As a tech founder and investor, I have spent a lot of time thinking about why some startups scale and why others fail. You have to when your livelihood is riding on whether or not you can execute. And when you’re putting other peoples’ money on the line, knowing what to do and being able to do it isn’t enough, but you have to be able to explain your decisions and actions.

When I made enough money as a founder to start angel investing, I was overly focused on the idea and strategy. Why? The business I had founded with my twin brother Ryan Weber was successful in terms of financial returns, but it lacked defensibility. In my opinion, that’s what prohibited our business from scaling to an even greater outcome- we didn’t have a great idea or strategy.

Learning from this lesson from my own business, I compensated by investing in founders who had a clever idea and a good strategy. Sometimes it felt like I was just investing in a nice pitch deck. Many of these teams just could not execute, and over time, they’d fail.

You can be a brilliant founder, with a clever idea and a good strategy, and still fail. It happens all the time. If you can’t attract customers, build a team, and set and achieve goals, you’re sunk.

As a VC, I’ve had to synthesize everything I’ve learned about operating and investing into a scalable, repeatable process- to turn these lessons into actionable guidance for conducting diligence. Founders who work towards these things increase their chances of reaching an exit, and investors who look for these things increase their chances of generating a return.

These are the top 5 signs a startup will succeed.

1) The startup has founders with great soft skills. Having a great idea or writing some really kickass code isn’t enough to scale a big business. Soft skills are even more important than tech skills or industry experience. A founder/CEO’s job includes sales, recruiting top talent, management, etc. All of these are soft skills.

2) The startup has a culture of accountability, and is focused on key growth metrics. Creating a metric driven, accountable culture is challenging. It is easier to do with a 4-person startup than a large-scale growth business so it is a critically important early piece.

3) The startup is good at new product development. Teams that are good at product development are analytical and creative. They run experiments before building a complete product which enables them to avoid focusing on building the wrong product with the wrong features.

4) The startup is focused on finding and perfecting one scalable customer acquisition channel. Experimenting is expected in the very early going, but eventually you need to bet on the one channel that can get you to scale. It could be digital media-focused customer acquisition, a referral program, or viral social strategy, anything that creates compounding returns. You need to be world-class at whatever your dominant channel is to succeed. For most of the best startups, growth is designed into the product or some other kind of clever growth hack is utilized. Look at Airbnb’s famous spamming of Craigslist (Airbnb Growth Study (benchhacks.com)) or DropBox’s famous early referral incentives. This is the scrappy team, focused on the right things, that has found the right product, and a way to scale.

5) The startup has an adaptable, entrepreneurial team. Early-stage is not the time for a team fixated on management systems. The time for investing more heavily in management systems is when your startup approaches 20–50 employees or more. In the beginning, you need a team with entrepreneurial skills, including customer empathy, product engineering strength, and go-to-market strength.

For former founders-turned-investors like myself, we need to be particularly aware of not being overly attracted to clever ideas in big markets, but instead focus on identifying the teams that can find their North Star to take them from point A to point B so the startup has an opportunity to start compounding. Execution is everything.

We are pleased to announce the launch of our venture studio, Great North Venture Labs. Great North Venture Labs will design and build companies with world-class founders and operators that are in focused market segments with substantial opportunities. Promising studio startups will be funded with capital from the second Great North venture fund.

Read more in the Star Tribune

The venture studio model is a relatively new model for entrepreneurship that combines company building with venture capital. By creating researched opportunities from great ideas, and pairing them with talent that can execute, Great North Venture Labs  will create early-stage startups built to succeed. These startups will be vetted for funding, with seed capital coming from Great North Ventures (formerly Great North Labs). 

Great North Ventures will focus on investing in founders who are applying breakthrough tech to inefficient processes. Our first two Great North Venture Labs companies are headquartered where we have the strongest talent pipeline, in Minnesota. In light of today’s reality of startups adopting a remote-first approach to developing their teams, Great North Ventures will encourage founders to build where they are.

We are flexible with respect to what the right business model is, and will pursue different business model types including enterprise SAAS, online marketplaces, and online community/social networks. Strong execution translates to all verticals and business models, and knows no borders. 

This is an evolution from our initial positioning. The truth is that the latest opportunities, teams, and new ventures are distributed. Remote work is becoming standard, and our geographic investment focus has become increasingly arbitrary. Good opportunities happen anywhere people can execute them. 

