Ryan and Josef talk about the importance of startup communities and the importance of innovation in rural communities, including St. Cloud, MN.
Molly shares her experience working with incubators, builders, and startups with Singularity University and how that led to her position as the Entrepreneur Ecosystem Development Lead at CORI, where she works with communities to build the infrastructure necessary to help entrepreneurs succeed. Molly paints a picture of a rural America in decline, and explains the transformative value generated by tech startups and productive tech startup ecosystems.
She explains that the key to any ecosystem is putting the entrepreneur at the center, and calls out Red Wing as a startup community that is really executing- as well as every rural community they work with. “That’s the stories that need to be told. Those are the underdogs that we need to be uplifting. Those are the people flying under the radar that I could talk about all day.” “We have so much more to go as a country in terms of entrepreneurship, in terms of innovation than just what we see in these five major metro areas.”
Full Transcript Below:
Welcome to the execution is king podcast. Today I’m talking with Ryan Weber, managing partner of Great North ventures. And joining us as a guest is Molly Pyle, the entrepreneurial ecosystem development lead at the center on rural innovation. I’m Molly, how you doing today? Hey, doing well, how are you? Good, good.
Hey everyone, Ryan Weber here in greater St. Cloud, Minnesota for my home. It’s late June 2021. And we’re starting to see things open up quickly as our vaccination rate Minnesota exceeds 50%. I moved to the St. Cloud from the Twin Cities in 1998 to attend college. The population here is around 189,000. While in college, my partner at Great North ventures Rob and I bootstrapped a company and online PC software publishing and later, ad tech focused on smartphone app marketing to 170 employees and eventual and exit. You know, at Great North ventures, we think execution is key to success. And this podcast will hope to help founders and investors learn best practices from others building the next great global startups from wherever they may be. And I’m really excited today through the work at Great North ventures I’ve had the great fortune of interacting with Corey and some of the work they’ve been doing with ecosystems in the region. So Molly, could you start off by telling us a little bit more about your background and what Korea is?
Yeah, definitely. So I got started working in entrepreneurship, working with startups, running incubators and accelerator programs at a company called Singularity University based in Silicon Valley. And I had this amazing privilege to get to work with global entrepreneurs see incredible ideas and innovators from truly everywhere, every corner of the earth, you can imagine folks would come and participate in this program that helped them, leverage these exponential technologies and build them into scalable tech startups. So that made me really fall in love with the opportunity that entrepreneurship provides for people. No matter where you come from, if you have a good idea, you can turn it into something real and impact billions of people potentially. So with that sort of becoming my professional focus, I learned about the center on real innovation, which is just a really compelling organization for me specifically, as I wanted to see entrepreneurship as an opportunity become more accessible to more people. So the center on real innovation is an organization that’s really dedicated to closing the rural opportunity gap that emerged out of the Great Recession. I joined the organization in August, like Joseph mentioned as the entrepreneur ecosystem development lead. And that’s really just a long way of saying I help rural community leaders build startup communities and entrepreneur ecosystems. And what that means is building that infrastructure that’s necessary to help entrepreneurs thrive to help aspiring entrepreneurs who have an idea, but maybe don’t know that they can take it forward and execute it. Figure out who are the people who are the programs? Where are the partnerships, what can I access that can help me actually create this tech startup, even if I am in Red Wing, Minnesota, or Cape Girardeau, Missouri, for example. So these uncommon places that you don’t often hear about, as you know, innovation and tech hubs, but center on real innovation really believes that they can become these kinds of tech hubs. And part of that why is why are we focused on rural America specifically, it’s because to be frank, it never recovered from the 2008 recession. So the urban and suburban communities really bounced back rural places failed to replace the jobs lost in that recession, let alone grow their economies. And then we all know the effects of COVID. Nationally, globally, no matter where you are, who you are, we all felt the impacts, but in rural, specifically, only 5% of tech jobs even before COVID were in rural areas, despite the same regions representing 15% of our national workforce. So all of this very unequal recovery stems from what we’re seeing the automation of jobs, so many of which were originally in rural like agriculture, manufacturing, globalization, so outsourcing some jobs that could ultimately be done by Americans if they were skilled up to be able to meet the needs that those jobs require in terms of skills and talent, and this 30 year decline that we’ve been seeing in entrepreneurship. So that’s why we’re really committed to creating sort of inclusive ownership of production in the age of automation.
