Graeme Thickins on Tech

Reflections & analysis about innovation, technology, startups, investing, healthcare, and more .... with a focus on Minnesota, Land of 10,000 Lakes. Blogging continuously since 2005.

Tag: startups (Page 1 of 19)

Who Knew? Airbnb for Boats!

March 7, 2022 / / 0 Comments

Boat ownership in Minnesota is second only to Florida (despite our weather being, um, less than half as good!). But here’s a better stat: Minnesota leads the nation in most boats per capita as of 2021.

Example of boat type available on Lake MinnetonkaOf course, we are famously called the “Land of 10,000 Lakes,” so it stands to reason. But Minnesota actually has 14,444 lakes of 10 acres or more, according to the U.S. Geological Survey. No wonder we love boating!

GetMyBoat is the world’s largest boat rental marketplace. Yes, it’s been called the GetMyBoat logoAirbnb of boats. Do people stay overnight in boats? Well, only the bigger ones that have such accommodations, I guess. But you can’t blame the company for liking the comparison. Most of their rentals, I’m suspecting, are a day at a time — though I’ve noticed week-long rentals are offered by some owners. But, surely, living on a big boat for a month while working remotely would be an intriguing escape for some digital nomads, no?

Big Money Can Float a Lot of Boats

chart of boat ownership by state

Top 10 States for Boat Ownership in 2020 – Source: Statista (click to enlarge)

It should come as no surprise that boat owners in Minnesota have discovered GetMyBoat. And I suspect many more will be, as expansion is definitely in the works for GetMyBoat. It just announced it has received $21 million in a Series B funding, with boat manufacturing company Yanmar Global, based on Osaka, Japan, taking a majority stake in the company. Yanmar has worked with GetMyBoat since 2018.

In the past two years alone, despite the challenges experienced by the travel and leisure industries worldwide, GetMyBoat says it has achieved 10X revenue growth and now “offers more than 150,000 boat rentals and water experiences across 9,300 destinations.”

Pontoon boat, Voyageurs Nat'l ParkGetMyBoat has a mobile app for iOS and Android that enables users to rent a boat right from their phones. In the news release, the company said, “Our mission is to make the joys of boating more affordable and accessible, and with this growth capital from Yanmar, we will be able to fully realize that dream.”

GetMyBoat is a fully remote company, with headquarters in Foster City, California. A large portion of its team is in South Africa, and it has employees in Toronto, North Carolina, Virginia Beach, and more.

The Local Connection

In Minnesota, the company currently has just one employee, but more than 85 watercraft owners are on the platform here as of March 2022. Of course, in the summer, I learned that number will increase a lot as owners “re-publish” their boats on the platform. SuperAirNautique boat“I’m in close contact with some of our owners here,” said Val Streif, marketing manager, based in Northeast Minneapolis. “Many of them have reported really great stories of growing their side hustle businesses, renting out their boats in the summer months or serving as full-time boat captains for their rentals.” Hmmm, is this a way to ease the payment pressure from those 15-year boat loans many have to take out to live their dreams on the water?

The only outside investor in GetMyBoat is Yanmar as of now. The company has been otherwise funded by the cofounders, serial entrepreneurs Sascha Mornell, CEO, and Example of houseboat available at some locationsRaf Collado. Quite the non-standard startup story! The company launched in 2013, and Yanmar invested for the first round in 2018.

All the Minnesota boats currently on the platform can be seen at this link. There’s a description for each listing saying what the owner/operator offers. The most popular listings in our state currently are on Lake Minnetonka, the St. Croix River, Prior Lake, and the greater Bemidji lakes area. (The photos in this post represent some of those offerings.)

The majority of GetMyBoat’s business is in the United States, but it has a large presence in the Caribbean, Canada, Mexico, and the Mediterranean, and Streif says the company is growing globally.Canoeing, somewhere in Minnesota

So what’s the range of watercraft sizes on the platform? I was told the smallest is a paddleboard (maybe I should rent mine?), and the largest are some superyachts (but none owned by Russian oligarchs, I have been assured!). And there are a whole lot of sizes in between — everything from kayaks and canoes to speedboats, cabin cruisers, pontoons, ski and wakesurfing boats, and even houseboats.