Why Now?

Before we launched Great North Labs in 2017, we considered launching a venture fund and a venture studio. Predating the launch of Great North Labs, Ryan Weber and I traveled the world as founders, and we were able to see great examples of the venture studio/incubator type of businesses such as Betaworks in NYC, IdealLab in LA (our partners in Fund I portfolio company Branch), and High Alpha (our partners in Fund I portfolio Structural) in Indianapolis. Locally, Rally Ventures (our Fund I partners in Parallax) and Invenshure (our Fund I partners in Flywheel) have successfully executed this studio model too. After much consideration, we opted to exclusively focus on launching our venture fund first so that we could develop a strong platform as early stage investors.

Now that we are getting started to launch Fund II, we now have a more robust internal team along with our Innovator Network. This strong foundation rooted in strong execution from founders and operators who have demonstrated excellence in execution enable us to do so where most other early stage funds lack operational depth. 

We are not just service providers, we are entrepreneurs!

One of the biggest questions we get from our fund’s Limited Partners is how can we build even large ownership in the startups we invest our capital and resources into. With the explosion of new early stage funds, including those that invest earlier such as in pre-seed, the competition for the best deals is fierce. There is no more proprietary deal flow than ground up building a startup, and the opportunity to pick teams centered around strong foundation execution enables us to de-risk the earlier stages at a level not possible by most other funds.

The first Great North Venture Labs company

The first Great North Venture Labs company is in stealth mode. The new startup is focused on solving the biggest problems faced by collectors of trading cards. Like many other alt assets such as luxury goods, paintings, vintage cars, NFTs, the trading card market has grown immensely over recent years, but the market is still dominated by legacy marketplaces and other industry participants, many of which rely on dated technology and analog business processes. It looks to enhance the trading card market by using breakthrough technologies not available to prior businesses operating in the trading card market.

This stealth startup is headquartered in Minnesota. Additional details will be shared at a later date.

The University of St. Thomas (UST) is the largest private university in Minnesota with ~10,000 students. The business school, the Opus College of Business, is #2 in the state for undergraduate business education. The Schulze School of Entrepreneurship, named for Best Buy founder Richard Schulze, is #1 in the state and nationally ranked. Digital transformation and education trends are driving big changes at the university in how entrepreneurs are educated and how startups are supported.

This year the university announced the end of its full-time MBA program, and a focus on part-time and online MBAs, citing the changing demand for graduate business education. The decline is part of a local and national trend trend, as Minneapolis-St. Paul MBA program applications are down 20% in the past five years, and as top ten business schools even see double digit declines. 

We’re not here to argue for or against an MBA, but to call attention to the fact that the perception of the degree is shifting, and UST is shifting with demand.

At Great North Labs, we don’t prioritize pedigrees. Whatever your background, what is important is whether or not you can execute. Whether you’re working from theory or practice, it comes down to the product and your delivery of it. 

Elon Musk weighed in on MBAs with the Wall Street Journal recently, saying, “I think there might be too many MBAs running companies. There’s the MBA-ization of America, which I think is, maybe not that great.”

Musk’s advice for business leaders was, “Spend less time in meeting rooms, less time on PowerPoint presentations, less time on a spreadsheet, and more time on the factory floor, more time with customers.”

So that begs the question: outside of the MBA program, how is UST supporting innovation? What is UST doing to get students “onto the factory floor” and spending time with customers? 

How University of St. Thomas Raises Up Startup Entrepreneurship

For answers, we turned to Great North Labs own Mike Schulte, JD/MBA ’17. Mike has experience with the Opus College, the School of Law, and the Schulze School, as well as the university’s other programs and initiatives. He is not only keyed in to the school’s programs, but speaks as an investor and startup ecosystem supporter through Great North Labs, and can speak to how his educational experience has helped his career in venture capital.  

The Aristotle Fund provides real investing experience to students. The fund is a 100% student-managed investment fund, and is the ultimate in experiential learning. Gerald Rauenhorst, the founder of a construction company that became The Opus Group, (and UST Trustee from 1966 to 2012), provided the initial $5M for the fund. The gift was kept anonymous for the first 17 years, until 2016. Rauenhorst stipulated that there be no faculty oversight in the investment decisions. Consequently, though it is run as a class, every student manager is invested in the Fund’s performance to the point where it is a full-time job. 

