Can the Upper Midwest drive digital innovation in manufacturing and logistics?

Legacy Manufacturing Hubs
Manufacturing and farming ecosystems in the US and around the world have developed around a combination of the following ingredients: raw materials (minerals, crops), energy (electric, hydro, wind, solar), logistics (bays/ports, rivers, roads), talent/labor pools, and viable operating economics. A combination of investment capital, balance sheet leverage, and public policy has provided the needed financial backing to scale up.
In the US, several manufacturing ecosystems have come to exist in different regions over the decades, focusing on aerospace/avionics, automotive, food and farming, healthcare, metals and mining, oil and gas, and semiconductors/electronic components/systems. Upper Midwestern states are prominent in this list. These ecosystems have been using current-generation industrial/process controls systems, heavy equipment, and ERP systems.

Industry Region Anchor Companies
Aerospace/Avionics California McDonnell Douglas, Hughes Aircraft.
Kansas Beechcraft, Cessna.
Washington Boeing.
Automotive Michigan, Indiana, Ohio Chrysler, Ford, GM, Visteon.
North Carolina Borg Warner, Bridgestone, Caterpillar, Continental, Cooper, Daimler, Denso, Freightliner, Goodyear.
South Carolina BMW, Mercedes, Bridgestone, Volvo, Magna.
Food and farming Central Valley, California Del Monte, Dole.
Wine Country, California Gallo, Mondavi, Jackson, J Lohr, Korbel, Rutherford, Sebastiani, Sutter, Wente.
Minnesota Cargill, General Mills, Land O’Lakes, Hormel Foods.
Missouri Monsanto.
Wisconsin Schreiber Foods.
Iowa Rembrandt, Burke, West Liberty.
Idaho Simplot.
Healthcare Minnesota Boston Scientific, Mayo, Medtronic.
Illinois Abbott Labs.
Industrial Equipment Illinois Caterpillar.
Iowa John Deere, Vermeer.
Minnesota Honeywell.
Wisconsin Rockwell Automation.
Metals Pennsylvania, Ohio Bethlehem Steel, U S Steel, USX.
Mining and materials Minnesota 3M.
Oil and gas New Jersey Arco.
Texas Exxon-Mobil, Schlumberger, Valero.
Paper Idaho Boise-Cascade.
Semi-conductors Silicon Valley ICs – Broadcom, Intel, nVidia, Marvell, SanDisk/Western Digital.
IC manufacturing equipment – Applied Materials, LAM Research.
San Diego ICs – Qualcomm.
Idaho ICs – Micron.

 Table 1: US regions, manufacturing ecosystems, and key anchor companies.
Digital Manufacturing – Requirements
In the age of ‘traditional’ manufacturing, the resources needed included:

 
In the age of digital manufacturing, from design to shipping, the following capabilities are important:

 
Advanced technologies useful for these capabilities include:

 
Next-generation digital manufacturing initiatives have taken root in regions where current manufacturing ecosystems have existed. For example, Tesla’s California factory is housed in the earlier NUUMI (General Motors and Toyota) plant in Fremont in Silicon Valley, where the plant was originally set up in 1960 by General Motors due to cheap land, the port of Oakland nearby, and a freight railroad along the Bay. Similarly, SpaceX (Hawthorne, CA) has leveraged design and manufacturing resources originally set up by McDonnell Douglas and Hughes Aircraft in the Los Angeles area near the port of Long Beach.
The Upper Midwest
Considering the extraordinary value creation of companies such as Tesla and SpaceX, there is a significant investment thesis in enabling next-generation manufacturing organizations to arise in the Upper Midwest, where many similar current-generation manufacturing ecosystems already exist.
Given the democratization (i.e., global availability) of some of the new technologies, the presence of global companies such as Google, Amazon, and IBM in most of the major cities in the Upper Midwest, and the significant academic centers across the region; highly-trained resources are available throughout the region to enable advanced digital manufacturing centers of excellence.
The Upper Midwest also has strong attributes to attract and retain relevant labor pools. Table 2 shows the relative desirability of different regions in the US as destinations for STEM workers. The statistics for the Upper Midwest, broadly including the greater Cincinnati, Columbus, Chicago, Denver, Madison, Minneapolis/St. Paul, and Pittsburgh areas, speak for themselves.

Rank (1=Best) Metro Area Total Score Prof Opptys STEM Friendliness Quality of Life
1 Seattle, WA 73.60 2 4 15
2 Boston, MA 71.94 7 1 43
3 Pittsburgh, PA 65.90 12 11 9
4 Austin, TX 65.15 6 8 27
5 Minneapolis/            St. Paul, MN 64.95 19 6 17
6 Madison, WI 64.00 13 16 13
7 Salt Lake City, UT 62.96 9 14 18
8 Springfield, MA 62.80 36 2 7
9 Chicago, IL 60.71 49 13 8
10 Atlanta, GA 60.69 5 27 31
11 Cincinnati, OH 60.51 16 33 14
12 San Francisco Bay Area, CA 60.50 3 7 67
13 Columbus, OH 59.71 33 21 21
14 Denver, CO 57.73 10 24 37
15 San Diego, CA 57.39 59 23 16
16 Sacramento, CA 57.20 44 20 25
17 Colorado Springs, CO 57.00 17 54 20
18 Worcester, MA 56.88 43 3 65
19 Richmond, VA 56.58 8 32 44
20 San Jose, CA 55.79 18 18 53

