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The Millennial Startup Exit

Minnesota could do more to encourage, nourish and retain new startups

By Peter Kane
07-23-2015

It’s not a secret. Minnesota is struggling to support early stage startups. Over the past half-decade we’ve seen mild improvements, but nothing with enough significance to stake a regional reputation. How could a state so steeped in innovation and technology advancement become the Minnesota that I live in today? Someone needs to say it: the Twin Cities has a dramatic gap between perceived ability and actual ability to support early stage startups. The lack of startup support structure is letting down an entire generation.

Startups

A startup is a high growth potential and investible organization in search of a business model. This explicitly means: A startup is not a small business or lifestyle business. At first, startups may seem crazy, with no obvious way to make money. The two most important elements for early stage startups are users and money. Users help startups understand the product they are building. Money gives the organization more time to create a repeatable method for growth and become self-sustaining.

Millennial Entrepreneurs Exiting En Masse

I remember finishing writing the code for my last startup and showing it to a well-known entrepreneurial leader the next morning. She told me that my users would never pay for my product and that I was wasting her time unless I had a verified business model. Thanks. I gained about 100 users for the platform in the following weeks.

This is part of the reason young entrepreneurs are leaving. We don’t have to stay in Minnesota and be blasted with terrible advice and disparaging feedback. Millennials are drawn to more established entrepreneurial markets where exploring is encouraged and crazy ideas change the world. We want to play at the top of our game and can’t wait for Minnesota to catch up.

Among the dozens of talented millennials I know who left Minnesota is my roommate from the University of Minnesota. Cary moved to Chicago and founded a battery startup. Soon after, he raised nearly $1 million at the Rice University business plan competition. To put this in perspective, the Minnesota Cup has awarded about $1 million over the past 10 years of its existence.

When the founders of Minne* (Minnesota’s most successful startup community) left to pursue startups in San Francisco and Washington, D.C., the reaction was “that makes sense.” No one cared. Minnesota stood by and did nothing.

Cultural Problems

As a native Minnesotan, I have pride in our culture of philanthropy and giving. I was raised with the expectation that if you do social good, your work will be supported, and I expected those values to apply to innovation ecosystems as well. They don’t. I am disturbed by Minnesota’s broader business community asking, “What do I get out of it?” when asked to support startups. That mentality is not how startup communities thrive. What can you give first, with zero expectation of return? The early stage startup community has nothing to give right now except for the promise of Minnesota’s future. We want to make Minnesota a world class player, and we’re promising cultural, economic, creative and competitive vibrancy.

A more discrete factor limiting the Twin Cities is our hierarchical undercurrent of entrepreneurial gatekeepers. It is so bad that I often feel as if young entrepreneurs need to repeatedly ask for permission to be successful. If you are not approved for success, collect $350 and go straight to San Francisco. If you stay, prepare to spend copious amounts of time in vetting purgatory before you are chosen.

One of my other college roommates from the U of M recently spent three months in Kansas City in the Techstars mobile health accelerator program. Since leaving Minnesota, she has gained thousands of users for her product and raised nearly $500k. What I want to know is, who was paying it forward to this team before it left? Who was trying to help that team succeed when there was no money? Who will welcome the team back to Minnesota? Why should it even come back? Minnesota’s business community is eager to work with funded startups. But that’s not how it works.

I want Minnesota businesses to embrace startups. Use products that were built by Minnesota startups. Make small grants to help more ideas get off the ground. Sponsor startup events. Help provide resources, connections, tools and machinery for startups that need them. When we do these things at scale, Minnesota will thrive.

Bio

Peter Kane is the founder of Healthcare.mn and Startup Venture Loft.

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