“A fierce competitor, Rauenhorst wanted all the future student managers to learn firsthand the challenges of managing money and holding themselves accountable to their clients,” said Professor Mary Schmid Daughert 

Official mentors include accomplished portfolio managers at top local investment firms. One attends the class every week to give feedback on pitches, and they pull no punches. Mike has acted as an unofficial mentor for the class, and continues to make connections through his former classmates. 

“This was the best educational experience I ever had, and I could easily find 20 other people to tell you the exact same thing. When we get together we still talk about spending hours in front of the Bloomberg terminal scouring analyst  reports and how it has shaped our careers,” said Mike. “I would not be able to do what I do at Great North Labs if it weren’t for the Aristotle Fund. That is why I recommend these students for positions.”

Servant Leadership creates ethical behavior in entrepreneurs. Servant Leadership is prioritized as part of the UST mission, with both the law school and the business school focusing a lot on self development. They bring in examples from industry to exhibit how this looks in practice, which include Pat Ryan of Ryan Companies US Inc., Dennis Monroe of Monroe Moxness Berg PA, and Alan Page, former Minnesota Supreme Court justice and NFL Hall-of-Famer. They challenge their students to adopt these same principles. 

UST talks a lot about Servant Leadership as a foundation of their mission, and it is visible in everything they do. Laura Dunham, Associate Dean of the Schulze School of Entrepreneurship, was recently featured in the Stanford Innovation Lab podcast episode “Teaching Ethical Entrepreneurship”. The podcast focuses on elevating applied ethics in the field of entrepreneurship. 

“I have students reaching out to me all the time to ask for career advice, and I never say no. I helped one student with an internship at a law firm I worked for. I’ve written letters of recommendation on behalf of students. This is what servant leadership looks like,” said Mike. “I really believe that faculty choose UST for the culture and that is why they punch above their weight class in that regard.”

At Great North Labs, we also believe in the principles of servant leadership. We support and give back to the communities we belong to, including organizations making a difference in the startup ecosystem. In addition to cash and time, we donate equity through our Founders Pledge so that when Great North Labs has a win, we all benefit. 

The Schulze School of Entrepreneurship pays students to work at early-stage startups. St. Thomas is arguably the most aggressive university in Minnesota at placing their students in early-stage growth companies. This sets them up to learn the skills required to execute and operate a successful startup business. These internships provide the “factory floor” experience that isn’t found in the classroom. 

The Summer Internship Grant program provides funding for some students while they intern at an early-stage startup. Companies interested in entrepreneurship students can inquire through the “Hire a Tommiepreneur” page on the St. Thomas website. 

gBeta St. Thomas program. gBETA is a program of gener8tor, a nationally-ranked startup accelerator with programs across the US and Canada. The seven-week accelerator is for early-stage companies, and is free, requiring no fees nor equity. Great North Labs is a proud partner of gener8tor, and a supporter of gBETA Greater MN-St. Cloud. 

gBETA St. Thomas is exclusively available to students and alumni of the University of St. Thomas. Companies of any stage, industry, or business model can apply to participate. The next cohort is July 13th -Sept. 3rd.

Mentor Externships give you a dose of the day-to-day reality, before you’re committed to it. The mentor-externship program at the School of Law requires at least 1 hour of “experiences” per week, where students are in the field, with mentors (usually UST alum), learning what lawyers do on a daily basis. This is completely self-directed, and students pick the fields they want to learn about. 

“For me, it was actually helpful in teaching me what I didn’t want to do which, in hindsight, was incredibly valuable. When I entered law school, I liked the idea of spending my days as a litigator in the courtroom… when I dug a little deeper, I determined that it wasn’t for me,” said Mike. “In addition to the externship, there was one semester where you worked 2-3 days a week in an internship. I worked at St. Paul City Hall. I had always liked local politics, but in practice… that was not the case. Every student’s experience was unique in this program, but I have no doubt that it was far more valuable than sitting in a traditional classroom setting.” 

Real consulting experience with real clients. The Applied Business Research course takes a team of 4 and assigns a client with a marketing need. The consulting team spends 6 weeks putting together a project, just like a marketing agency would do. 