I asked Streif if all the larger boat rentals come with captain included. “No, people can choose boat listings based on this option,” she said. “I would say the vast majority of boat rentals on our platform are captained charters, but it’s not always the case. It will Big party on a Minnesota boatsay on the boat listing either ‘Captain is Included’, ‘Captain is Optional’, or ‘Captain is Not Included’.”

For those rentals with no captain, I asked if the cost is high because of insurance expense. “It’s not necessarily super expensive when it comes to insurance.” she said. “We have some insurance partners that offer bareboat, or non-captained, coverage at competitive rates. The key for boat owners is to make sure, for their own insurance policy, that it covers bareboat rentals when they’re renting out their boats to Ski boat on Gull Lake near Brainerd MNcustomers on the platform without a licensed captain.”

GetMyBoat sees itself as “the driving force in shaping the world of on-demand boating.” It says it’s on track to send 2,000,000 people boating before the end of 2022.

I have a feeling Minnesota will account for a growing number of those rentals as we get into the summer of 2022 — one we are all very much looking forward to, for obvious reasons.

See you on the lake!

 

I Told You We Were in a Startup Boom

January 22, 2022 / / 1 Comment
man standing in fireworks

Photo by Rakicevic Nenad via Pexels.

And it seems to be raging even more. Thank you, Great Resignation. You’ve started something big.

A new survey from Digital.com has found 43% of Americans plan to start a business in 2022. Whoa, that would be a big number! With findings like this, it certainly appears entrepreneurship is continuing to gain ground as a career choice. And this news comes on top of almost 5,000,000 new businesses having been launched between January and November of 2021, according to the Census Bureau. I call it a major (positive!) trend coming out of the pandemic.

[When I say I told you, you may recall I wrote about this topic some five months ago, but these latest numbers just drive the point home even more.]

Of the 1250 adults surveyed across the U.S., more than 2 of 5 – or four in ten, if you prefer – said they were planning to launch a new venture. What’s more, though some of these will surely be “side gigs,” 55% of these aspiring new business owners say they will leave their current jobs during the year. Yes, quitting is a hot thing. The number of job openings has gone ballistic nationwide. Time to feel even more sorry for your neighborhood job recruiter, I guess.

Taking the Leap

It seems the decision to go it alone is just not as daunting as it used to be. People are increasingly looking to be masters of their own fate, this data is showing us. They are emboldened. And you know what’s especially surprising in the results of this survey? One-third of these planned new startups in 2022 will be launched by first time entrepreneurs.

What kinds of businesses will these founders be pursuing? The survey said the most popular categories are these: “retail” (presumably including ecommerce), which came in at 14.6%. followed by “business & finance” at 10.91%, and “computer & IT” at 10.17%.

“One of the drivers for The Great Resignation is that people want to feel a sense of purpose,” said Dennis Consorte, Digital.com’s small business expert. “Business ownership can give you the flexibility to pursue what matters to you in a way you believe will be most meaningful and impactful.”

Having It Both Ways

What about launching a new business without quitting one’s current job? Yes, it happens – a lot, traditionally. (I did it early in my career.) And this new survey finds that practice will likely be continuing this year. In fact, I daresay it will become more common. Some 29% of survey respondents don’t plan to leave their current job during 2022.

What’s one big factor at play here? It’s this: 26% of the employed and self-employed individuals who responded to the survey currently work fully-remotely, and 40% more work both remotely and in-person. As the survey sponsor so astutely notes: “Remote work may allow for more flexibility to simultaneously continue current work while beginning a new endeavor.”

Thank you Covid, I guess? It’s making entrepreneurship easier! Especially when that new business can be run totally online. And the survey found 32% percent of these planned new businesses intend to operate that way.

Why Start a New Business?

The survey asked respondents who plan to launch a new venture what is motivating them. The chart below tells the story.

chart showing reasons to start a business

How to Finance It?

