Great North Labs’s August Update

Fostering Midwest success means making guidance and capital available for tech startups

Great North Labs got the front-page treatment in the Star Tribune Business section this Sunday. Former investment banker, consultant and corporate officer (and current business journalist) Lee Schafer talked about building successful tech companies with Ryan and Rob Weber– including the importance of providing advice and mentorship in addition to capital.

Rob also caught up with former advisor and mentor Young Sohn, President of Samsung, and former advisee and investee Mynul Khan, CEO of FieldNation. They illustrate the success that can come with “a little bit of money and a lot of advice”.

If a startup is considering moving from the Midwest to find that success, as Rob says in the article, “It shouldn’t be because the capital can’t find you. It shouldn’t be because you can’t get the mentorship you need.”

Events

September 17th, St. Cloud – Great North Labs Startup Ecosystem Kickoff. This invite-only event is THE annual event for Great North Labs! We will hear from:
Mary Grove, Partner at Revolution/Rise of the Rest Seed Fund, formerly Director of Google for Entrepreneurs
Margaret Anderson Kelliher, President/CEO of Minnesota High Tech Association
Matt Lewis, Director of Make It MSP @ Greater MSP, team member at Forge North
Mynul Khan, founder/ CEO of FieldNation
Corey Koskie, former Minnesota Twin, Founder at Linklete
Mark Ritchie, former Minnesota Secretary of State
Talks include “Why the Future is Bright for Startups Across America” and an “Outlook for Minnesota Technology & Innovation”.

A panel discussion on Sports Tech features local startup executives from SportsEngine, SportsRadar, SportsHub, and Starting11, while an Outstate Entrepreneurship panel will feature leaders from local accelerators, investors and entrepreneurs who are actively involved in outstate, upper Midwest ventures.

Great North Labs portfolio companies will give updates, and will be available to connect with. These include: Dispatch, Structural, Pitchly, ZapInfo, TeamGenius and FactoryFix.

This is about building the startup ecosystem, so there will be plenty of time for some high-quality networking and hors d’oeuvres.

If you haven’t received an invite, go here to request one. Tickets are free, but the invite list is filling up fast! After you receive your invitation, tickets for you and up to 2 guests can be claimed via Eventbrite.

October 8th-14th, Greater Minneapolis-St.Paul Area. Twin Cities Startup Week. With too many events scheduled to list, we’ll just focus on our own:

Great North Labs Pre-TedX Happy Hour, St. Cloud. From 5-6pm October 11th, we’ll gather at Great North Labs’s headquarters for a happy hour ecosystem talk and networking, before TedX St.Cloud 2018: Cultivating, which will be held only a few blocks away, at the Paramount in St. Cloud.

Past Event: Forward Fest was a great event this year, with Ryan Weber in Madison for two days (Aug. 20-21) of the annual week-long Wisconsin startup gathering. The fun started at Starting Block Madison, where GNL Advisor Nick Kartos ( CEO-GymDandy) helped facilitate a meet-and-greet happy hour. The event pitted MN and WI microbrews against each other, while entrepreneurs and investors had a chance to check out Starting Block’s space and hear about Great North Labs. The next day, Ryan moderated a panel on Startup-Corporate Partnerships at the Forward Technology Conference (Forward Fest’s “headline tech conference”). Thanks to everyone who came out, and thanks for the help, Nick!

Portfolio action

ZAPinfo is new to the Great North Labs portfolio. Formerly WebClipDrop, ZAPinfo is an information automation and productivity tool that helps recruiters and sales professionals be more productive by capturing, enriching, and sharing data easily across the web and any web based applications. With one click, users can gather a plethora of information about candidates from a variety of web sources, and with another click export it to any web form or app, or to a CSV, PDF, or other data file.

ZAPinfo is led by CEO/founder Doug Berg, who previously founded Jobs2Web and techies.com, and is an expert on workforce and career trends.

New advisors

Great North Labs welcomed two new advisors in August:

Daine Billmark, Senior Manager at TransUnion (formerly eBureau).
Wade Beavers, President of Mobile at Newscycle Solutions.