That’s great just for framing today’s conversation a little bit Can you talk about for corys focus? Can you define what you mean by entrepreneur and what you mean by rural?
Yeah, totally. So rural, we talk about like a community in the population size of 5000 to 50,000, which may seem even bigger than you might think but something that we think is important is trying to Create, whether it’s through regional partnerships or through technology as well, the density that rural communities in rural areas lack, that you just naturally have population density in an urban area. So we think about rural in this way, we try to encourage the communities that we work with to take more of a regional approach and think about how they can leverage technology to build more of an ecosystem and inclusive culture. And entrepreneurs, you know, anyone with an idea who is actively working on turning that idea into a startup, and we specifically focus on folks interested in building scalable tech startups. And we do that because there are lots of organizations incredible organizations like score and co starters and the SBDC and local communities that will help folks with a main street or small business or sometimes called a mom and pop kind of business idea. And we acknowledge that that kind of entrepreneurship is critical and is a backbone to really the American economy. But what we want to see is scalable technology startups being created in rural communities, because we’ve seen the returns that those kinds of companies can have in terms of jobs, in terms of wealth being created for that community. So seeing those kinds of impacts, helping people create tech startups, also the rise of distributed work and remote teams being something that you can do, you know, build and scale a startup in rural Maine. And you could have some team members in other hubs where there’s more tech talent, perhaps, but doing that, helping bring the jobs helping bring the wealth and create that in a rural community. That’s our goal. That’s what we’re really focused on.
Right? Can you share a little bit more about what community needs to be successful? Is there a checklist of must haves that you have put together?
Yeah, so I mean, the first kind of obvious thing, which I am proud of and want to share about the center on real innovation is one of the things we do as well is help communities to apply for federal funding. So the basic funding that you need to stand up and build an incubator, for example, or get the funding to run an accelerator program or a hackathon, all of that has to start somewhere. And we support real communities and applying to this federal funding. And I’m very proud to say since 2019, only, we’ve helped communities raise more than 13 million in federal funding and match dollars. So the first kind of thing I would say is, while there’s no checklist, it’s it’s pretty obvious that you need, you need capital, you need an infusion of capital, you need folks willing to invest in the community to build the basic infrastructure for an entrepreneur ecosystem. And you know, there is no replicable formula that you can take and drag and drop. We’ve seen some things work in some communities and not working others, but ultimately to one of the most basic things in addition to just having some infusion of capital, whether it’s federal funding, or investors or a mix of that public private partnerships, is also just access to connectivity to high speed internet. So just to illustrate, and part of what Cori does, as well, another bridge organization is support communities and accessing broadband and getting broadband set up. So for example, a recent Deloitte analysis of the digital divides economic impact showed that a 10% increase in broadband access in 2014 would have produced nearly 900,000 more us jobs, and 168 billion more in economic output in 2019. So that’s, that’s kind of, I think, a really powerful statistic to show how important broadband is to economic development and particularly, to building entrepreneurship ecosystems in tech startups. If you’re again, trying to hire remote, you know, DevOps team, and you’re in whatever rural community you may be in, that’s where you love. That’s where you want to be rooted and build your business. If you’re having trouble connecting to the internet and chatting with your team on zoom, which, as we’ve seen, is such a lifeline to doing work in the 21st century, you know, the chances of your success are really limited. So starting with broadband at the most basic level, starting with capital to help you actually build out some of the physical and, you know, otherwise infrastructure that you need for programming. That’s super, super important. And then I also think it’s really, really vital for tech entrepreneurs, especially in rural areas to see visible success stories of people who look like them, who come from their community, who have made it who have been there done that, even if they failed once or twice, I would say that’s even better. Because there is this mindset of, you know, this can’t happen here. There’s this fear of well, if I try and I fail, then everybody knows me, I’ll I’ll have to run into people at the grocery store and kind of hide my head and shame. And I think that we need to really blow up that idea and celebrate the failures, which is something I think I jokingly say Silicon Valley maybe has over indexed in doing but in rural communities, we can kind of bring it back down to It’s okay. You have the courage to actually go out there and try something. And we should be celebrating you and highlighting your efforts to try to build something amazing in this community and for us and for us to be proud of. So get back out there, try again, amplify the voices of people doing this, put them on platforms, do speaker events, do tech talks, do things that the community can come in open to the public and engage because these types of things, I think, plant that seed, and shift the narrative that oh, this can’t happen here. So that’s really important. And also that leads to more that leads to you know, I go to a tech talk, I hear from an entrepreneur, who has actually made it in my rural community. And that suddenly inspires me, I can do this. Now, what do I do? What’s the next step? So having a sort of clear pathway of you go to a tech talk, you hear someone who’s made it who’s from your neighborhood? And then you think maybe this is for me? Well, where do I get started? Who can help me? Are there programs are there incubators are their mentors are their angel investors. So building all of those basic next steps for an entrepreneur to have a sort of cohesive journey, I find that that’s really, really critical. And that’s something I work a lot with our rural community leaders on developing that journey for their entrepreneurs.