It’s easy saying you’ll start a business, but a little thing like money always comes up. Well, get this: 13% of the entrepreneurs who responded to this survey reported having raised more than $100k for their planned new venture! Twenty-nine percent said they’ve raised more than $50k, 57% raised more than $25k, and 87% raised at least some amount of money. Female entrepreneurs reported raising slightly less money than men. What about investing some of one’s own money? That matters, too – and 34% of these entrepreneurs said they’ve invested between $6k and $50k of their own cash.

“If you want to pursue a startup full-time, then it’s a good idea to have at least 6 months’ savings and to adopt a frugal lifestyle,” said Digital.com’s Consorte. “Raising money can often help you move faster, but it can come at a high cost. Start with friends and family, and opt for models where you don’t have to give up too much equity in the beginning. You’re going to need it if you get to a point where you want to bring in institutional investors.”

Great advice there! Read more about this eye-opening survey here and here.

A final note: As the survey sponsor says, “Whether or not these plans turn to action remains to be seen. But what’s clear is the exploding interest in entrepreneurship.”

Amen! I, for one, will plan to follow up with some yearend data. Meantime, as 2022 gets underway – likely a strong recovery year for workers as the pandemic eases — be sure to support your local entrepreneurs!

 

The Startup Surge to End All Surges?

September 9, 2021 / / 1 Comment

Photo by Chuttersnap via Unsplash

As big trends go, I’d label this one blockbuster. Startup formation is on fire. It jumped 24% year-over-year in 2020 here in the U.S. Consider this from the Economic Innovation Group:

“A new Census Bureau dataset allows us to track early-stage entrepreneurial activity in almost real-time. For the duration of the pandemic, the Bureau’s Business Formation Statistics series has provided a detailed look at the number and character of new business applications on a weekly basis. Its findings suggest that the pandemic delivered a massive shock to American entrepreneurship that has seriously altered established trends in new business formation. Counter to expectations, 2020 shaped up to be the best year for business applications on record.” (Emphasis mine.)

bar chart of business applications

Then there’s this analysis from Oberlo:

“In 2010, the number of new business applications came in at 2.50 million. But as new business statistics show, in 2020, 4.35 million applications were submitted. That’s a whopping 74 percent more. It is also a 24.19 percent increase from 2019 and the biggest increase of the past decade by a mile.”

[Note: This post first appeared as an article on Grit Daily.]

I’ve experienced (and survived!) at least five technology/business cycles since going entrepreneurial and founding my consultancy more than three decades ago. And each of these cycles drove a startup surge that was considerable. (One, the dot-com cycle, saw a reversal for a few years after it peaked in 2000. So, surprisingly, did the startup surge driven by the advent of the smartphone era, but that was due to the financial crash of 2008.) I benefited greatly from every single one of those surges – getting to partner with so many wide-eyed entrepreneurs who were doing some crazy, innovative things and reaped some big rewards.

But this latest explosion of startups – call it the Covid Surge, the #WorkFromAnywhere Surge, the Digital Transformation Surge – whatever name you want to hang on it, this baby stands well above the rest.

line chart of new business applications

It’s More Than Just the ‘Cool Kids’

Today, it seems everybody wants to be a startup. Or at least work for a startup. Or start planning a startup. Or marry someone who has a startup. There’s even a term for those who wish they could do a startup, or who dream about doing it someday: “wannapreneur.”

Quite simply, these people just do not lust after a traditional career anymore. Seriously, when do you remember a time you felt this sorry for big corporations? They’re so unloved. (Wiping a tear.) Who in their right mind wants to work for one company for the rest of their career – or, hell, even five years anymore?

You, Mr. or Ms. Millennial, GenZer, GenXer, or even Boomer, have other ideas about how you want to live your life. In charge of your own destiny – that’s what. With a chance to build wealth well beyond what you could as an employee for the rest of your life.

Do I get an amen?