Welcome to the team!

Job Board

Dispatch is hiring Drivers in Cincinnati, Chicago, Dallas, Kansas City, Orlando, and Minneapolis.
Structural is hiring an Account Executive and a Senior Software Engineer.
Team Genius is hiring a Lead Full-Stack Engineer.
Pitchly is hiring a UI/UX designer and Core engineer- watch for postings or contact directly for details.

Great North Labs’s July Update

Where to Invest in the Midwest

At Great North Labs we are constantly making the case for investing in venture capital in the upper Midwest. Skepticism ranges from the size of the funds here, to the funding opportunities of the region, to the value of venture itself. GNL partner Pradip Madan addresses these issues in his latest piece “Where to Invest in the Midwest: Venture Across Asset Classes”. The article explores the popularity of venture investing with various types of investors, market timing, and the unique advantages of investing in a small venture fund in the upper Midwest.

Events

Thanks to everyone who came out to the Digital Transformation Summit on July 25th! Hosted by Great North Labs and Digerati, with speakers Gene Munster and Mark Ritchie, the Minneapolis event was a thoughtful collection of successful panelists and innovation professionals. With great food and cocktails, and VR demos by [x]cube LABS, the night was as fun as it was empowering.

August 16th-23rd, Madison. Forward Fest is an 8-day tech and entrepreneurship festival. It is a tremendous collection of events for startups and entrepreneurs. Ryan Weber will be attending from the 20-22nd, and will be holding office hours to meet with startups, entrepreneurs and investors while in Madison! Use the contact links below or tweet @mnvikingsfan to set up a time to meet!

August 20-22nd, Grand Forks. UAS Summit & Expo. What is UAS? Unmanned Aerial Systems: drones, their controllers and operators. This summit is in its twelfth year!

September 13th, Minneapolis. Coolest Companies Fest is put on by the Minneapolis branch of the tech and entrepreneurship publication, American Inno. “Join us for drinks, music, fun and the Coolest Companies celebration in September! During the event, we’ll crown Minne Inno’s Coolest Companies.”

September 17th, St. Cloud. Great North Labs annual stakeholder meeting. Save the date! Invitations and details to come!

September 19-20th, Des Moines. Angel Capital Association (ACA) Midwest Regional Angel Meeting . A forum for Midwest angel investors to learn about latest industry trends and access the ACA “Best of the Midwest” investments for syndication opportunities.

September 27-28th, Chicago. Rise of the Rest CEO Summit. This is a private event put on by Steve Case’s Rise of the Rest Seed Fund. If you’re in Chicago and you want to connect with Great North Labs, Rob Weber will be in town for this event. Contact us through the contact links at the bottom of this email, or tweet Rob directly @robertjweber !

Portfolio action

Pitchly is the newest addition to the Great North Labs portfolio. It is a content service platform for M&A professionals to organize and activate their intellectual property. Based in Des Moines, Iowa, Pitchly has developed a SaaS platform for professional service firms to aggregate information created during client engagements. Pitchly enables customers to conduct analyses on prior client services and easily turn data into content for marketing and business development activities. Pitchly is used in 35 countries to store more than 2 million client service data points for its customers.

Dispatch has closed their round of funding led by Great North Labs! The funding will be used to fuel an expansion to new markets. We had a strong showing for co-investors, with Revolution’s Rise of the Rest Seed Fund and the Gopher Angels investing alongside in the over-subscribed round.

New advisors

Bonnie Speer McGrath is President of Speer McGrath & Co. and CHRO of the Timmaron Group. Both companies provide executive support, board work, investing and fundraising. She was formerly President of TruScribe Software (now known as Squigl) , and nonconcurrently, the Board Director. Welcome to the team, Bonnie!