So where do you see communities like starting out? Do you have like leaders come to you who are working on building that infrastructure? Or do you see it beginning with entrepreneurs trying to do a tech startup and then reaching out when they when they have, you know, things that they need that they’re not able to come up with?
Yeah, our model is working with the community leaders. So the people at that ecosystem building layer, maybe their managers or directors of incubators, co working spaces, accelerators, or general, you know, entrepreneur innovation hubs, maybe attached to a university, we work with that layer of folks to ultimately build their capacity and their ability to serve their local entrepreneurs. So trying to keep things really deeply rooted in the community because someone who has been managing the CO working space in you know, platteville, Wisconsin for five years knows much more than I do about who you should talk to and where the mentors are, or what investment may have happened two years ago with this other successful startup. So we try to help those community leaders actually be the most effective that they can for the entrepreneurs. However, I will say I, I’m a big fan, probably no surprise to anybody in the startup world and Brad Feld and Ian Hathaway in the book, startup communities, I’ve been reading that and doing a book club, actually, with the real community leaders on it. And there’s a piece in that which I love. And I always try to drive back home, which is this philosophy of keeping entrepreneurs at the center, everything in the startup community in the ecosystem should revolve around entrepreneurs at the center, what do they need? What are they looking for? How can we best be of service to them? So trying to apply that lens to the work we do with the community leaders is really front and center of ultimately, everything I’m doing is saying, Are you talking to entrepreneurs just like how we tell entrepreneurs? Are you talking to customers? Are you getting out there in the field? Are you asking questions? Are you iterating, based on what they’re telling you, the ecosystem builders and the people serving entrepreneurs need to also have an entrepreneurial mindset. They need to be flexible and adaptable, they need to respond to the changes of what the entrepreneurs are saying they’re needing or what’s working or what’s not working for them. So trying to really help them adopt that mindset and be the best possible, you know, supporters and fans and amplifiers of their local tech entrepreneurs. That’s really, again, what I think we are all about, ultimately, are the work that I do.
I got a shout out our advisor Scott Resnick, at this point. He’s he wrote a portion of a chapter or maybe it was a whole chapter I forget in the startup community, his book. He’s EIR at starting block in Madison, Wisconsin doing all kinds of good ecosystem work in Madison.
That’s really interesting, Molly, you know, I was thinking back to when we were starting there. You know, it’s obviously a larger market, but we had entrepreneur success stories. And that was a major inspiration. And I think more recently, I’ve heard about tech successes and other smaller markets, like Ben from Douala into Moines. He’s got very become very active in the ecosystem in Iowa. And Zach, founder a jam that went public in Eau Claire has done so much to help, you know, you know, ignite, you know, a spark there in Eau Claire. And, and I think that’s something people don’t realize is that there are six very successful tech startups that are being formed, you know, all around the country in the world right now. But these markets are a little bit bigger than the markets you’re targeting. I’m really curious to hear are there any markets or startups kind of entrepreneurial success stories that you could share from these smaller rural markets that you’ve engaged in started working with?