The Great Resignation: ‘Been Nice Knowing Ya, Boss’

What I say is driving this latest startup-surge-for-the-ages is not Covid, and not #WorkFromAnywhere, per se – rather, a by-product of it. It’s called freedom. People got a taste of freedom of when they want to work, and where. And, for many, how they do that work – without being under the nose of some boss.

Surely you’ve seen multiple stories by now about how so many people are quitting their jobs rather than go back to the office. LinkedIn alone will bury you in them. (Which raises the question, why do they write so much about all this quitting when it obviously affects their model? No question they’re quite dependent on big companies and their recruiting ads, and all the ladder-climbing robots who flog their corporate accomplishments on the platform. Makes you think LinkedIn is really going to need that freelance marketplace platform we keep hearing rumors about if it wants to keep growing anywhere near like it has.)

Granted, not everyone who’s quitting their job is doing a startup. Some are taking different jobs (duh). A slew of others would describe what they’re doing as simply “going freelance.” But many if not most of those are forming a legal entity to do that – the Company of Me – which shows how serious they are. It seems fair to assume the majority of these new entities are “solopreneurs” initially. That may or may not fit your definition of a startup – but, regardless, today we’re looking at huge company formation numbers overall, those that have already happened in 2020 and the similar numbers rolling in for 2021.

If you’re into economics, more great insights come from this article, including the following:

“There is a widespread perception that small businesses create the most jobs in the United States and other advanced economies. Research suggests that it is new businesses (emphasis mine), not small ones, that create these jobs (Haltiwanger et al. 2013). Studying the patterns in startup activity is hence an indicator of future employment growth.”

A Telling Finding

Amazingly, a survey just published by Digital.com found that one-third of workers who quit their jobs within the last six months started a business. That is just an unprecedented number in my experience!

graphic of workers starting businesses

More insights from the survey:

“Sixty-two percent of respondents say they are starting a business to be their own boss, and 60% say they are passionate about pursuing a business idea… Although many respondents say the pandemic influenced their decisions, they also cite several reasons for leaving the workforce. Forty-four percent of workers quit their jobs because they want better wages and benefits, 42% want to focus on their health, and 41% desire a more rewarding career. Sixty percent of new entrepreneurs learned about launching a startup business during the pandemic lockdown.”

Many startups begin life as personal service companies. Some of those actually go on to become product companies, whether hardware, software, even manufacturing businesses. A great many upstarts during the Covid era were founded as retail or ecommerce ventures. Online shopping went ballistic during the pandemic, and so many smart entrepreneurs took advantage of that.

It’s Easier Today

Historically speaking, entrepreneurs in the U.S. today have it pretty nice.

Consider all the factors that make their plight not nearly as difficult as it used to be:
• The low cost of starting a business
• The speed of creating a business entity (at least in most states; looking at you, California)
• Accessibility to capital, with a myriad of funding sources
• The low cost of capital these days
• And so many resources to learn how to do a startup, with organizations (both for-profit and nonprofit) practically tripping over each other to help entrepreneurs. These resources encompass many low-cost and even free services – coaching, classes, mentorship, accelerator programs, competitions with cash awards, and the list goes on.

Speaking of resources for starting a business, the outfit that sponsored the above survey, Digital.com, offers a wealth of links for new entrepreneurs.

So, What Are You Waiting For?

There’s never been a better time. But then, I’m biased.

 

Start a Business During a Recession? Yes, Take the Plunge!

March 22, 2020 / / 0 Comments
photo of diving board

Photo: Markus Spiske, Unsplash.

Are we in a recession? Who knows? The definitions can be arcane. But we are in a massive government-initiated reaction to a public health crisis — that we do know. The talking-head economists will argue the meaning of the “R” word and when one actually begins (or ends). Blah, blah, blah — who cares? Some are calling what we’re in now just a “hibernation.”

The point I want to make is that, regardless of what we call a downturn in the economy, it can actually be the very best of times to start a business. I know something about this topic. I started my business during a recession — a year in which U.S. unemployment jumped faster than at any other time (well, until 2008-09). Did that scare me? Hell no! Because I knew I had something — customers weren’t getting what they needed from the established incumbents. And I survived three other recessions because I adjusted and simplified — reinvented myself and my business to meet the new realities.

