While there are vaccines on the horizon and a potential further stimulus package, possibly in time for the holiday season, we still have a ways to go until economic recovery. Startups will be key to that recovery. 
 

Which Startups Will Succeed?

Have you ever wondered if your app idea was worth pursuing, if a startup was worth working for, or if your buddy’s startup was worth investing in? Of course you have. While enterprise SaaS startups have reliable benchmarks to compare against, early-stage consumer app startups are harder to evaluate. 

This is a problem for these startups, because it affects their ability to raise money. It’s also a problem for Midwest investors, who miss out on huge successes like Groupon and Grubhub.

Here’s how to evaluate them.
 

MN Entrepreneur Gift Guide


As of 2010 census data, roughly 49% of the private sector worked for a small business, and 2 out of 3 new jobs were created by a small business. If you didn’t find all of your gifts on Black Friday, Small Business Saturday, or Cyber Monday, check out our 2020 Minnesota Entrepreneur Gift Buying Guide and buy from a small business.

Local small businesses have great, innovative products. Buying from them this holiday season also supports local jobs and growth. 

It includes ideas for a variety of products from local companies from camel milk skincare products to Boozy Jerky, and from Askov Finlayson’s Climate Positive Parka to the James Beard-winning  “Sioux Chef’s Indigenous Kitchen” (in case you’re still celebrating Native American Heritage Month).

Local Early-Stage Startup News


LaunchMN celebrated it’s one-year anniversary, and released a First-Year Progress Report

Our latest Lean Startup School (with Red Wing Ignite, ILT Studios, and LaunchMN) pitch night ended with 2 winners: 

gBETAGreaterMN St. Cloud Director Precious Drew was just named to Minne Inno’s 2020 Under 25! (Boozy Jerky mentioned above is an alumnus!)
 

Startup Investment Incentive

If you’re thinking of investing but need some incentive, here is how investors (including investors in VC funds and angel investors) can get a 100% exclusion on their gains from those startup investments

Events

Here is a mix of upcoming events, for investors, founders, and/or ecosystem supporters. All events listed are virtual.

Portfolio News


USA Softball Announces Partnership Agreement with TeamGenius. TeamGenius has a new partnership to serve as the athlete evaluation system for USA Softball. 

Inno on Fire: The 30 companies and people shaping Wisconsin’s tech sceneAllergy Amulet was named to the list of impactful tech startups.

2ndKitchen Releases New 2021 Multifamily Amenities Guide2ndKitchen has a new report out with research and survey data on the importance of amenities in Multifamily properties.

 

Job Board

Great North Labs is hiring VC Analyst interns for summer of 2021. The application closes this week!

Dispatch is hiring a Territory Sales Manager, Business Development Representative, and Ruby Developer for Remote work. 

FactoryFix is hiring a Team Lead – Full Stack Developer, Full Stack Developer, and Infrastructure Developer- DevOps in Madison, WI; and a Sales Development Representative in Chicago, IL, Indianapolis, IN, or Madison, WI.

PrintWithMe is hiring a Regional Sales Directors for East Coast, South Central, and South East regions; Director, Demand GenerationOperations Lead, and MBA Strategy Intern in Chicago, IL.

Parallax is hiring an Experienced Product Designer in Edina, MN. 

Branch is hiring a Senior Software Engineer and Android Engineer for remote work, and an Account Executive, Mid-Market, and Channel Sales Manager in Minneapolis, MN.

Inhabitr is hiring a Chief Growth Officer/Head of B2C Growth, and a Sales and Customer Experience Associate in Chicago, IL.

Clinician Nexus is hiring a Customer Success Manager in Minneapolis, MN. 

NoiseAware is hiring a VP of Marketing, a QA Technician (independent contractor), Account Manager, and a Customer Advocate in Dallas, TX.

PartySlate is hiring a Senior Growth Marketing Manager in Chicago, IL.

It’s a wrap for Twin Cities Startup Week (TCSW), Minnesota’s largest annual startup event. How big is it? In 2019 the event attracted 17,000 people to over 200 sessions. This year, the event stretched nearly a month as it went virtual for the first time. 

Startup Competition Winners

One of two big competitions during TCSW is the MN Startup Awards, a joint venture between Tech.MN and TCSW. The winners this year included Canomiks (Emerging Startup), Maddy Kennedy (Impact Award), BetterYou (Operational Excellence) SayKid (Voyager Award), Black Tech Talent (The Inclusive Evolution Award), and Target Accelerators Team (Corporate Champion). 

Great North Labs sponsored the 10K Lakes Award for Greater Minnesota for the second year in a row, which recognizes work supporting startups in Greater MN. MN Cup took home the award this year!