Yeah, so I, I mentioned this community earlier, and I love talking about that. Because they are a, you know, real underdog that’s come up and hence a massive success, and that is Cape Girardeau, Missouri, and this is a community 40,000 in population 25%, poverty rate 25%, lower median income household in the population. So it’s a region and an area that had been in decline in all the ways you can think of and university attendance in their some of their main industries being manufacturing. So the two entrepreneurs locally, who decided to do something about this, James and Chris, they opened, codify, which is a co working space, an innovation hub and tech incubator in Cape Girardeau, which is in Southeast Missouri. And they started this competition called the first 50k, which is ultimately aimed at attracting tech startups to the area and ultimately giving them $50,000. If they agreed to stay in that area for two years and build their company there. And they provide lots of value mentorship, they actually have a in house project shop, and an adult coding boot camp where they’re building the tech talent pipeline as well. And that’s another big thing in terms of what do entrepreneurs particularly in rural need is access to tech talent, right? So beyond hiring remotely, if you can find local tech talent within your community, that’s fantastic. And so keep Gerardo the codify folks were really trying to solve for that building out the tech talent building out the program to bring entrepreneurs, and they had some really interesting learnings in that program, and found that there were some folks who, you know, came participated, got the $50,000 for two years and then left. And that’s obviously not what they want, they want to find people who are going to stay and become rooted in the community and really, you know, give back and stay there for as long as their startup is scaling and growing and in business. And what they found is that that was actually a real goal of one of their entrepreneurs show rust of a company called show.ai, which is a sort of AI and digital marketing firm, which is just rapidly now scaling, super successful. And part of it is because show, he was doing the startup thing in LA, he was, you know, scaling and getting a lot of traction and saw the first 50k competition as an invitation to return home. He had had family he had had, you know, community and connections in Cape Girardeau, and thought that that was always maybe a place that he would like to return to and be closer to his community. But he didn’t think that there was anything there in terms of, you know, startup activity, mentors, investors, people who could support him. So he was living in LA trying to build that out. However, he saw this first 50k competition, he realized, while people or people in my hometown are trying to make it happen, actually, there’s there’s activity, there’s vision. So he applied, he won, and he has been there ever since. And he’s actually a company that our firm, the Corey Innovation Fund, actually a branch of our organization has invested in so we have a fund that invested in qualified opportunity zone startups startups based in those opportunity zones, which Cape Girardeau is. So show being back in that opportunity zone, being back in his hometown with his family, building his tech startup that was you know, doing great in Los Angeles, but now continues to thrive in Cape Girardeau. I just love that story. And I think it’s a great example of finding, finding that personal connections, people who are gonna return to a place or move to a place or stay in a place because there’s something you know, that really roots them there. I think that is really special and really notable. And I just have to add that part of the first 50k program, why I love it, and think it’s impactful is if you can find those people who are going to stay, of course, beyond the two years, that’s the goal, who have this reason or vision for saying in the community. What that has happened is seeing the awardees, seeing those startups generate over 6 million in revenue, create 40 plus local jobs, and generally, again, prove to the community be visible that this is possible that this can happen here. So ultimately, I think that that is one success story. But the program itself is so much more impactful. I think when you look at that big zoomed out view of how many jobs and how much impact and how much of a mindset shift it’s creating for folks in Cape Girardeau.
Yeah, that’s really interesting. You know, I, I hadn’t heard details of that story, but I can only imagine how transformative that is to a community like that. And, you know, there’s, you know, you know, a couple of people I wanted to get kind of shout out and in our region, you know, in Sioux Falls Matt Polson, of marketbeat, a founder has really taken a leadership role along with local other entrepreneurs and consulting groups to really shape Sioux Falls, South Dakota, and it’s really a it’s become a statewide initiative. It’s really connecting communities around the state to supercharge startup entrepreneurship and In North Dakota, you know Greg Tevin and advisor in our fund, with emerging prairie in the grand farms initiative, they’ve got a plug and play now in partnership with Microsoft building the future farm itself, you know, these are larger markets, but you would, it would just blow your mind how connected these communities are and how these entrepreneur and ecosystem leaders together can really make a difference quickly and in and that’s what, you know, in your story. It resonates that speed at which, you know, a small group of people in a smaller market, when aligned can really, really change the trajectory of a community quickly. And that’s one of the real, you know, positives, there’s obviously no, there’s some of the challenges that we discussed earlier. You know, speaking of challenges, what are some of the lessons learned, you know, what are unrealistic expectations? What are some of the past failures that we might learn from, from some of the work you’ve seen?