So, buck up, people! Think of a recession as a challenge. The opening of a new door.

Why can starting a business during a recession be the right time? I’m hardly the only one who knows these truths. I loved how Australian startup founder Alec Lynch framed it when he wrote in Forbes after the last major recession (the 2008 financial meltdown), “10 Reasons The Best Time To Start A Business Is During A Downturn.” Here’s his list:

• People want innovation

• People want to save money

• Incumbents are vulnerable

• Good people are looking for work

• Things are cheaper

• Lower interest rates means cheaper credit

• You will have fewer competitors

• Smart investors want to invest

• Downturns give startups negotiating power

• You’ll build a lean startup with good habits

Some further perspectives on reasons why now is the best time to launch a business come from a guy named Brad Sugars, who penned a great piece in Entrepreneur magazine post-2008 recession, “Top 10 Reasons to Start a Business in a Recession.” One excerpt: “Just go back and look at the economic slowdowns throughout history. Most recessions in the post-World War II era last an average of 10 months, followed by growth cycles that last an average of 50 months. What this means for the startup is there’s no better time than right now to get going and start pursuing your business dreams — in anticipation of the next period of growth.”

You won’t find his list much different than Alec’s, but he does offer up one other key point: “You can get good PR by showing you are going against the trend. The media loves aberrations, and if you are optimistic by expanding or getting into business now, you would be in that category. That means you can generate some great PR by demonstrating your ‘alternative’ view of the market.”

And you have to love how he wraps up his piece: “There’s no better time to start than the present, especially if people around you are more comfortable with their own list of reasons why they shouldn’t start pursuing their own business dreams right now. It only means you’ll be facing a lot less competition.” Bingo!

Edward D. Hess, a business professor at the University of Virginia, coauthored a book called, “So, You Want to Start a Business? 8 Steps to Take Before Making the Leap.” Among his key points is having a clear understanding of your value proposition. “You need to decide why someone is going to buy what you have to sell. You must have a message (my emphasis) to customers about why you’ll be better, faster, or cheaper than the competition.” And to develop that, you need to talk to them directly and get to intimately know their needs.

Yes, it all comes down to this: will people pay you money for what you’re offering, and why? And remember, there’s a big difference between a business idea and a profitable business idea. The good news is there are tons of resources out there to help you start and run a new business. Read, think, plan, talk (a lot)… and build confidence.

Then dive in!

—————-

UPDATE 6/9/20: I told you to start your business 🙂 … It’s not too late!

“U.S. had shortest recession in history: Economist Mark Zandi” | Fox Business Video

 

Will Another Minnesota Startup Ever Become a Fortune 500?

June 24, 2019 / / 0 Comments

{NOTE: I originally wrote this article for a new publication called Starting Up North, which launched in early June 2019.]

Pretty much every Minnesota company on the Fortune 500 list began as a startup, as hard as that may be to imagine today. Sure, some were spinouts of large, established firms, such as Target, originally an internal startup at then Dayton-Hudson Corporation back in the 1960s.

Image by skeeze from Pixabay.

But think 3M in the early 1900s, rising from the obscurity of the Northern Minnesota mining industry, or Medtronic, which began as a repair shop in the 1950s in Earl Bakken’s garage in Northeast Minneapolis – both giants in their respective industries today. (Medtronic dropped off the list in recent years only because it’s now headquartered in Ireland.)

Obviously, the startup-to-Fortune 500 story can take decades to happen. And many, many American firms that reached this coveted designation have faded away over the years. But one wonders when another scrappy little Minnesota company might break out and hit the big time.

But should we even care? It’s just a list. Nonetheless, it’s fun to imagine… what startup out there could possibly be the next, however many years it might take?

What Even Qualifies a Company to Be On the Fortune 500 List?

