Economic Development (DEED).
It’s clear that Grove is comfortable being back home. A blue Minnesota-shaped candy dish in his office overflows with caramels his mom made.
He wears a retro Casio digital watch with a bright red watchband. “This is like a dinosaur,” Grove says. “But my buddy sent me this article from The New York Times two months ago that did a full-scale review comparing this watch to the [Apple] watch. Because this thing has stood the test of time.”
He wants to see more risk-taking and grit from Minnesota entrepreneurs, and a greater willingness by startups to take venture capital. With that in mind, DEED started Launch Minnesota, a new program with a $2.5 million annual budget to provide financial incentives, training, and grants to startups. Launch is a tenant of the Osborn370 building, which has emerged as a tech hub in downtown St. Paul. “It was important to us,” Grove says, “that we base ourselves outside the halls of government.”
TCB: What can Minnesota learn from Silicon Valley?
Grove | That risk-taking culture. That desire to try something new, to put yourself out there. When you talk to folks in this [Minnesota] startup ecosystem—it’s growing, and this is changing—but I think a predominant feeling for some time has been that it’s a little bit more of a risk-averse culture. I think part of that just comes from having such a stable and strong economy, where there are lots of opportunities to get stable and strong jobs.
We had that [risk-taking culture] a lot, I think, in the mid-20th century, with the super-computing industry. The early days of Unisys and Cray Research and 3M and Honeywell, there were 30-plus super-computer companies or adjacent industries all packed together in this system that really made it strong. Employees hopped from firm to firm, they spun off and tried new things; that’s really why we were in many ways the Silicon Valley of the country for some time in the middle of the century.
Q: What can Silicon Valley learn from Minnesota?
A | One of the things you find in our startup ecosystem here is that I think founders aren’t just chasing money or eyeballs, they’re trying to solve a problem. And I think the startups that grow here are usually founded by people who genuinely care about the problems they’re trying to solve and are willing to stick it out and see that startup through the finish line. We have one of the highest startup survivability rates in the country.
I think there is a little bit of a “pay-it-forward” nature to this ecosystem. It’s a collaborative state. That kind of civic pride and civic backbone that Minnesota has is special. The Valley can be a little more cutthroat … I think there is a sense here that people want to help each other out. Because the journey of an entrepreneur is lonely. It’s hard, it’s challenging.
Q: We seem to have incubators everywhere. Why do we need Launch Minnesota?
A | We looked at some of the markets that have been really successful in startup growth across the country. Three that come to mind right away are Massachusetts, Austin [Texas], and the Valley. We studied that and said, “What are the key factors that lead to growth there?” And in every case, the government has played a role in that formation.
[In] Massachusetts in the late ’70s, government put money into a venture fund that ultimately funded startups. In the Valley, it was a lot of the federal contracting opportunities there that led to a lot of the early semiconductor growth that coined the phrase “Silicon Valley.” In Austin, which was a university town for some time, they really invested in being kind of like a second headquarters for every Silicon Valley company that was looking to expand out.
Government’s never going to, nor should it, control a startup ecosystem … but government playing a role to fill the gap that others aren’t incentivized to fill? That’s where we come in.
Those dollars matter. Launch Minnesota has $5 million [over two years] that will help more of these companies grow. And underneath its umbrella is also the Angel Tax Credit [which provides a 25-percent credit to investors or funds that make equity investments in specified industry niches]. It’s things like that: They’re levers that no other institution can really put into the market. We think it’s a flag out there to people to say, “This is the place to come start a company.”
Q: But Minnesota has historically been known for medtech, not tech tech, right?
A | I think we’ve got to play to our strengths. We are the No. 1 device manufacturer in medical technology in the country. We’re No. 5 in computer and electronics manufacturing in the country … Yes, we as a state generally missed the shift to software in terms of having a leadership role in technology growth, but that super-computer industry really became the medtech industry you see today.
Q: It seems like tech is intersecting with so many other industries now. Is that a genuine phenomenon?
A | I think that every company that’s going to be successful in the future will be some version of a tech company … Successful companies today need to think like tech companies.
If you go to a place like Red Wing Shoes, they’re becoming a tech company. You walk their floor and they have extraordinary automation that cuts the leather on any given hide in the maximally efficient way, using spatial analysis and laser-cutting in the way that a manual cutter used to have to do [in] a lot more time. They are very sophisticated in their sales channels as it relates to direct-to-consumer, their store footprint.