It’s really important, like, I like I had mentioned that tenant of keeping startups and keeping entrepreneurs at the center of everything. So anytime that there is a story of a pitfall or a failure, I tried to think about, well, what were the symptoms or the factors that caused this and almost every time, I would say, if not every single time, it’s when governments or other actors, stakeholders, people kind of outside of the direct sort of center of entrepreneurship are trying to exert control, trying to impose their views from the top down, rather than letting the entrepreneurship ecosystem be really bottom up, be led by entrepreneurs. So architecting out, entrepreneurs from leadership is the most, I would say accelerated way you can lead an ecosystem to fail, if the entrepreneurs are not the people at the center, making decisions, having their voices heard, having their needs being met. I think that that is something that, you know, will be a fast track to pitfalls. And, and I think that all too often, too, there is this expectation of these kind of actors or investors at the maybe government or other level who believe that there is such a thing is an overnight success story. And while there are there are definitely people who can move fast and break things, as they say, all over this country, and particularly in rural areas as well, because I really believe that innovation and being resourceful is kind of at the heart of a lot of people in rurals mindsets and attitudes, you had to be innovative and resourceful to survive in rural America really, for so long. And so I think that when you can see, you know, folks not understanding that this is also a long term commitment. This is a long game, like, you know, Brad Feld says think of it in 20 year segments. So when folks are expecting overnight success and have a misalignment of expectations of Oh, we want to see your first accelerator ever that you’ve done in, you know, rural Vermont produce the next Google, that’s obviously not realistic. However, it doesn’t mean that there can’t be fantastic startups coming out of these areas. And these programs, it just means that we need to in tech startups, for that matter, it’s it’s definitely our focus, like I mentioned, but it’s something that I think we need to get on the same page about early on is that this is going to take, if you’re starting from scratch, especially a longer time, you’re going to need to really stick with it to be okay, like I mentioned with the failures that you might see at first, and to understand that this is something that will happen over the course of like Cape Girardeau, that kind of massive impact and all of the, you know, millions that they’ve generated, and the hundreds of jobs that have been created beyond that first 50k program, they also have, you know, tech startups being built just within their space, all of that happened over the span of now seven, seven years or so. So it’s it’s not something that can happen within six weeks. But it’s also you know, something that I think we can stay optimistic about because it can happen, it just may look a little different than you might imagine it would in Silicon Valley. And that’s okay. I don’t think we need to recreate the next Silicon Valley, I think rural communities can create their own thriving startup ecosystems that fit with the culture in the context. So ultimately, I think it’s about keeping that in mind.
That’s really interesting. You mentioned a few of the success metrics, like job creation, and you talked about, you know, upskilling, you know, the labor, you know, workforce, but also, you know, attracting, you know, you know, skilled talent back to a region. You know, are there any other metrics that are qualitative or quantitative things that you use as measures of success? Because, you know, this is a can be a grind, and you have to, it may take a long term, but what are some of the things that you would any other anything else you might suggest focusing on, you know, for measuring the progress that’s being made?
Yeah, I mean, we definitely do look at access to capital as a indicator like like every startup ecosystem, but particularly how die The situation is in rural, that we’ve found and research shows that less than 1% of all VC money goes to rural areas 80% of all investments are made in just five major Metro cities. So tracking and looking at and supporting, how are how the companies in these rural communities are raising capital, whether it’s through traditional investment, capital micro financing grants, we’re trying to support them in all the different ways in blends that they can access capitals. So helping them do that. And tracking that is a huge metric. It’s also you know, the the, the equity investments that they can get from that wanting to see that it’s the exits we’ve had and seen a few exits a few IPOs, a few acquisitions. So trying to track all of that, but also, you know, just the the general startups if you’re starting really small, that are participating in your incubator. are you growing that number over time? Did you start off with five companies in your incubator or accelerator and then three years later, you’ve got 25, we would count that as massive progress because it means that you’re building traction at that community level. So funds raised jobs created profit generated by the new startups, those are, I think, really great and traditional metrics to look at. But helping match metrics with the early stage ecosystem development is important, too, right? You’re not going to have maybe 7 million raised in capital out of the companies in the first incubator ever, or maybe one company does that. And that’s great. But ultimately, you may not see that happen right away. But to match that metric with wherever you’re starting out, if you’re just trying to get folks to pivot, a small business idea, let’s say into a scalable tech startup in a week long, you know, startup bootcamp that’s going to have different and should have more than grounded metrics, then what you want in your accelerator program, after you’ve been doing this community building for three years, let’s say,
could you talk about, you know, kind of changing gears a little bit here? Where can someone find resources as a community leader or entrepreneur for supporting rural startups? You mentioned a book earlier startup communities? What other resources at quarry or or, or more broadly, Do you often recommend?