Despite what it may seem, the Fortune 500 isn’t simply a list of the 500 largest firms of all types. Minnesota has at least one giant — Cargill, the largest privately-owned company in the U.S. – that’s never on the list. Surprisingly, there is no set amount of revenue that gets a company onto the list — though companies are ranked by revenue. (The threshold for making the list is different every year; for 2018, it was $5.4 billion in revenues – 6 percent more than 2017.) It’s a list of only American companies, meaning incorporated in and operating in the U.S. The companies can be public, private, or even cooperatives, but they must file financial statements with a government agency to qualify. (Cargill doesn’t, but we have other Minnesota companies that do and have made the list, even though they are not publicly traded: CHS and Securian. But, it should be noted, Securian dropped down on the list that just came out; it’s now #506.)

Profits aren’t part of the criteria. Crazily, you can lose money and make the list, even tons of it (looking at you, Tesla). Fortune magazine, which publishes the list annually, says its other criteria focus on a company’s long-term goals and adaptability. They rightfully point out that the road to the 500 will take a lot of years, and whatever your company is currently offering probably won’t get you there.

So, who might make it someday from Minnesota? What industry might they represent? First, let’s look at the industry sectors Minnesota Fortune 500s represent today:

• Healthcare/Medtech: 2
• Retail: 2
• Logistics/Transportation: 1
•¨Insurance: 1
• Food/Agriculture: 6
• Manufacturing 2
• Banking/Financial: 3
• Energy/Utilities: 1
• Water/Hygiene/Food Safety: 1

Notice not a single one is classified as “technology” in Wall Street terminology (meaning IT, software, computers, semiconductors), though the current Fortune 500 list has many such companies — by my quick count at least 18. Sure, looking at it another way, what company today would not be considered a technology company? It runs through everything. But the fact remains, Minnesota is not a technology company hotbed anymore. And that causes people to wonder how that happened, with our long history in the state as an information technology innovator. It’s been since the mid-1980s that a computer-related firm in Minnesota made the list. That would be Control Data (where I was a manager early in my career, in that company’s glory years). It broke itself up long ago, though its legacy remains strong. It spawned literally thousands of startups over its four decades of existence, scattered all over the country. At least three books have been written about Control Data and the era of tech dominance in our state.

Steve Grove, Minnesota’s new Commissioner of the Department of Employment and Economic Development (DEED), wrote about the state’s computer legacy in an excellent column in the StarTribune in January: Reboot required (or seeking a Minnesota Miracle 2.0).

Here’s the closing line: “With pride in our entrepreneurial roots and a bold vision for the future, Minnesota can become a nation-leading tech hub once again.”

Let’s Start With a Counterpoint

When seeking commentary for this article, I especially wanted to hear from Tom Kieffer, one of the most prolific and successful serial tech entrepreneurs in our state. He’s had four successful exits in his career in the IT sector, the latest being the sale of a majority interest in Virteva just this spring. (A company I had a role in helping him launch in 2005.)

“I think the question you raise with this article is the wrong one,” he said. “It’s an outdated measure of success. I think history will show the pursuit of Fortune 500-ness in this day and age is a fool’s errand.”

He went on: “The real question is, how well is Minnesota positioned to build the companies — and jobs, careers, communities, and clusters — of the future?”

That future, he said “lies somewhere between the gig economy and the GE-style conglomerates of the past — and it’s certainly closer to the small end of that spectrum. The world is getting smaller, and we’re not going back –- ask any millennial or Gen-Xer.”

Look at the history of the Fortune 500 phenomenon, Kieffer said. “A major benefit, and definition, of being one of these companies is access to ‘cheap’ public funding. But it’s really not that cheap anymore. There are many ways to access capital these days, from Kickstarter to private equity in addition to legacy VC. And there are plenty of exit paths for startups beyond selling to a public company.” (Exit alternatives he knows well.)

Many of the Fortune 500 companies created in the past 10 years are the so-called ‘unicorn’ style, he noted — such as Amazon, Facebook, and Uber. “However, I think the public financing approach is going out of fashion now, just as the current wave of unicorns goes public.”

So much for Fortune 500 (and IPO) adoration.