We are proud to support MN Cup through our Founders Pledge, where Rob Weber also judges the High Tech division, and are pleased with the recognition of their success. MN Cup wound up their own competition on Sept. 23rd, with top honors going to BlueCube Bio

The winner of this year’s 10K Lakes Award for Greater Minnesota Startups is MN Cup. Director Jessica Berg accepted the award. 

The other big competition of TCSW is the BETA Showcase, which routinely attracts 800+ attendees. This year featured 21 startups, including 7 startups from Greater MN. The winner of the coveted Golden iPod was Bibliate, a Minneapolis-based provider of academic research summaries.

gBETA Greater MN-St. Cloud

The accelerator program gBETA Greater MN-St. Cloud has announced its fall class. The class includes startups from around the state. Sproutary is from Kimball, Shrpa is from Rochester, LegalMaps is from Edina, and Live.Give.Save is from Red Wing.

This class has some accomplishments under its belt already, as Shrpa took home 2 dedicated awards form MN Cup this year, and Live.Give.Save is the winner of last year’s inaugural 10K Lakes Award.

$2M Pitch Competition for Black founders

Revolution’s Rise of the Rest (ROTR) is partnering with Opportunity Hub, 100 Black Angels & Allies, and Morgan Stanley’s Multicultural Innovation Lab to fund Black-founders via the “Rise of the Rest Virtual Tour: Equity Edition”. $2M in investments will go to the top 3 companies. 

Please share this event with your network! It’s a great opportunity for Black founders in the Upper Midwest to connect with investors and resources, and to have a chance at a big check! Great North Labs has partnered with ROTR to help connect capital with Black founders, and Rob Weber be taking pitch meetings during the event.

Great North Labs + Vikings Football = $$ for Minnestar

For every point the Vikings score this season, we are matching up to $5 in donations to Minnestar! Give as little as 10 cents per point, and know that it will be matched, benefitting one of Minnesota’s top startup support organizations. 

The campaign started on September 1st (when the Vikes were 0-0) and continues until the day after the Super Bowl, because hey, you have to believe! This campaign is through local startup ScoreSide, which connects sports with philanthropy.

It’s important to support the organizations that support our startups. Times are challenging. While we believe there’s a shortage of early-stage capital in the region, we also think that right now is a great time to build a startup

Events

Here is a mix of upcoming events, for investors, founders, and/or ecosystem supporters. All events are virtual unless otherwise noted. 

Portfolio News

River’s Edge participates in new robotic technology pilot program for screening COVID-19. Misty the robot is being used to screen hospital employees for COVID-19. 

PrintWithMe Announces National Partnership With Trammell Crow Residential. PrintWithMe has inked a deal with one of the nation’s largest developers of multifamily apartments.

Job Board

Dispatch is hiring a Business Development Representative and Manager, Account Management in Bloomington, MN; a Ruby Developer and Senior Ruby Developer for Remote work. Also Territory Sales Managers in Arlington, VA, Baltimore, MD, and Washington D.C.

FactoryFix is hiring a Team Lead – Full Stack Developer, Full Stack Developer, and Infrastructure Developer- DevOps in Madison, WI; and a Sales Development Representative in Chicago, IL, Indianapolis, IN, or Madison, WI.

PrintWithMe ishiring Regional Sales Directors on the East Coast and in Texas; AR/AP Specialist and Operations Lead in Chicago, IL; VS/SVP of Operations, Marketing Director, Part-Time Customer Service Representative, Inside Sales Executive and a Fall 2020 Strategy Intern (MBA) for Remote work.

Parallax is hiring an Experienced Product Designer in Edina, MN. 

Branch is hiring a Data Platform Manager, Senior Software Engineer, Customer Success Manager, Customer Support Rep, Enterprise Support Specialist, and Fraud Agent in Minneapolis, MN.

Inhabitr is hiring a Chief Growth Officer/Head of B2C Growth, and a Sales and Customer Experience Associate in Chicago, IL.

NoiseAware is hiring a VP of Global Sales & Customer Experience, Embedded Developer, QA Technician (independent contractor), Account Manager, and a Customer Advocate in Dallas, TX.

On March 19, 2020, a bill proposing the New Business Preservation Act was submitted to the Senate that seeks to drive economic activity, innovation, and job growth in the wake of the COVID-19 pandemic and the economic downturn. The New Business Preservation Act will provide equity funding for new businesses, with larger allocations directed to areas lacking in capital including the Midwest.

While the bill was important even earlier, the events of recent weeks add urgency. Dollar for dollar, it represents possibly the most effective grassroots economic stimulus for the mid-to-long term (2-10 years). Even for the immediate months ahead, it can stem job losses among venture-based businesses.

As an early-stage venture fund based in the Midwest, Great North Labs believes this legislation will drive startup activity and value creation in the undercapitalized regions of our country. Entrepreneurship is a proven, capital-efficient way to build economic value and transform regions, and adding capital to our under-capitalized region will bolster existing entrepreneurial ventures and encourage new ones.