Yeah, I mean, like I mentioned, doing that book on Brad Feld, I mean, Hathaway book is, is, I think, a great tool for learning and for rural ecosystem builders to really get that perspective. I also, you know, selfishly would say what we’re doing at Korea is really partnering with folks to help navigate How can they build this startup community? What do they need to do? Who are the partners, where’s the funding? So we do a lot of that I also point people to the resources from the Kauffman Foundation, I think they are doing some really innovative work and are supporting entrepreneurs in you know, the heartland in rural areas where I think it’s really needed most. So I also think that as much as I mentioned before, you’ve got to get the actors and then governments and the stakeholders to really understand and put the needs of the entrepreneurs, front and center. And assuming you can do that, I think that governments actually a great source of support for entrepreneurs and for ecosystem builders. So if you know how to navigate those complexities of federal funding, SBR process can be great for non dilutive funding, though it can be challenging. There’s also a lot of programs through the Economic Development Administration, we support communities to apply for the build to scale program, which helps you really get that first infusion of capital to build out a scalable tech startup ecosystem. There’s also the USDA rise grant, which was just announced, which provides funding for tech innovation, entrepreneurship, even building physical infrastructure, building the incubator space that you may need. So I suggest you know, folks stay in touch and tuned into what federal funding opportunities are coming down the pike that Kauffman Foundation that Cory I mean, I would say the content that Joel are producing to at Great North ventures could be fantastic for people in your region. So I think it’s important, yeah, to take the national level, understand what’s happening at sort of that layer of the entrepreneurial vision and possibility in this country. But also what’s happening at your community level are they’re great people producing events and content and trying to make connections. And they would love to have more people at those events and reading their blogs and showing up and so finding whatever is in your area, but also tuning into some of those natural national resources. I also just really appreciate the work, though it may not be a resource they bring a lot of, I think thought leadership to this work is village capital and rise in the rest. So those are two that I kind of like to look to as well for what are they thinking what are they saying what are the frameworks they’re putting out? And, you know, how does that look and compare to the work that we’re trying to do in building these ecosystems in rural Specifically,
thanks so much for coming on the podcast, Molly, I usually close out with the same question every time. And that’s to ask you who is someone, or a team or a startup, or in your case, it might be an organization, but someone who’s flying under the radar, maybe people haven’t really heard about them. But that’s really executing, that people should be paying attention to.
I, it’s funny, I would take a wide approach to this question and say that every rural community that we work with is in many ways flying under the radar, right and should be looked at as a really, you know, interesting place and a inviting place to invest. And to just understand more and more about what startups are there that tech startups are actually viable and are happening and are being created in these rural communities. And I definitely think I would be remiss not to mention Red Wing, Red Wing, Minnesota being a place that we work and partner with that community. And though it’s not exactly under the radar, because one of their startups was on Shark Tank, actually. And I was just, you know, learning a little bit more about her story, and was really proud of just the way that she has built this company with her brother from the ground up and ultimately got an offer from the sharks and turned it down and is just crushing it otherwise with profit. So I love to see those kinds of things. It’s not under the radar. But I think there’s lots of other entrepreneurs in Red Wing and being served by Red Wing ignite, the one entrepreneur first collaborative that they have there, which I think is just really cool. It’s another model, like we talked about building density, that’s a great model, because they have regional collaboration, they’ve got 11 different counties within southeastern Minnesota, all working together to try to build up that, you know, pipeline of rural tech startups and amplifying those entrepreneurs. So another one I think is really cool. You guys may know is doc labs, this robot that will help people be better at basketball, I just love I mean, those kinds of stories of people having problems that really personally affected them, but then figuring out well, how can we how can we solve this because that’s a real pain point for you know, actual people in this world and solving that and going after that, I think is just, that’s the heart of what entrepreneurial ism is. It’s identifying what needs to exist in the world that doesn’t, and how can I go out there and build it? So seeing that happen in places like Red Wing in places like Wilson, North Carolina and Durango, Colorado, I mean, to me, it’s, it’s that’s the stories that need to be told those are the underdogs that we need to be uplifting. Those are the people flying under the radar that I could talk about all day, because I just think it’s really exciting that we have so much more as this as a country to give in terms of entrepreneurship in terms of innovation than just what we see in these five major metro areas.