Running the Numbers

The quantity of Minnesota firms on the Fortune 500 list has remained relatively stable over several years. I can remember it being as high as 21 or 22, then it dropped to 17 in 2016. In 2018, it went up to 19. On the most recent list, just published in May 2019, we’re back down to 17 Minnesota companies. So we’re hanging in — somewhat.

Minnesota DEED says on its web site that our state ranks third in Fortune 500 companies per one million people. And, by number of firms on the list, our state ranks #10 in the U.S.  Yes, Minnesota represents well.

How many more Minnesota firms are on the second 500 of the Fortune list? Don’t get excited: only six more. So, a total of 23 Minnesota firms now on the Fortune 1000, as of their 2018 list (just published). What we’re asking in this article is, are there growing companies in our state that might be among the 2000 or 3000 largest right now – or maybe an upstart we’ve barely heard of yet – who could be capable of rising up over the years (decades?) to become dominant corporate leaders in Minnesota?

Ecosystems Matter

Does Minnesota have an ecosystem that can ensure we will continue to produce Fortune 500 companies?

“We do have some things in our favor related to eventually producing additional Fortune 500 companies — such as a patient workforce,” said Mac Lewis, who’s been CEO of a public company (Computer Network Technology, acquired by McData in 2005). He’s also a venture capitalist with Sherpa Partners, was CEO of Field Solutions (acquired by Field Nation), and currently serves as CEO of Phocus.io. In addition, he’s a longtime board member of the Minnesota High Tech Association. “Employees here tend to stick with a company.”

He notes that many Minnesota startup companies do have experienced leadership and a culture for producing value, with revenue-based business models – that is, “a real product or service, versus plans to capture eyeballs and then do advertising.”

Other benefits of our business community, according to Lewis are “a skilled workforce, experienced leaders and managers, high-caliber support in the legal, regulatory, and financial areas, and many mentors.”

Phil Soran has been a CEO and cofounder of two successful Minnesota tech firms, one being Compellent, which went public and was later acquired by Dell (in 2010) for close to $1 billion. (In essence, it almost became our own little unicorn.) “Minnesota does have attributes that could produce more Fortune 500 companies in the future,” he said — role-model companies with experienced management not being the least. “We tend to build on sustainable business models as opposed to hyped trends. That’s the foundation of a company that can be a future industry leader.”

How have things changed over the years in Minnesota? “It’s much more accepted now to be an entrepreneur — that was not the case previously,” Soran said. “This is very important. We now need more large successful startups to role model success in this new environment. I do see some current growing younger businesses in our state that could grow into Fortune 500 companies.” (No, I couldn’t get him to name them.)

“It’s a hard task to accomplish,” Soran added, “but made easier as many Fortune 500s are being acquired, providing openings for new members.”

Soran said we’re very lucky to have so many “large, ethical companies in a variety of industries providing very good employment opportunities.” But he sees two issues: “I do not think our community and government appreciate their impact nearly enough.” Also, though he sees lots of “spinoffs” that alumni of these companies have started, “many of them are not as visible as their success might dictate.” Too shy? Too Minnesota-nice to brag?

What Are We Lacking?

So, all the positives aside, where does Minnesota fall short?

According to Lewis, “Relative to other parts of the country, Minnesota does not have the entrepreneurial personality to ‘swing for the fences’ — that is, leadership and vision for a company that can paint a big picture of its future, in which it can be the next ‘unicorn’ with a market value in the billions.”

But there’s a bigger problem, he said: “There’s less local venture leadership and other financing for companies that may need mid-to-high hundreds of millions of dollars of funding to support large, sustained investment in product and distribution – things that are critical to building such a ‘unicorn’.”

Soran sees an ongoing issue, a common refrain of local startup CEOs (and one he himself has experienced): “I still find it very hard for young local technology companies to win business at larger companies in town. There’s still a little bit of the notion that ‘it cannot be good if it’s not from the coasts’,” he said.

Listening, Fortune 500 execs?