Job Board

FactoryFix is hiring a Business Development Representative
Dispatch is hiring a Sales Manager
Structural is hiring a Back-end Software Engineer, and a Senior Software Engineer
Team Genius is hiring a Lead Full Stack Developer

More than 8,000 venture-backed companies received a combined $85 billion in funding in 2017, representing the highest annual total since 2000.[i] As stocks, real estate investments, and venture capital reach record highs, what are investors thinking about where to invest?
The answer depends on the type of investor:

Large funds such as university endowments, pension funds and funds-of-funds have been allocating a part of their portfolio to venture capital for many years now and have seen success. Universities like the University of Minnesota[ii], Stanford[iii] and Yale[iv] have done very well with venture investments. For the fiscal year ending June 2015, the University of Minnesota invested 26.1% of its capital in private investments, with 14% of the private allocation invested in venture capital. The overall fund returned 5.7%, private capital returned 16.1%, and venture capital returned 28%.[v] This has increased the appetite for venture investments among endowments.
High net worth individuals who have built their wealth in tech are reinvesting in tech venture funds.
High net worth individuals who have traditionally invested in the stock market, real estate, or private equity, are warming up to tech venture investing.
Family offices are increasingly doing the same. In a recent tally of the attendees of a US family office event, 35 out of 60 firms expressed interest in venture capital.

Is this a good time for venture investing?
If the economy continues to do well, venture investments will do well. If the economy falters or if there is a stock market correction, this may still be a good time to invest in venture capital.
This is because stock market corrections (and corrections in the real estate market, which usually follows the stock market) follow business cycles, which can last 4-7 years. Venture funds usually invest over a 9-10 year investment cycle (i.e., a 5-6 year investment period followed by a 4-5 year harvest period). A slower business climate or stock market correction ahead could well be bracketed within the life of a new fund. And if needed, with due approvals from the limited partners, venture funds can extend their term to time their exits better.[vi]

Is there benefit in investing in venture funds in down cycles?
Let us look at the dynamics of different asset classes in downturns.

Real estate – During the 2008 financial meltdown, real estate crumbled. As people lost their jobs, renters could not pay their rents, and property owners could not cover their mortgages. As defaults grew, real estate prices dropped. The Case-Shiller index dropped from 195 in 2005 to 116 in 2011.[vii] Considering the leverage of real estate investments, the losses for investors were much higher.
Stocks, ETFs – The stock market similarly took a serious hit. The DJIA dropped 54% from 14,164 to 6,469 over 17 months.
Venture capital – From Q1 2008 to Q1 2009, venture funding fell by 50% nationally to $3.9 billion (Dow Jones Venture Source).

Why did venture capital fare better than real estate or stocks?
First, lean times promote capital efficiency. As is often heard, recessions are the best time to start new companies, which is where early-stage venture capital is focused.
Second, venture capital firms mark up or mark down their investments over their life cycle. However, as actual valuations are pegged only by liquidity events, the real IRR is not known until the investments achieve liquidity. During the holding period, capital-efficient companies, and venture companies that focus on capital efficiency, do well, i.e., are counter-cyclical. They suffer fewer dislocations during downtimes. They can maintain their strategies, continue to do business as usual, and get ahead of those that slow down. Employees of such companies are more secure and loyal. And if needed, high-quality talent not available during good times can be hired, with loyalty that again pays dividends over the long term.

The capital efficiency of the upper Midwest
Companies in the upper Midwest inherently tend to be capital-efficient because there is less capital available. Similarly, smaller funds such as there are in the upper Midwest are inherently more capital-efficient, as they have less to invest.
44% of venture capital flows into Silicon Valley.[viii] This sets the consumption set-point of Silicon Valley companies at much higher burn rates than in regions where availability of venture funds is limited. The relative lack of available capital in other regions, including the upper Midwest, instills caution in spending.

Employee wages
While most other expenses are comparable across the US, with legendary real estate prices, Silicon Valley employees cannot survive at less than Silicon Valley wages.
This is not true in the upper Midwest. Though other expenses are comparable, housing costs may vary from 1/3^rd to 1/10^th of the Bay Area, enabling much greater capital efficiency for employers. For example, Google employees can buy 5 houses for the price of one by moving to one of Google’s locations across the country.[ix]

Figure 1. The real estate cost advantage of the upper Midwest compares well against not only the most expensive regions in the US, but also against what may be incorrectly perceived as lower-cost overseas regions (e.g., China). Seven cities in China and an equal number of cities in the US are listed above Minneapolis.