What a great summation to that’s what it’s all about identifying problems people have and fixing them for him. That’s fantastic. Again, thanks so much for joining us on the podcast today. We’ll catch up with you later. Yeah, thanks me. So fun.
There is a history of successful tech companies in Minnesota founded during recessions. These resilient startups didn’t just survive- they proliferated under pressure. Jamf, which recently raised $468M in an IPO, is the largest, latest, and highest-profile example. Jamf was founded in 2002 out of UW-Eau Claire, and is headquartered in Minneapolis. Jamf is now valued at $4.7B.
Looking into startups that were founded during recessions, you wouldn’t expect to find a list of successes. But by digging into public data on Crunchbase and in local publications, a surprising number of successful companies emerged that were started up in during the dot-com bust (2000-01), or the Great Recession (2007-2009).
Here are examples of startups founded during recessions in Minnesota, that found success.
|Company Name||Description||Year Founded, Names of Founders||Exit/Valuation/Funding Raised*|
|ProtoLabs||Automated quoting and manufacturing systems to produce commercial-grade plastic, metal, and liquid silicone rubber parts||1999 (significant growth in 2000-2001),|
|Successful ~$70M IPO in Feb 2012 with a current Market cap of $3.2B|
|Modern Survey||Provider of employee survey services. The company provides employee survey and talent analytics service that enables companies to understand their workforce and drive business performance by creating an aggregated, holistic view of the employee lifecycle— from the candidate experience, new employee onboarding to engagement, and exit interviews.||1999 (significant growth in 2000-2001),|
Don MacPherson and Patrick Riley
|Acquired by Aon Hewitt in Feb 2016. Terms were not disclosed.|
|NativeX (aka W3i and Freeze.com)||PC publishing platform and mobile content and app delivery||2000,|
Ryan and Rob Weber
|We peaked in 2012 at $70 million in revenue and $10 million in EBITDA, with 170+ total employees.|
|Inbox Dollars||Online rewards club that pays members cash for their online and mobile activities. They reward members for their everyday activities such as reading emails, taking surveys, playing games, and signing up for offers.||2000,|
|Acquired by Prodege in May 2019 for an undisclosed amount|
|Ability Network||Connecting thousands of hospitals, skilled nursing facilities, home health agencies, clinics, and tens of thousands of physicians across the country with each other, and with the nation’s largest payer: Medicare.||2000,|
|ABILITY Network was acquired by Inovalon for $1.2B on Mar 7, 2018|
|GovDelivery||As the number one referrer of traffic to hundreds of government websites, GovDelivery enables public sector organizations to connect with more people and to get those people to take action.||2000,|
|GovDelivery was sold to Vista Equity Partners in a $153 million deal in Oct 2016|
|Code42||Code42 provides data loss protection, visibility, and recovery solutions.||2001,|
Brian Bispala, Matthew Dornquast, Mitch Coopet
|Code42 has raised $138M total, through their Series B round in October of 2015|
|CVRX||Medical device company that develops implantable technology for the treatment of high blood pressure||2001,|
|$340.6M total raised in 8 rounds|
Most recently raised $93M in a Series G in 2019
|Jamf||World leader in macOS and iOS management with offices around the world. They deliver, support and service the solution for Apple management needs in education and business.||2002,|
|Raised $468M in 2020 IPO. Current Market cap of $4.7B|
|Compellent||Develops and provides enterprise storage software and hardware solutions that automate the movement and management of data||2002,|
|Acquired by Dell in 2010 for $820M cash|
|DoApp||Mobile ad network and consumer and business app developer for websites, desktops and mobile devices||2007,|
|Acquired by Newscycle Solutions (Now Naviga) in 2016 for undisclosed amount|
|ZipNosis||Hospital and healthcare company that specializes in online diagnosis and triage, telehealth, and virtual care||2008,|
|Zipnosis has raised $25M in funding total through a Series B round|
|Calabrio||Delivers workforce optimization (WFO) and analytics solutions that elevate the customer experience and drive strategic business growth||2008,|
