The following is a post originally written by Mark Suster (@msuster). I liked it so much, I asked Mark if I could re-post it, updated for Minneapolis/St. Paul. His thoughts really apply to most cities in the US, if not the world. I literally swapped Seattle for Minneapolis, changed the name of the universities, Fortune500 big wigs, and startups local and relevant to the Twin Cities scene.
As a founder who sold his company to one of the Fortune 50, I am tempted so often to do another startup, but one of the main reasons I'm still at Best Buy is to try and put their resources to work to foster the startup culture here. We employ a lot of local developers who also have startups on the side. I spend a lot of my time trying to convince my peers locally at large corporations to do the same. It pays dividends both ways: large companies want to be closer to innovation and more nimble, and startups need money, volume, and all the resources they can muster.
Thanks to Mark for allowing me to share his post, albeit in a roundabout way.
This article originally ran on TechCrunch. I’m in Minneapolis this week.
People keep asking me if I’ve “seen anything interesting.” Of course I have. I’m an entrepreneur at heart so I’m always inspired when I hear stories about innovation.
I really like CrashPlan, Inveni, TheUptake, and much more. Can’t list them all.
But I’m not here trolling for deals. I’m here to build long-term, stable relationships that I hope will pay off over a decade, not a week. I’m looking to turn dots into lines over time.
I’m inspired by the enthusiasm of the young, emerging startup ecosystem that is here. It has all of the components for success: a steady inflow of smart, CS graduates from UofMN who prefer to stay local if they could, a smattering of local VCs & angels, some “patron” companies like Best Buy and Target who provide new talent as well as the opportunity for company-defining partnerships and it has “elder statesmen” like Joel Ronning and Paul Douglas.
The ingredients are all here. Minneapolis should be the envy of any non Silicon Valley tech community in the country. Great lifestyle, great cost of living, motivated people and only the crap weather on the negative side. They have their successes; yet somehow all of the neurons don’t yet seem to be firing as powerfully as they need to be.
As I gear up to host MinneBar tomorrow, I started to reflect on what it would take to “change the trajectory” for Minneapolis/St. Paul or for any regional market, really. It really wouldn’t take much to turn a great technology ecosystem into a truly electric one.
And I think about the “Twin Cities issue” as a metaphor for startups and business in general. I’ve always been a big believer that just a couple of key individuals make all of the difference in a company’s success. It’s why my investment philosophy is called, “the entrepreneur thesis.”
I was meeting with a first-time CEO of a very promising young startup recently and offering my advice on what his priorities should be. He listed all of the product releases that were up coming, the customers that were in the pipeline and where he saw his competition moving. I gave him the same advice I give nearly all over-worked, control-freak, do-everything-yourself startup founders:
“Your number one priority isn’t any of these things. Your highest priority right now is hiring the 1 or 2 people that are going to join your company and make a difference. There’s you and your killer CTO co-founder. But who else is going to get out there and close your big biz dev deals with you? Who’s going to help you with improving your marketing / positioning to become a clear platform category leader like Twilio?
Are you going to do all of this? Evidence over the past year would suggest otherwise. You have too much on your plate.
A few key people really can make a huge difference.”
“I know, I know. I will start recruiting soon. But I need to get our next release out the door. I need to take some VC meetings. I just don’t have enough time to focus on it right now. It will be a bit easier when we have a little more progress to show.”
“Bullshit. It never gets easier. There are always the next 20 tasks. The reason you’re not getting to the next level is that you’re not prioritizing the precise thing that could take you to the next level. I would say recruiting at least one superstar would be your priorities 1,2 & 3.”
I don’t care if you’re a 10-person organization, a 1,000 person organization or a multinational corporation – often it is the few key players that change the dimensions. Imagine Apple without Steve Jobs. Or less obvious, imagine Facebook without Sheryl Sandberg.
So entrepreneurs need to think the same way some VCs do – because markets change, competition changes, innovation & technology cycles move so fast only having a few truly outstanding leaders in your company can you sustain any sort of advantage.
And that is precisely my thoughts for Mpls/St. Paul:
Which few key community leaders are going to step up and get those neurons properly firing and connected?
My recipe for Mpls/St. Paul or your community:
1. Community Leaders + Organizers
You need a good mixture of both.
Look at what Brad Feld has done for Boulder. I know it’s not single-handed as he has both fantastic partners at Foundry Group and many other community leaders. But he has helped put Boulder on the consciousness of so many young, aspiring entrepreneurs in search of somewhere other than the San Francisco Bay Area to work & live. It is possible and he’s showing people that.