“My project was for Code42. Code42 was considering a new product launch and wanted to know how to market it. Our research, including secondary, IT executive interviews, mass surveys, etc., uncovered that their customers cared less about the new product and more about security concerns,” said Mike. “Today, Code42 is positioned as an enterprise security software company. While I’m sure they weren’t relying on our research independently, I do think we provided valuable insights.”

By the Numbers

St. Thomas has 34,000 business alumni worldwide. 96% of them found employment, or went on to graduate school, within 4 months of graduating. Undergraduates from the School of Entrepreneurship have gone on to raise $42.9M in subsequent funding. 71% of the companies started by undergraduate alumni in the last 10 years are still in business. gBETA St. Thomas has helped develop and support a dozen local startups, without extracting capital or equity from the founders. 

Mike Schulte has seen first-hand the founders, talent, and startups that St. Thomas’s programs generate and support. He himself launched his career in venture capital thanks to the experiences he had at St. Thomas., and has been with Great North Labs for 3 years. 

Mike isn’t the only UST success story with Great North Labs. Two of our portfolio startups, TeamGenius and Clinician Nexus, are led by UST alumni founders. Our portfolio of startups employs 19 University of St. Thomas alumni all together. That’s almost one alumni for every startup we invest in!

Why it Matters

Though the market for full-time MBAs is fluctuating, UST is pro-actively adjusting to emerging trends. The school is re-thinking it’s educational offerings, as it adjusts to meet demands, but is maintaining rigor and efficacy.  In short, digital transformation is fueling innovation instead of fueling attrition.

While that change might not quite reach the level of “Hey, teacher! Leave the kids alone!”, it’s definitely not business as usual. The entrepreneurial support programs that have emerged across disciplines, schools, and functions are signs of this shift, and of the continued commitment of UST.

Those programs have continued to produce and support startups, founders, and talent, even as ideas of entrepreneurial education evolve. And during these challenging times, St. Thomas’s values have shined through, with the school emerging in the national scene as a leader in ethical entrepreneurship. That’s a mark of smart leadership for the largest private university in Minnesota. 

$23.7 Million Raised


Great North Labs has closed its first fund with $23.7M in committed capital! This is one of the largest debut seed funds ever raised in the Midwest. 

“We are very appreciative and humbled by the tremendous support shown for our debut fund by our limited partners,” said Great North Labs Managing Partner Rob Weber. “Our investors’ support shows not only their conviction for us as fund managers, but also their conviction to backing the next generation of startup founders across our region.”

Managing Partners Rob and Ryan Weber, SCSU President Robbyn Wacker, and Managing Partner Pradip Madan at the Great North Labs Startup Ecosystem Kickoff last September. 

This fund raise has exceeded our team’s expectations, and has increased our capacity, reach and impact as we cultivate the next generation of tech startups across the Upper Midwest.

“The opportunity in the Midwest is significant for investors with the right experience, criteria and investment thesis. For four decades, capital has gravitated towards Silicon Valley, Boston and New York. With the high cost of living and a talent supply-demand imbalance, making a startup successful is now more difficult in Silicon Valley,” said Managing Partner Pradip Madan, who is based in Silicon Valley. “As a result, investors are starting to pay more attention to the startup ecosystems in places like Chicago, Minneapolis, Madison and Des Moines. Plus, many of the industries – financial, food, travel and hospitality, healthcare, insurance, manufacturing, mining – that entrepreneurs are now disrupting are native to these areas. In the new Gold Rush, the gold is the hard-working entrepreneurs and their startups in these regions.”

Read more at VentureBeat, the Star Tribune, Yahoo Finance, the Minneapolis-St. Paul  or Milwaukee Business Journals, MinneInno or ChicagoInno, Tech.MN, the Grand Rapids Herald, the St. Cloud Times

Events

July 17-18th. Enterprise Rising, Minneapolis. “If you’re an enterprise SaaS startup, then this will be the best room you’ll be in all year.” 

July 17-18th. Fund Conference, Chicago. Brad Feld of Foundry Group is the featured speaker this year. “FUND Conference was launched in 2015 to connect investors, vetted, emerging-growth companies, and business leaders for same-day connections and business development opportunities.”