|Calabrio was acquired by Kohlberg Kravis Roberts (KKR) in 2016 for $200M|
|SportsEngine||The leading provider of web software and mobile applications for youth, amateur and professional sports||2008,|
Carson Kipfer, Greg Blasko, Justin Kaufenberg
|Acquired by NBC Sports in 2016 for an undisclosed amount|
|Field Nation||World’s most active Freelancer Management System (FMS) ensuring successful collaborations in today’s rapidly changing world of work. Field Nation enables companies to find, hire and pay contractors anywhere and easily manage their workforce.||2008,|
|Raised a total of $30.2M|
|HomeSpotter (aka Mobile Realty Apps)||Helps brokerages, agents, and MLSs build relationships amongst one another and with clients. Allow agents to collaborate with ease, work on the go, and increase their productivity. Brokerages and MLSs are better equipped to support and retain agents and help grow their businesses.||2009,|
|HomeSpotter has raised $3.9M in funding|
You can see that I’m on this list with my brother, Ryan Weber, with our former company NativeX. Several other founders from this list are people we have recruited as operating partners for Great North Labs, such as Joe Sriver, Carson Kipfer, Mitch Coopet, Brian Bispala, Patrick Riley, and Daren Cotter.
Capital Efficiency and Resilience
Resilient startups and founders find ways to adapt, persist, and succeed in spite of the challenges they face. The startups on this list found success coming out of challenging times with limited capital availability.
Across the entire Midwest, both the quantity and value of early-stage deals went down during the past two recessions. You can see in the chart below that the dot-com bust in the late 90s led funding to drop off a cliff, with a long climb back up hindered by the Great Recession in 2008-2009.
We live in a region where startups have to be capital efficient. We simply don’t have the amount of early-stage capital other regions get. This leads to more competition for capital, and to higher capital-efficiency among startups.
“This is good news for investors, as the returns in the Midwest are more favorable for investors compared to investing in VC in other regions.”
While that means the Midwest’s 10% of VC-backed startups receive under 5% of funding, it also means that the Midwest startups that make it to exit return the highest median multiple on investment (5.17x). This is good news for investors, as the returns in the Midwest are more favorable for investors compared to investing in VC in other regions. But, it puts greater demands on early-stage startup operators, who need to operate in a way where they can maximize their chances of success with the capital available.
How do you Scale Resilience?
Great North Labs’s approach to early-stage investing includes cultivating resilience in the regional startup ecosystem, identifying it in opportunities, and developing it into our portfolio startups.
When identifying opportunities and developing resilience in portfolio companies, in addition to our own experience, we include resilient founders with startup success in Minnesota and the Upper Midwest as operating partners. We believe that successful founders and operators make the best early stage investors because they’ve had to scale an emerging technology company before. We also believe that the best way for founders to grow is to learn from the experience of others who have been in their shoes.
By having startup operators who have not only been there before with a startup, but have found a way to thrive coming out of tough times, and have done it all in our region, facing the same regional capital availability issues that persist today, are invaluable when it comes to providing guidance for other early-stage founders in Minnesota and the Upper Midwest.
Using this approach Great North Labs is:
- Building capacity in Minnesota for developing breakout startup opportunities
- Identifying and investing in breakout startups opportunities early on, in Minnesota and the Upper Midwest
- Guiding portfolio companies to success using our operating experience and networks, and the operating experience and networks of our operating partners
Our plan and hope is that after the current recessionary period, we will be able to look back over our portfolio companies and at other Minnesota startups fighting through these times, and add many more to this list of successes.