 Table 2: Desirability of cities in the US for STEM professionals. (Data Source: Richie Bernardo/ WalletHub, “2018’s Best & Worst Metro Areas for STEM Professionals”).
Superimposed with Table 1, Table 2 shows the opportunity for these regions to become magnets for next-generation manufacturing.
What Do the Next-Generation Manufacturing Innovations Look Like?
As a result, disruptive new companies are emerging in these regions, creating the investment opportunity to fund them from early-stage growth to scale-up. These companies are working with the incumbents shown in Table 1 to accelerate their evolution towards advanced digital manufacturing.
Examples of innovative companies focused on manufacturing and transportation in the upper Midwest include:
Proto Labs[i]– Rapid prototyping: allowing quick turnaround manufacturing.
FactoryFix[ii]– Contingent labor for equipment: predictive diagnosis for timely repair with skilled labor and relevant spare parts for better customer experience at lower cost.
Basin Commerce– River transportation: harnessing of shipping capacity on lake and river waterways using barge booking software.
Rambl[iii]- AI: sales call CRM logging and intelligence that analyzes calls for specific criteria and actions to surface insight.
Stemonix– Drug discovery: tissue manufacturing for testing potential side-effects of new drugs for neurological and cardiac diseases.
Aker– Crop management: Use of drones for crop management based on weather databases and image-based diseases detection. 
The Four Legs of the Innovation Stool
Infrastructure, technology, labor, and capital are the four legs of the innovation stool. The Upper Midwest has all of these.
Through new digital manufacturing technologies focused on topline and bottomline benefits, today’s manufacturing ecosystems are ripe for significant new value creation.
At Great North Labs, we are focused on providing early-stage capital to innovators in the Upper Midwest, with an emphasis on next-generation manufacturing. We leverage partners and advisors with market and operating experience in manufacturing. We invest in, and provide guidance and advisory resources to technology startups like FactoryFix that are poised to disrupt the traditional manufacturing and logistics industries in the Midwest.
 
[i] Donald Krantz, Director at Proto Labs, is an advisor to Great North Labs
[ii] FactoryFix is a Great North Labs portfolio company
[iii] Rambl’s co-founders, Mitch Coopet and Brian Bispala, are advisors to Great North Labs

Exponential Technology

Intel co-founder Gordon Moore famously predicted that computing power would grow exponentially by doubling every two years (“Moore’s Law”).  The implications of such rapidly improving computing power are now evident all around us, but back when Gordon predicted such growth it was hard to imagine a future with such incredible computing power.

In March, we held our first-ever Exponential Technology and Leadership workshop to address the inevitable trends that will disrupt many industries.

Whether it’s AI, IoT, medicine, space, or even blockchain, it was evident throughout this bootcamp that proactive, exponential thinking is necessary to maintain a competitive advantage in all industries.

Participants had the opportunity to hone in on their skills development through the process of question storming, developing moonshot ideas, and rapid prototyping.

If you were unable to attend, you can still sign up for our next workshop on April 23rd.

See Tickets for April 23rd Workshop

 

Welcome, new Advisors!

Candice Savino – VP of Engineering at Trunk Club; Formerly Senior Director of Engineering, Groupon

Nicolas Thomley – Henry Crown Fellow at The Aspen Institute, Co-Founder & CEO of Morning Sun Financial Services, Founder of Pinnacle Service

Suk Shah – CFO at Avant; Formerly CFO at HSBC

Paul Longhenry – SVP – Strategy, Corporate, and Business Development at Tapjoy; Formerly Venture Capital Investment Director at D.E. Shaw Ventures

See our Team

 

Top Midwestern Spots for Startups

It’s no secret that the startup ecosystem is rising in the Midwest. “…the amount of money being invested into startups is on the rise in the Midwest and throughout many other parts of the country, reaching fresh multi-year highs in 2017. Almost one full quarter into 2018, the trend appears to continue unabated.”

Read more from Crunchbase about why the Midwest is now being coined as a “goldilocks zone.”

Check out the Great North Labs Portfolio

 

Upcoming Classes

4/10 – Lean Startup Bootcamp

4/23 – Exponential Technology & Leadership Workshop –

4/28 – Agile Scrum Crash Course

See Startup School

 

Lean Startup Bootcamp 

Follow the Lean Startup Path to create your next startup, realize your potential in Product Management as a career, and master the skills needed to find winning business models through Lecture and Labs.
Our work-friendly bootcamp is over three Tuesday sessions: 4/10, 4/17, and 4/24 from 6:00 – 8:30 pm at Great North Labs in St. Cloud.

Exponential Technology & Innovation Workshop

The implications of rapidly improving computer power are evident around us – gain a competitive advantage and avoid disruption through this workshop. Become familiar through our Intro to Exponentials, review Disruptive Technologies, expand your Exponential Leadership, and develop skills to broaden your perspective.
Monday, April 23rd from 8:00 – 4:30 pm at Fueled Collective in Minneapolis.

Agile Scrum Crash Course

Learn and begin applying the foundational concepts of Agile Scrum to improve work transparency on your team. Review the history of Agile, problems that can be solved via Agile, and tackle software development complexity.
Saturday, April 28th from 9:00 – 5:00pm at Fueled Collective inMinneapolis.

 

Minnebar is April 14th

Great North Labs’s Managing Partners, Ryan and Rob Weber, will speak three times at this annual tech and software conference which has been a Twin Cities mainstay since 2006. The all-day event will be at Best Buy Headquarters. Tickets are free.

Tweet to Meet with Rob (@robertjweber) or with Ryan (@mnvikingsfan) at the event.

Check out more Events

 

Do you know any investors interested in sharing investment opportunities? Have them contact us!

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