July 18th. Minnedemo32, St. Paul. A showcase of working tech products made in Minnesota. No PowerPoint, 7 minutes to present. 

July 24th. Horizon, St. Paul. This is Forge North’s activation event for ecosystem leaders. “If you are ready to look to the horizon, set clear and ambitious new goals for our region, and rally around breakthrough ideas, partners in Forge North invite you to join in.”

July 25th. TedX Fargo 2019: Forward, Fargo. “We want to empower people to be solution-orientated, believing that ideas can change the way the world works. We want to encourage you to listen to new ideas, find a topic that you’re passionate about, and then take action to enable those ideas. Join us as we celebrate our 10th TEDxFargo event, and 10 years of TEDx!”

Advisors

Two Great North Labs advisors are new to the team

Geoff Wood is the founder of Gravitate Coworking in Des Moines, Iowa, as well as the Executive Director of the West Des Moines Business Incubator. Geoff co-founded and publishes Clay & Milk, a media startup that covers the Iowa entrepreneurial ecosystem.  

Mike Rynchek is the former CTO of Bright Health. Before that, Mike founded and served as CEO of Spyder Trap, which was acquired by Bright Health. He is currently the Global Strategy Lead for Onduo, and an active startup investor and advisor. 

Job Board

Dispatch is hiring all over the country (25 cities!) for Field Sales Representatives and Drivers. In Bloomington, MN, they are hiring an Engineer, a UX Designer, and for Biz Dev, Customer Experience, and Driver Engagement roles. 

Structural is hiring a Node/JavaScript Engineer.

FactoryFix is hiring a Software Engineer in Madison, WI, and a Business Development Specialist and an Account Managers in Chicago.

Misty Robotics is hiring a Manufacturing and Repair Engineer, a Devops Engineer, and a Sr. Software Engineer, in Boulder, CO. 

pepr is hiring for Biz Dev – Outbound Sales in Minneapolis. 

2ndKitchen is hiring a Full-Stack Developer in Brooklyn, NY, and an Operations Associate in Chicago.  

PrintWithMe is hiring a Business Development Executive, a Customer Success Manager, a Strategy Intern, and a Marketing and Operations Intern.

One of the largest debut seed funds ever raised in the Midwest

St. Cloud, USA — June 19, 2019 — Great North Labs closed its first fund with $23.7M in committed capital. Great North Labs is an early-stage venture fund focused on cultivating the next generation of tech startups across the Upper Midwest. The fund is based in St. Cloud and Minneapolis, Minnesota, with a partner located in Silicon Valley. This is one of the largest debut seed funds ever raised in the Midwest.

“We are very appreciative and humbled by the tremendous support shown for our debut fund by our limited partners,” said Great North Labs Managing Partner Rob Weber. “Our investors’ support shows not only their conviction for us as fund managers, but also their conviction to backing the next generation of startup founders across our region.”

The bulk of venture capital is raised and spent on the coasts. Fifty-two venture capital funds were formed in the US in 2018, with the majority formed in California, New York, and Massachusetts. Those states accounted for 79% of the $5.3B in capital raised (source: National Venture Capital Association). Nationally, some larger funds are becoming more active in seed stage investing in the Midwest. The most active of these are Techstars, which operates an accelerator in addition to a venture fund, and Revolution’s Rise of the Rest Seed Fund.

Funds that invest in early-stage startups, or “seed funds”, are generally smaller in size, and only about half a dozen have ever debuted in the Midwest with over $20M committed. In the Upper Midwest (defined as ND, SD, MN, IA, WI, IL), there are only two examples besides Great North Labs, both from Chicago. Hyde Park Venture Partners raised $25M in their 2013 debut, and MATH Venture Partners raised $28M in 2015 (sources: data compiled from Pitchbook, CB Insights, Crunchbase, and public databases). Both Hyde Park and MATH have gone on to raise larger funds since their debuts.

Managing Partner Ryan Weber said, “Exponential technologies are causing accelerating changes, and the implementation of these technologies is greatly enabled by the domain expertise living inside our strong industries throughout the Upper Midwest, creating fertile ground for high growth, technology-driven entrepreneurship.”