David Cohen deserves much credit for building TechStars into an internationally recognized brand name for innovation. If you can attract people to Boulder for a session to be part of the magical mix of people at TechStars then some will naturally stay put afterward. But it did take Brad as a public spokesman, consummate networker and successful VC to help create legitimacy to let David’s ideas flourish.
It takes both to build a community. The business leaders need to do their parts. The people with the time, energy & creativity to build organizations like TechStars need to bring their ideas to fruition.
I see this emerging in Minneapolis/St. Paul and the passion of “a few key individuals” who can help shift the game. Luke Francl & Ben Edwards have created MinneBar with the goal of hosting regular events to connect an encourage startups. If you could convince a few young “wantrepreneurs” that there is a community that can support them & a safe landing if they’re not immediately successful you might have your next Compellent in the works. These two guys are part of the recipe for Seattle’s growth.
2. Passionate Entrepreneurs & Ambassadors
Stating the obvious but you can’t will a region into success. You need to have passionate tech entrepreneurs who want to build businesses locally. They have the same trade-off decisions that you do about packing up and moving to Silicon Valley vs. staying and building locally. The answer seems obvious (to move) but it’s not. When you account for competition for talent, the difficulty of retention, the cost of living and the difficulty of rising above the noise – there are many advantages of staying put. The advantages of moving are more obvious.
So you need Dan Carr who has built an interesting organization called The Collaborative, a local-community initiative to connect founders, investors, and peers.
Every community needs their “ambassadors” who build relationships with leaders from other communities, who convince these people to come visit the community, who help organize events with local teams to get the cross-city interactions and who create awareness for the local talent.
Luke, Ben, and Dan are key ingredients in the recipe for Minneapolis' success.
3. Patron Companies
Minneapolis/St. Paul has something that many communities don’t have. It’s what I call “patron companies” and the local giants are Target, Best Buy, and United Healthcare. When you think about the success that is Silicon Valley, the unfair advantage is not just the huge amounts of available venture capital. When you start a company in the Bay Area you can often get your first biz dev deal done with Google, Facebook, Salesforce.com, eBay, Yahoo! or the countless other successful startup firms.
A key deal not only helps you raise venture capital but it can help attract employees, garner press attention, help with product focus & importantly drive customer adoption and/or revenue.
In Los Angeles they don’t have “patron technology companies” that are big enough to matter – they’re still hoping to see them emerge. But every time you talk with senior executives a the big studios or talent agencies it's the same story,
“You know that your industry is being disrupted. What industry isn’t these days. You can be part of the creative destruction. You can help local entrepreneurs get their first deal done and the innovation ought to benefit you.
Sure, it might mean some of your employees or colleagues go to join the barbarians at the gate, but would you rather that innovation happen in your home town where you can play to your strengths or do you want your entire future industry to shift to Silicon Valley?”
This message is surprisingly well received. People do want to help. They just need a few key individuals who are willing to go out on a limb, take some actions and make things happen for them. They need somebody bending their ears. They can then direct staff, allocate budgets, talk to the press, connect you with politicians and attend events. A few key people really can make a difference.
And that is what is most disappointing about the feedback I’m getting about the Twin Cities. It has the large technology patrons and yet the consistent story I get is that they’re not actively out embracing the startup community, helping local successes emerge, getting comfortable with the symbiotic benefits of some employees going to startups that innovate at a different pace and then buying up local teams, talent & IP. They’re doing stuff – just not enough.
The Twin Cities has its patrons. The neurons aren’t connecting to the startups. Somebody needs to make this happen.
4. Elder Statesmen
This is where I think the action on connecting neurons has to come from. Execs at Target, 3M, Wells Fargo, & United Healthcare have to recognize that it’s in their best interest to see the community thrive and the benefits to them (not to mention the Twin Cities) are far greater than any negatives of employee flow. These kinds of connections seldom emerge from middle management who view the immediate threats more than the long-run benefits.
But the CEO's of these companies are not likely to spearhead this movement. They’re too busy running their companies and literally changing the world. Who from Minneapolis/St. Paul has their ears? Who can help get access to their capital? Who can get them to communicate the bigger picture message top-down to their teams to embrace the startup community and unleash local partnerships?
Without this – it’s a totally wasted patronage. Who will step up the way that Steve Case (founder of AOL) has done with Startup America to promote this initiative to politicians, business leaders and the press. Actually, who will get Steve Case to spend time in Minneapolis/St. Paul helping communicate the message to local leaders? It’s clear that America has a vested interest in promoting entrepreneurship in many regions in the country to stimulate innovation & job creation.
