If you’ve ever downed an enticing craft beer and wondered where else you could buy it, there’s a website for that. NearestYou.com, a Twin Cities startup, allows users to click on their favorite local brew, insert an address, and review an interactive map will reveal its availability.
NearestYou.com isn’t the only startup giving local business leaders hope for the future. Another one is med tech company HabitAware, makers of the Keen bracelet — a personal care monitoring device that alerts the user if they begin to compulsively pull hair from their eyebrows and eyelashes, among other obsessive behaviors.
There have been plenty of efforts to foster startups and retain Fortune 500 headquarters in the Twin Cities, but not all of them work in concert. Matt Lewis, vice president of strategic initiatives with the regional economic development group Greater MSP, sees the two motives as intrinsically linked: Startups can provide investment opportunities for growth — or be scaled up for potential local acquisition, kind of like independent R&D labs for innovative mature corporations.
Lewis would like to see a lot more of all of the above — more innovation, more venture capital investment in emerging businesses, and more one-man or one-woman startups making the leap to become visible employers.
To move things along, Greater MSP has brought nearly 100 companies together to promote entrepreneurship. Rather than reinvent the wheel, the goal of the “Forge North” coalition has been to promote peer groups and rope in initiatives already in play, such as introducing early-stage investors to each other so they can trade leads or partner on an investment opportunity.
Last week, Greater MSP held a promotional event at the downtown St. Paul Palace Theatre to showcase Forge North’s latest efforts. Greater MSP CEO Peter Frosch joined Doug Baker, CEO of St. Paul-based Ecolab, representatives of the Knight Foundation, the Minnesota Cup, and a host of startups and business accelerators to highlight a growing spirit of regional partnership.
Every few years, Greater MSP compares the economic competitiveness of the Twin Cities’ 16-county statistical area to 11 peer cities through a wide-ranging indicators dashboard that measures 56 trends, from labor force participation to housing affordability. The latest results show both strong business growth and a climate that still has far to go to catch up to places like Austin, Texas; Denver, Colo.; Charlotte. N.C.; and Pittsburgh in key areas.
“Things are mostly trending up,” Lewis said. “At the same time though, that’s true for a lot of major metros across the country.”
VENTURE CAPITAL UP 90 PERCENT, BUT …
For instance, looking statewide, the indicators reveal a 90 percent increase in the amount of venture capital flowing into Minnesota businesses over the past five years — a total of $708 million last year alone. Those are large numbers, but other regions have drawn even more funding even faster, leaving the state in 11th place on the 12-city survey.
“If you compare us to ourselves, it’s wow, great, a 90 percent improvement! For the Midwest, we’re doing quite well, and we’re proud of that,” Lewis said. “But if you compare us to our peer metros — that might be an Austin, or a Denver, or a Seattle or a Dallas or a Portland — we still trail most of our peer set. We were coming from further behind, and we’re still at the bottom of the pack.”
Just as frustrating to Lewis, the state ranks 12th on the indicators dashboard — as in, dead last — in terms of the number of new businesses. There were 9,336 startups in Minnesota last year. The good news is that more than 54 percent of new Minnesota businesses reported making it to the five-year mark, making the state the second-best place to do business by that measure.
“Fewer companies are started, but we have one of the highest survival rates,” said Lewis, who sees plenty of cause for optimism. “We have a higher ambition, and we think this place is as good as any place in the world, and we want to see results that reflect that.”
‘SAFE SPACES’ FOR CAPITAL
It turns out, venture capitalists need a “safe space,” too.
“A lot of investors see potential deals here that aren’t right for them, based on what their specialty is, but that could go to another investor locally,” said Lewis, who has been promoting social groups for the investment community. “We’ve already started seeing some sharing, and some deals that are being done together.”
In some other parts of the country, business leaders have pooled resources in “syndicate funds” to back startups, and then used the returns to reinvest in a second generation of new businesses, and so forth. Other regions are more focused on worker training, recruitment and retention. Over the summer, a new Forge North business council will take a look at what the key regional goal should be for the Twin Cities region. By November, Greater MSP plans to announce a three-year focus area for 2020 to 2022.
“We’ve never set goals around startups, and entrepreneurship and innovation,” Lewis said. “We think we have enough of the assets now that we can be a little bit bolder.”
Of Greater MSP’s two-dozen employees, only two staffers are dedicated to Forge North on an ongoing basis, and only one of them full-time, though they also have access to communications and research teams. With sharper focus, that staffing could grow, Lewis said.
Large companies (and sometime competitors) such as Securian, Ecolab, both in St. Paul, and Target and Cargill in the west metro, have for years spent large sums on “business accelerators,” or the dozen Twin Cities startup mentoring programs that over the course of just a few months aim to help entrepreneurs refine their concept and marketing, find venture capital funding and take their small business to the next level. Lewis believes those accelerators can be brought together to help build on each other.
“(Golden Valley-based) Allianz Life, they created an investment arm a couple years ago,” Lewis said. “Their venture arm didn’t exist here a couple years ago. And they realized that, in partnering with Securian, they both share an interest in the future of life insurance. They decided to work together to bring a startup accelerator on behalf of this community called Gener8tor. The first cohort started a few weeks ago. They partnered in the same way Cargill and Ecolab partnered on Tech-Stars.”
The goal is partly self-serving: Some of those startups can then be acquired, keeping a Fortune 500 employer on track with the latest innovations before they’ve even fully emerged in the marketplace. One thing that hasn’t been seen before is partnerships between accelerators to showcase their work together, or to help introduce the entrepreneurs to new opportunities. Lewis believes that’s the next step.
“You go through the Minnesota Cup (start-up competition) and you participate on that stage. You pass or you don’t,” Lewis said. “What are the next places you need to go? It might be you join an accelerator program. It might be you join a mentoring group. How do you find out about those programs?”
“Those 12 high-growth accelerators that exist today, only one of them existed five years ago,” he continued. “You blink and there’s a new program. … All of them have the same mission, and they work pretty well together, but they didn’t really have the opportunity to partner. There’s some practical ideas that they have, but there’s some ideas that would require some more resources.”
FORTUNE 500s GROWN HERE
Why all the focus on startups, anyway? Most business leaders and political officials are keenly aware that if Minnesota is going to draw another Fortune 500 headquarters, it’s probably not going to entice one away from another state through cheap land sales or subsidies. Instead, it will grow one here from the bottom up through the startup community.
“This region has created 50 Fortune 500 companies that were once local startups. A lot of those companies are still here today — Ecolab and Securian being examples,” Lewis said.
“In (Carlson School of Management Professor) Myles Shaver’s book, ‘Headquarters Economy,’ his thesis is that the reason we have all those Fortune 500 companies is because people have actually stayed here. People stay in the community, but they move around the companies. Nearly all of the big companies we have started as startups here, and nearly all of them rely on startups to solve problems they’re looking to solve.”
“For us as a region, that differentiates us,” Lewis added. “If you’re looking to solve a problem in water, or the future of agriculture, or the future of retail, this is a place where people solve those problems. … If we find a way to strengthen those connections, we’re going to accelerate our growth. At the end of the day, Forge North is about making those connections quicker.”
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