Lewis said some large Minnesota companies do seem interested to work with local startups as initial local customers, “to help them establish their market,” he said. “I believe this has been an initiative of the Itasca Project and other business groups. However, I don’t think it’s been easy to implement, and, as a result, has had only a minor positive impact.”

What’s Better: Becoming a Fortune 500 or Having a Big Exit?

Some say we’re unlikely to produce as many Fortune 500s as in the past because too many fast-growing Minnesota firms opt to be acquired rather than go public.

“Early-stage companies get acquired for many good reasons,” said Lewis. “They get financing and much larger market exposure by becoming part of an established company,” he said. “Investors and leadership teams get a payout and liquidity.”

But he points to another benefit for the seller: “It can be less risky and less costly than staying independent. In the 1990s and earlier, smaller companies were able to tap public markets for funding and liquidity. Now there’s a higher bar to go public,” Lewis said, “including (the costs associated with) Sarbanes Oxley [a U.S. Federal Law] and desire or need of investment bankers for fees from larger and larger transactions.”

Soran said, “Going public is a challenging hurdle for young companies to clear — and there have not been many in Minnesota in the recent past.” (His Compellent was one of the last big, successful ones, certainly in the tech sector.) “There are lots of benefits for companies jumping this hurdle — in branding, sustainability, and credibility. Nationwide, the number of IPOs is way down, with other options like private equity providing liquidity, growth capital, and equity upside to entrepreneurs.”

Care to Pick a Winner?

What sector is likely to produce our state’s next Fortune 500?

“I’m not sure,” said Lewis. “I don’t see an easy path for any Minnesota company to become a future Fortune 500. But I’m an optimist — as an entrepreneurial personality — and believe there will be some. Considering industry segments, I’d probably prioritize the likelihood like this: healthcare services, medtech, agtech, software, or financial/insurance services.”

“Our economy is changing quickly,” said Soran. “Technologies such as data analytics, artificial intelligence, digital records, and information security will provide leadership opportunities for Minnesota startups.”

Does One XL Beat Five Mediums?

Is continuing to attract educated, highly paid workers to our state dependent on growing new Fortune 500 companies to our ranks? Or if we produce, say, 5-10 fast-growing startups, each achieving $50-100M in annual revenue, will that lead to the same result?

Lewis likes the former: “Having a local company grow to be a market leader would have larger impact on our local economy and job base – like Seattle with Microsoft and Amazon. Multiple smaller successes are good and will have positive impact, but not close to the impact of one or more big success stories. UnitedHealthcare is an example of such impact recently in our market.” (That company, which is Fortune #5, dwarfs the other 17 Minnesota firms on the list – and how many “spinoffs” of various types  has it produced already? I don’t know the exact number, but it’s many and growing!)

What Role Should Minnesota Fortune 500s Be Playing to Support the Growth of Startups in the State?

So what are some things — right or wrong — with the current situation?

“Engaging newer companies as vendors is the most important support that’s needed,” said Soran. “That’s where Fortune 500s can have an impact.”

Another way they can play: collaborating with and supporting incubators or accelerators in their respective markets. “The impact that Target, Cargill, and Ecolab are creating with their Techstars programs is palpable. Keep it going!” (And UnitedHealthcare also recently launched such a program. Gener8tor, too, is coming on strong with its accelerator programs in Minnesota and other states.)

What about the part local higher-ed institutions can play? “The universities I am involved with have a strong appetite for collaboration,” said Soran, “Much more so than in the past.”

Lewis echoed that actively engaging newer companies as vendors is at the top of his list. He also agrees with Soran about incubators and collaborating with our local universities.

So What’s the Verdict?

There’s no question our startups can learn much from their successful predecessors in the state. But it’s time they got more love and support from them, too. Minnesota’s strong entrepreneurship legacy can and will continue to roll on. Our startup community is hot! Even Fortune’s archrival, Forbes magazine, has told us that.

If you’re a Minnesotan (or even if you’re not), what’s your take? Are the best days ahead for our state when it comes to being a center for Fortune 500 companies?

 

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