Great North Labs invests in consumer or enterprise startups that have potential to reach a $1B market, show early signs of product-market fit, possess defensible attributes, and leverage new technology. Startups must be based in, or significantly tied to, the Upper Midwest. Great North Labs has also committed 10% of the fund ($2.37M) to investments in pre-seed startups with founders from under-represented groups, or startups located in under-served markets, such as St. Cloud, MN; Sioux Falls, SD; and Fargo, ND. At a time when 45% of deals by Midwest investors are still going to startups outside of the region (source: TechCrunch), Great North Labs is committed to catalyzing the potential of the region by not only capitalizing on existing exceptional opportunities, but by cultivating new ones.


The fund has three Managing Partners: Ryan Weber, Rob Weber, and Pradip Madan. The Webers, twin brothers who have worked together since bootstrapping their first company in college, have a successful track record as founders, operators and early stage investors. Pradip Madan is a Silicon Valley tech executive with a long history of success at both Fortune 100 companies and startups, and has been part of several seminal moments of tech and venture history. The Webers live in St. Cloud and Maple Grove (Minnesota) respectively, and Madan is located in Silicon Valley. The team also includes a network of accomplished advisors from successful tech companies throughout the Upper Midwest and Silicon Valley.

“The opportunity in the Midwest is significant for investors with the right experience, criteria, and investment thesis. For four decades, capital has gravitated towards Silicon Valley, Boston and New York. With the high cost of living and a talent supply-demand imbalance, making a startup successful is now more difficult in Silicon Valley. As a result, investors are starting to pay more attention to the startup ecosystems in places like Chicago, Minneapolis, Madison, and Des Moines. Plus, many of the industries – financial, food, travel and hospitality, healthcare, insurance, manufacturing, mining – that entrepreneurs are now disrupting are native to these areas. In the new Gold Rush, the gold is the hard-working entrepreneurs and their startups in these regions,” said Managing Partner Pradip Madan.

ABOUT Great North Labs

Great North Labs is a St. Cloud & Minneapolis-based, early-stage venture fund. We are industry agnostic, and invest in consumer and enterprise technology companies across the Upper Midwest. Our hybrid model emphasizes advisory support and guidance for our portfolio companies along with capital investment, and we support and develop the local startup ecosystem through partnerships and education.

We mentor with Techstars, serve on the board of Minnestar, and lead the local chapter of Singularity University. The partners regularly speak at industry events, mentor founders, and advise startups and provide financial support to Gener8tor/gBETA Greater MN-St. Cloud, Beta.MN, St. Cloud State, St. John’s Center for Entrepreneurship, SingularityU Minneapolis-St. Paul, and MNCup. Great North Labs also provides educational support in valuable industry skills, such as Lean Startup, Agile Scrum, and Innovation Design, at low cost for founders and students through the Great North Labs Startup School.

Our mission: We apply capital, operating experience, relationships, and market intelligence to cultivate the next generation of leading tech companies in Minnesota and across the Upper Midwest. For more info, visit gnladmin.staging.wpengine.com, or follow us on LinkedIn, Twitter, or Facebook.

Media Contacts:

Great North Labs josef@greatnorthlabs.com

Images + More info can be found in our media kit.

###

July Newsletter
Great North Ventures

iraLogix closes $22M + Branch expands with Uber

iraLogix Closes Series C
Great North Ventures

iraLogix closes $22M Series C

June Newsletter
Great North Ventures

Flywheel lands Gates Foundation grant

We're Hiring
Great North Ventures

Venture Capital Analyst

We're Hiring
Great North Ventures

Executive Assistant – Venture Capital Firm

Great North Ventures Raises $40M Fund II
Great North Ventures

Great North Ventures Raises $40 Million Fund II

Investment Thesis: Fund II Strategy
Great North Ventures

Investment Thesis: Fund II Strategy

Investment Thesis: Community-Driven Applications
Great North Ventures

Investment Theme: Community-Driven Applications

Fund II Theses: Solving Labor Problems
Great North Ventures

Investment Theme: Solving Labor Problems

April Newsletter
Great North Ventures

Trends in the Gig Economy + Work in the Metaverse

Minnebar14
Josef Siebert

MinneBar 14 Recap

Minnesota Innovation Collaborative
Josef Siebert

Minnesota Innovation Collaborative

engineer and various business information. Internet of things industry.
Pradip Madan

IoT 3.0

Healthcare innovation image
Great North Ventures

Healthcare Innovation