Our support of this legislation is apolitical. As investors, we see the success of this approach every day. Around the world, venture capitalists who pick talent, invest in portfolio companies, and work with their ecosystem (including government) enable grassroots wealth creation. Better than any stimulus or wealth transfer mechanism, the most powerful and durable antidote to economic inequality is new value creation. It is not the CCC or WPA creating jobs for the sake of paying people, or the government distributing wealth, this is grassroots economic growth driven by venture capital.  It is not a one-time distribution. It does not depend on daily oscillations of the stock market which cannot possibly reflect true changes in economic value. Rather, it drives true economic value creation through innovation.

“Senator Klobuchar’s bill is a positive step at a critical time.  As we look at how to cope with the challenges presented by the coronavirus, we should not lose sight of the critical role new businesses play in creating jobs.  The New Business Preservation Act will help level the playing field, by backing entrepreneurs in every state and every zip code, and lead to a more inclusive economy.”

-Steve Case, Chairman and CEO of Revolution (Revolution operates the Rise of the Rest Seed Fund focused on investing in areas outside of traditional VC hubs.)

The Bill

The bill was sponsored by Sen. Amy Klobuchar, and co-sponsored by Sen. Chris Coons, Sen. Angus King, and Sen. Tim Kaine. It seeks to create an Innovation and Startups Equity Investment Program (ISEI) within the Department of the Treasury. The Program will “allocate money to certain States to assist high-potential scalable startups access venture capital to commercialize innovations, create jobs, and accelerate economic growth, and for other purposes.”

New Business Preservation Act

The legislation calls for $2B to go to the ISEI, with $1.5B going to initial funding and administrative costs, and a further $500M for follow-on investments. Eighty percent of funds would go to the Midwest, Southeast, and Southwest, with distributions based on population and adjusted for VC money already present, according to Leigh Buchanan at Inc. magazine, and as exits produce returns, they will be “reinvested in the next generation of businesses, creating a sustainable funding resource.”

Feasibility of the approach

Investing in America’s startups by following VC leads into deals is a fiscally responsible approach. As the chart below of VC returns by vintage year shows, even in recessionary years, returns are at an acceptable level for U.S. Treasury purposes.

Startups headquartered in the under-capitalized areas targeted by the bill will likely outperform the national averages because they generally are more capital efficient due to nascent capital markets to support them. It’s not unreasonable to expect a 5%-15% IRR even in recessionary times. This is accomplished because VC is a long-term investment vehicle, which is the perfect counter to a short-term financial crisis.

Small business vs. startup vs. tech startup

While the article and press release talk about “small businesses” and “new businesses”, the bill deals strictly with startups. A “startup” is defined in the bill as a business entity that:

While there is no mention of the word “technology” in the bill, most people associate startups with tech for good reason. New technologies drive, catalyze, and enable innovations central to new business models, products, and entities. While using a new technology is not required for a startup to put together a winning formula (or to get funding from the ISEI), many of the most innovative and successful companies in the world relied on either new or novel uses to create their businesses.

These companies often require upfront equity investment in order to achieve the scale necessary with their new software or hardware technologies to become viable, high-growth companies. Unlike a services, manufacturing, or industrial business, technology startups rarely have the assets or the initial sales base to obtain traditional bank financing.

The capital gap

Currently, in many of the vast, regional economies outside of VC centers, private investments are reserved for real estate and other traditional vehicles. The need for liquidity in the innovation ecosystem is not met. Because of this, startups in the Midwest and other under-capitalized areas have to work with a capital efficiency not required in more capital-rich areas.

This lean approach can be productive in the early stages of a company’s life by helping to refine products and achieve product-market fit out of necessity. This efficiency is an advantage that Midwestern startups have over coastal startups when capital markets start to freeze up in an economic downturn.

However, once the opportunity for rapid growth and scaling arrive, large amounts of capital are necessary for a startup to reach its potential. Until recently, this meant relocating the operation to Silicon Valley, Boston, or New York. Along with the promising startups goes the jobs created, profits generated, and other ancillary economic benefits. This capital gap is where venture funds such as Drive Capital, Great North Labs, Hyde Park Venture Partners, Rally Ventures, and others that specifically focus on areas underserved by venture capital, work to provide the capital, guidance, and networks required to fuel growth and build long-term value.

May newsletter
Great North Ventures

$40M Fund II Raised!

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

Great North Labs Newsletter December 2017
James DonFrancesco

Great North Labs Newsletter – December 2017

Rob-Back-To-The-Future-wide
Rob Weber

A Letter To My Younger Self

mixed icons with brown color and tech theme
James DonFrancesco

Great North Labs Newsletter