The state of venture capital in Minnesota

A big report on the state of the venture capital industry is out, and Minnesota is doing…okay

By Brian Martucci
Wednesday, April 20, 2016

The report’s official name is a mouthful: “The MoneyTree™ Report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters.” Let’s just call it the PwC/NVCA MoneyTree Report.

The U.S. venture capital industry invested about $12 billion in the first quarter of this year, on top of about $58 billion total last year. The 10 biggest deals accounted for a quarter of all venture capital activity, up from 18% last year — suggesting that VCs are devoting more resources to finding those elusive “unicorns.”

No unicorns in Minnesota, though — at least, not this year. The PwC/NVCA MoneyTree Report didn’t provide a full state-by-state breakdown, but none of the top 10 deals came anywhere close to Minnesota.

San Francisco-based Lyft, the main ridesharing rival to Uber, scored the country’s largest venture capital investment: a cool $1 billion, from a multi-investor consortium, accounting for nearly 2% of all U.S. venture activity last year. Other big winners included Florida-based Magic Leap, an augmented reality company ($793.5M); Utah-based Domo, a business cloud computing platform ($131M); and New York-based Betterment, an automated brokerage and investment advisory platform ($100M).

Still, Minnesota saw some solid VC activity. The report identified 11 Minnesota deals, with a total value of approximately $67.3M, in Q1 2016. That’s a better pace than last year, when Q1 saw just five deals, cumulatively valued at $44.5M. Activity picked up in the second half of the year: 2015 ended with 30 deals, cumulatively valued at $371.7M. It’s unclear whether the second-half surge is responsible for this year’s solid Q1 numbers, nor whether the past three months bode well for the remaining nine.

Digging down into Minnesota’s data, most local VC deals — and the vast majority of total dollars allocated — involved companies in the “expansion” or “later” phases of growth. Such companies are generally viewed as less risky than “seed” or “early” stage companies because they generally have larger, more loyal customer bases and healthier revenue streams.

Four categories accounted for the lion’s share of Minnesota VC investment last year: software ($195.1M), medical devices and equipment ($129.9M), media and entertainment ($12.8M), and financial services ($12.5M). So far this year, three categories are making out: industrial/energy ($25.2M), media and entertainment ($19.1M), and financial services ($13.5M).

The state’s top deals included tenKsolar, a photovoltaic systems firm ($25.2M); Zipnosis, an online diagnostic and treatment solution ($14.1M); Gravie, a self-service insurance solution ($13.5M); and BiteSquad, a restaurant food delivery service ($5M).