A Few Ideas to Generate $1B in Fresh Capital for Minnesota Startups
Capital is like sunlight and rain for startups. With more of it, they grow bigger and faster. Without it, they’re stuck in dry shade, straining to reach for what little light and moisture breaks through.
Today, we’re calling for Minnesota to think big: Let’s get $1 billion in new money to catalyze those new investments.
It’s been almost 50 years since a new Fortune 500 began here. Startups are typically responsible for the most new job growth in a market. If there’s growth capital on the table, job growth can follow, and with enough job growth comes economic growth for the broader region.
So where should the state look for solutions? We talked to smart people who work in and around venture capital to develop a few ideas that could unlock the capital we know is here. Some are ideas that are working in other places. Others involve focusing attention on the highest-impact leverage points that could bring fresh resources.
Leverage and Grow Public Funds
The state of Minnesota spends little public money on startups, unlike many other states. North Dakota used oil tax revenues to seed a $100 million fund for startups, from a state budget that’s one-seventh the size of Minnesota’s. Ohio devoted a portion of the state’s liquor tax to a fund. Tennessee invests directly in venture capital funds.
Minnesota has had an on-again, off-again angel investment credit, which gives tax advantages for investing in early-stage companies. In 2024, $5 million in tax credits drove $20 million in investment, yet since 2025 it hasn’t been funded.
States like California and Texas skip the tax credit route and invest billions of pension dollars in startups. To date, Minnesota has done nothing similar with the $100 billion in assets in state pension funds. Pensions in Minnesota are governed by the State Board of Investment, so the power to change investment priorities lies with four officeholders, including the governor.
A Big Minnesota Growth Fund
Late-stage investing is typically the funding to grow a successful idea from small but profitable into a fast-growing job creation engine. In other states, private “fund-of-funds” have been set up to coordinate among big investors, major corporations, and institutions.
Michigan’s Renaissance Fund invests in venture capital, which then invests in startups. The fund also plays a coordinating role in connecting startups with investors and corporations. It was created by seed money from local corporations, universities, foundations, and institutional investors with a novel theory: to attract more venture capital, invest outside the state, which will then create relationships that drive more deals home. Michigan corporations also serve as early customers for the companies being funded. Renaissance Venture Capital claims its funds have attracted $2 billion in investment—the equivalent of $13 for every $1 invested—to Michigan’s startups.
The O.H.I.O. Fund has delivered more than $600 million in economic impact over two years by coordinating private capital. In the fund’s first year, it raised $238 million and made 19 investments in companies across the state, according to the organization.
“Put simply, Minnesota needs infrastructure for founders to pour money back into creating people and companies like them.”
—Charlie Rybak, VP, editorial innovation, TCB
Bigger Exit Strategy
Big “exits”—companies being sold, going public, or having a so-called “liquidity event”—are a critical piece of the puzzle. These create groups of founders or investors with fresh capital and a success story on their hands. Historically, this has resulted in a portion of that capital being reinvested in the ecosystem it came out of.
Michigan’s Founders Fund plays a role in bringing local funding back to new companies. More than 150 founders put 1% of their equity or profit into the fund, which has created more than $350 million for the ecosystem.
Put simply, Minnesota needs infrastructure for founders to pour money back into creating people and companies like them. We should be rooting for billion-dollar companies to invest in creating new billion-dollar companies to build the flywheel needed to go to the next level as a startup ecosystem.
Minnesota Taxpayers as Investors
Software and “hard tech” companies differ in fundamental ways, and birthing the latter requires a level of coordination and public policy involvement. The hardest hard tech is risky and expensive but has a huge upside. It is also less mobile compared with a software company.
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Venture capitalists aren’t going to do the really hard stuff on their own; it’s challenging to make investments of the scale needed to test, build, and grow speculative and expensive technology. Government involvement is essential to grow hard tech industries like energy, biotech, and robotics.
MIT manages a fund called The Engine, which reports more than $1 billion in assets under management. Chicago has the mHub Innovation Center, which plays a coordinating role and runs its own fund. Detroit has a three-tier capital pipeline that invests in hard tech founders as they grow. Pittsburgh has seed investor Innovation Works that targets hard tech—robotics, AI, and advanced manufacturing.
These are just a few examples of the type of connective tissue that straddles public and private entities outside Minnesota. The state will have to ante up to keep up with peer states in these hard-to-fund, hard-to-build niches.
