Finding the Fuel for Minnesota Startups
Minnesota’s startup scene may not have the same cachet as places like San Francisco or Boston, but investors and entrepreneurs alike are beginning to see potential in the North Star State. Startup Genome, a San Francisco-based policy and advisory research group, this year ranked Minneapolis fourth on its list of the top 100 emerging startup ecosystems in the world.
Still, in terms of venture capital dollars, Minnesota still lags plenty of other states, even fellow Midwestern states like Ohio and Illinois. What’s holding Minnesota back? What can we do to make the state’s startup ecosystem stronger? And in the age of remote work, does geography even matter anymore? At a Nov. 16 TCB Talks: Fueling Startups event at The Minneapolis Club, we put these and many other questions to three local investors: Adam Choe, managing partner at Tundra Ventures; Morgan Evans founder and principal at Engage Venture Partners; and Rob Weber Managing Partner at Great North Ventures.
Here are a few key takeaways from the event:
On startup support from Fortune 500 companies:
“I think we’ve been asking the wrong question as an entrepreneurial community here,” said Weber. “The startup community asks the corporations, ‘What can you do for us? Will you invest in our funds? Will you invest in our companies? … That’s not the right approach. We should be asking what our our entrepreneurial ecosystem can do for them.”
On developing a workforce with tech skills:
“A great example of a similar-sized community that I think is actually outpacing us for growth is Indianapolis, right here in the Midwest,” Weber said. “They had a public-private partnership called TechPoint, which does apprenticeship programs. … You have startups and corporations providing apprenticeships for these innovation skills. It’s magnificent.”
On bolstering Minnesota’s reputation as a startup hub:
“The more positive PR we have as being an entrepreneurial ecosystem, the easier it is for outside investors to look into our own state to invest,” said Evans. “So, instead of talking about all the things that Minnesota needs to do and Minnesota investors need to do, why not have the coasts come here?”
“Being humble and being modest is something that’s preached upon people from the Midwest,” said Choe. “There might be someone who had a six-figure or seven-figure exit that you live next door to and you’d never know. … I do think PR does play a part in magnifying the amount of opportunity in terms of potential capital that can be deployed here.”
On diversifying the Twin Cities startup community:
“When I first fundraised for my very first startup, I was 28 and female and no one looked like me,” Evans said. “So if a lot of startup funding is done via networking and networks, if no one looks like you at all, that’s a really hard place to get the same momentum as others. So my thought was, if I don’t like that, change it. How do we get that platform for younger women to invest, to know that space, to try to get the ecosystem more diverse?”
On Minnesota’s angel tax credit program:
Investors said the program has had positive impact but expressed concern about a lack of dedicated funding from the state. “The fits and starts piece of it makes it really hard on the ecosystem,” said Evans. “It’s not a built-in tool we can rely on.”
Weber said there might be better funding mechanisms that the state could explore. “We’re sitting here talking about how great our angel tax credit program is — $5 million a year,” he said. “States around us are punching at another whole weight class. What are we doing? And we have all these budget surpluses. If now is not the time to [fund startups], I don’t know when it will be.”
One thing that might influence more people to start their own businesses?
“Subsidized health care,” said Choe. “Oftentimes, a lot people don’t leave their corporate gigs even if they have the talent and the opportunity because they’re of sound mind and they know that forming a startup is a little bit irrational. I fully admit that. …I talk to two to three people a month that are in corporate and have a burning desire to go out and try something, but they just can’t take the risk. … Subsidizing some of that risk from the perspective of Maslow’s hierarchy of human needs would be helpful.”
On the impact of hybrid on startup culture:
“Almost every company we invest in is distributed teams,” Weber said. “It was already trending that way, but then Covid happened. Where does geography even fit anymore? We have so many associations around geography, and I wonder how much it matters.”