Who will be those key leaders who will step up and make a difference?
5. Playing to Your Advantages
Every region has its advantages and while not limiting innovation to local themes it seems to make sense to at least consider local advantages. It’s no big surprise that I spend a larger portion of my time in Minneapolis St. Paul working on: retail, biomedical, storage, agriculture, and advertising. We have unique skills, teams, experience and regional assets that give us a better chance of success than other regions.
I’m not sure it makes too much sense to have check-in applications for restaurants here. That seems likely to be dominated by a more urban startup from NYC or from San Francisco. But who know? I’m just saying’ … what local assets do you have that load dice in your favor?
6. Marketing Muscle
It’s great to see advocates like Julio Ojeda-Zapata of the St. Paul Pioneer Press, and Graeme Thickins because every community needs its local tech press to report on companies. Consider just how much exposure the Austin community gets every year due to SXSW. It’s awesome.
I’ve often talked about the NY advantage of having the NY Times, WSJ, Silicon Alley Insider, New York Magazine and even the editor of TechCrunch based there. Not to mention every major agency, many PR firms, etc. There is no question NY startups get disproportionate press. That’s natural. Not to mention they have the highest profile VC / blogger Fred Wilson of AVC.
7. Local Angel Community / Recycled Capital
Fred Wilson wrote an eloquent piece on his blog about “recycling capital,” which every regional community should read. The magic that is Silicon Valley is that every tech entrepreneur who has made a bit of money chooses to “recycle” it by investing back into the startup community. There is a long tradition of these and it’s what formed the original angel network groups.
As I look at LA I see a lot of this reinvestment going on. There are great entrepreneurs like Evan Rifkin, Tom McInerney, Paige Craig, Diego Berdakin, Brett Brewer, Kamran Pourzanjani, Jarl Mohn and many, many more who have done several local Los Angeles tech investments. There are several “club deals” where you see the same sets of people “passing the hat” around on deals.
I know from all of my private conversation that they aren’t seeing this as a “get rich quick scheme” – they’re giving back to the community. And the truth is that they know $25-50k from them on a deal that they can help influence returns on is a lot better than handing it over to a money manager who is parking your cash in a vehicle you don’t understand.
I know there’s tons of money in the Twin Cities. Perhaps somebody needs to organize it a bit better to go into more angel deals. Perhaps some experienced tech entrepreneurs could formalize more of the local money into a higher velocity of angel deals.
8. Venture Capital
And of course you need a mature venture capital industry. There are several local firms in Minneapolis/St. Paul like Norwest, Split Rock and others. But the consistent message I heard was “there’s not enough.” That’s why more VCs ought to be spending time in Minneapolis/St. Paul. It’s similar to LA in that there are a highly motivated cadre of tech savvy entrepreneurs wanting to create companies and a lack of funding. I’d bet if one is disciplined about investing here you’d see significantly better pricing than chasing deals in the overly competitive Bay Area corridors.
9. Foreign Direct Investment (FDI)
The other message I delivered to the room of entrepreneurs & investors at dinner the other night was that you need to think about equity from outside the region the same way that countries think about foreign direct investment. The inflow of capital can be transformative.
But what is often not talked about is that those investments lead to 8-10 board meetings every year of which it would be hoped that the “outside the region” VC would attend 6-8 of them in person. I think a series of brand ambassadors should find out when these VCs will be in town and organize evening events for them the night before so they don’t do a fly-in, fly-out visit.
Imagine if the ambassadors from Minneapolis/St. Paul organized a dinner with 8 entrepreneurs, the CTO of Thomson Reuters, the head of Target.com and the head of marketing for United Healthcare. You mean to tell me that the VC wouldn’t fly in early for that?
With VC FDI the community gets more than money. They get time, commitment & attention. One deal begets more deals. If you’re already on a plane to Minneapolis/St. Paul 8 times a year picking up a second investment there is trivial. Get them over that first hurdle. Besides, we're right in the middle of the country, an easy stopover between the coasts.
And finally, it’s clear that to really build a regional community you need time. LA and Minneapolis/St. Paul are in the second (or third) major wave of technology innovation. We have all of the 2nd-time entrepreneurs from Seagate, DigitalRiver, ReTek, Lawson, etc. on to their next companies.
It’s a shame that hasn’t translated into more local break-out successes, but if a few key people really wanted to put in the effort to make it happen I’m confident that Minneapolis/St. Paul could be a major force in the decade to come. That will be “the decade of the cloud” where it really starts to become a truly connect resource that continues to accelerate innovation.
Top image courtesy of Fotolia