Leaders in Minnesota's startup ecosystem last week spoke about the region’s entrepreneurship space, expressing optimism for the future despite challenges like a continued market slowdown and gaps in venture capital for people of color.
The speakers at Beta’s annual State of the State event discussed how the region fared last year and what the future could hold. The Feb. 2 event, held at Theatre in the Round in Minneapolis, focused on three areas: founders, investing and innovation in the region.
More people have been starting businesses now than they were four years ago, Department of Employment and Economic Development Commissioner Steve Grove said in opening remarks.
A key part of the state’s work in supporting founders is through Launch Minnesota, a program that provides grants and mentorship to entrepreneurs. Since it launched in 2019, the program has provided nearly $6.5 million to almost 200 startups, said Executive Director Neela Mollgaard. Those startups have since collectively raised nearly $80 million.
“If you translate that [to] taxpayer dollars, you invested $1, and they were able to leverage $12.40,” Mollgaard said. "That's a pretty good return on your investment, and it really shows the progress of our startups.”
A coordinated system for founders leads to better rates of success, Mollgaard said. She added a call to action: "To those of you who aren't founders … we need your wealth, your wisdom or your work to really keep growing this strong ecosystem."
The ecosystem is experiencing a downturn, meaning “it's a very pivotal time to really reinforce and double down on the things that we really, really care about,” Tundra Ventures Managing Partner Adam Choe said in a talk with Morris Goodwin Jr., managing director for Forge North, the small business-focused initiative from Greater MSP.
Minnesota founders are generally more pragmatic, which will help when “weathering that storm,” he added.
However, they also tend to be more modest, Choe and Goodwin agreed.
In other areas, like on the coasts, entrepreneurs are more likely to want to shoot for unicorn status immediately instead of gradually building up to it, Goodwin said.
“There's a little bit more gusto you can go out there with,” Choe said.
For founders of color, being able to secure funds has remained a struggle, Choe and Goodwin discussed.
Only 1% of venture capital went go to U.S. Black founders last year, according to TechCrunch, which cited Crunchbase data.
Making sure founders from under-represented backgrounds are aware of the available resources is one possible solution, beyond writing more checks, Choe said.
For those growing up in or coming from under-resourced areas, innovation is life and death, said Jeff Aguy, founder and CEO of 2043 SBC, a St. Paul-based economic development firm that focuses on inclusivity, in a conversation with Scott Burns, founder of now-acquired software company Structural.
The state has a unique challenge in retaining Black entrepreneurs, with many Black-founded startups leaving Minnesota to raise capital in other places, Aguy said.
The ecosystem needs to “figure out how to make this place as welcoming as possible, not just for people to feel loved … but to feel successful,” Burns said.
Also, the culture needs to shift its view of failure, which is important to spur innovation, Aguy said.
Since Burns first began his entrepreneurial journey in the 2000s, when the ecosystem was disconnected, there has been a surge in founder support activity, he said. "We're not perfect, but we're firing on a lot of cylinders."