I do think that the other thing that we want to see grow here is companies that are willing to take on venture capital. This is a different way of financing that can lead to much bigger, faster results and growth that is the kind of growth we see in strong tech ecosystems. A lot of Minnesota entrepreneurs and Minnesota businesses might look to loans first, or they want to bootstrap it themselves … but when you look at the ecosystems where there’s a lot of movement and excitement, it’s where there’s a strong venture-backed startup that can take on that kind of risk capital early and grow fast and take bigger bets more quickly.
I think that every company that’s going to be successful in the future will be some version of a tech company. Successful companies today need to think like tech companies.
Q: We were told recently that there’s plenty of seed-stage investors here, but not much VC.
A | I would not call myself an expert on the venture capital market here, but what we do hear is that VCs just need more incentive to look at the Midwest. Over 75 percent of the capital in venture capital goes to Boston, New York, or the Valley. When the Angel Tax Credit came along, we were excited to see over half of the venture money coming to the state is from outside the state. So it is kind of putting a spotlight on Minnesota as a place where startups can grow versus just being kind of an insular “Let’s fund each other” kind of thing.
Right now you’ll see, and venture capitalists will tell you this, that companies get to the place of a Series A [financing round] … and they say, “OK, now’s the time to move to the Valley because that’s where that money is.” … You think, “Gosh, it’d be great to keep more of those folks here to build and grow these companies all the way through.”
Q: Is it time to break up Big Tech?
A | I don’t want to comment on that specifically, on breaking up Big Tech. I will say that I think society is going through a really important reckoning right now with the role of technology in our lives and I think it’s a good thing. … Technology is changing society faster than it ever has before, and those who create it don’t always know what the effects will be. So I think public pressure on making sure we’re OK with those effects and thoughtful engagement on making sure that technology improves the lives of everyone, and not just those that are most fortunate, is really important.
Q: Minnesota consistently ranks near the bottom for racial economic equity. What can DEED do?
A | I think inclusive growth is really important for the technology ecosystem here. The Valley is not a particularly diverse place. … I think that we want to see an ecosystem here that looks a lot different than the one in the Valley but is a lot more inclusive, that looks a lot more diverse. Not just because it’s good for society, but it’s also good for the products that get built. When teams aren’t diverse, they don’t [create] products that work for everybody.
I would say that you’ll see it built into all of our incentives at DEED, and that includes all of Launch Minnesota, carve-outs for communities of color, women, veterans, people with disabilities. We want to look there first and designate a percentage of the money for those communities. But that’s not even nearly enough in this space. This is where we come to the subject of workforce development, which is “How are we training that next ecosystem of leaders to be ready to take jobs in technology or start their own company?”
DEED hasn’t done enough in the past on training people in technology careers, which we need to [do] because those jobs pay way more than jobs that are not in technology. Minnesota doesn’t, for example, have a requirement of taking computer science before you graduate from high school. Maybe we should consider that.
Q: Companies in all industries are concerned about the labor shortage. What’s causing that and what can be done?
A | It’s the most pressing issue that DEED faces in our economy since the governor has come into office. We actually have one of the highest labor force participation rates in the country, over 70 percent. The reality is we need to grow our population here, and we need to get people to work who are on the sidelines right now. That means both creating the kind of state that people want to come live in and that means being a lot bolder about what we have to offer here in this state. I think … Minnesota humility needs to evolve a little bit to be more bold and welcoming about the great benefits that are here.
Q: Should we all just learn to code?
A | [Laughs.] I don’t think it hurts. I think there’s something about computer science. It’s actually a liberal art as well. Learning the skills of computer science is also learning to think analytically, so I think it’s important for us to not think of tech or coding as narrow skill sets. They’re problem-solving skill sets. Look at me, I didn’t come from a coding background, but you need business people to come in and help tech companies grow. I don’t think we all need to learn how to code, but I think we need to make it really easy for anybody to be able to learn.
Coding isn’t about just being a geeky computer scientist, it’s a creative skill. If you can code, you can build stuff. You can create the next version of our economy. Computer science is the foreign language of the 21st century that everyone should learn or at least be familiar with.
Q: What’s the biggest challenge for the tech startup ecosystem for DEED?
A | We’re at an inflection point in our state’s economy … the war for tech talent and the growth of regional and metropolitan communities in the future is going to be won by people who really are aggressive and want to build the next great company in their market. I think the big challenge is just putting ourselves on the map in a way that people want to come here to start a company, not leave here once they’ve started a company. I think the signals are really good, we’ve just got to accelerate it.
Burl Gilyard is TCB’s senior writer.