Fold? Hold? Or double down?
Not only can capital-efficient companies continue without disruption during slow times, given the lag between investment and market benefit, those that increase their investment can emerge even stronger in a recovery.
Intel applied this counter-intuitive strategy across many recessionary cycles, and invested several billion dollars in down cycles.[x] When their new semiconductor fabrication capacity resulting from these investments came online a few years later, their timing coincided with market rebound. On the other hand, competition (e.g., Atmel, Fairchild, Intersil/GE, IBM, Motorola, Raytheon, and several others) weakened from retrenchment and lost market share. As the industry consolidated during down cycles, Intel gained market share, and cumulatively over several cycles, emerged as its leader.
Some investors may feel that liquidity is useful during a downtime. Others argue against it, as getting out of the game when entrepreneurs are especially capital-efficient has a higher opportunity cost, and to use the Intel analogy, puts the winners further ahead of the losers. According to a prominent Silicon Valley investor, “you got to stay in the game”. At these times there are opportunities to go one step farther and double down.

Are smaller funds better than larger funds?
The statistical odds of a unicorn (company valued at over $1B) are lower than, say, of a ‘deci-corn’ (company valued at over $100M). Larger funds invest larger amounts per deal. To return high multiples, they need unicorns, which are rare. Smaller funds invest smaller amounts and can get the same multiples from ‘deci-corns’, which are much more common.

Advantages for Midwest venture capital
There are other tactics used by, and attributes common to, small Midwest VC’s that safeguard against downturns:

Global investments that require skills available in the upper Midwest. While staying abreast of the latest trends in Silicon Valley to stay competitive, Midwest VC’s can take advantage of expertise available in the upper Midwest to serve global markets. In so doing, they avoid the valuation markups and early-round dilutions of Silicon Valley yet seek global parity in later rounds and exits.
Local investments, global exits. An emphasis on the upper Midwest inherently allows investing at a discount compared to the investments in overheated markets such as Silicon Valley. This roughly translates to a 60% discount in term sheets offered on companies in the Upper Midwest. Global businesses rooted in the upper Midwest still attain exit valuations that correlate with global valuations. Thus, if a down cycle may require 50% markdowns for some Silicon Valley funds, Midwest VC’s can still record a 10% (=60-50%) markup at the bottom of the trough, emerge stronger from uninterrupted progress from investees’ capital efficiency, and exit with a markup brought to parity with global valuations in strong economic times.
Emphasis on product-market fit. With the reduced capital investment now possible in many tech businesses, the barrier to entry has been lowered. Smaller venture funds can adjust criteria to focus investments on product-market fit, early revenue, and early break-even and profitability, instead of being limited by the number of affordable investment options. Nothing demonstrates product-market fit and staying power than paying customers and profit; for customers, employees and investors alike, there is nothing more powerful than profitability. Judicious investment in such businesses and mentorship to focus teams on profitability facilitates survival in lean times.
Operators as investors. Small venture funds are often started by former operators with past successful exits, and the Midwest is no different. Many Midwest VC’s have a history of building profitable businesses the old-fashioned way, a dollar at a time. This experience of running a company, of managing payroll through good times and bad, of knowing the revenue and cost management discipline required to make money operationally and sustainably (i.e., not with short-term financial engineering), is invaluable for VC’s to have. So much so, that even accomplished operators will supplement their teams with experienced industry advisors.

[i] https://nvca.org/research/research-resources/

[ii] https://www.bizjournals.com/twincities/news/2018/03/15/how-the-leader-of-the-university-of-minnesotas.html

[iii] https://www.wsj.com/articles/robert-f-wallace-named-ceo-of-stanfords-endowment-1427138729

[iv] https://news.yale.edu/2017/10/10/investment-return-113-brings-yale-endowment-value-272-billion

[v] http://www.pionline.com/article/20151014/ONLINE/151019943/university-of-minnesota-endowment-reports-57-fiscal-year-return

[vi] https://www.strictlybusinesslawblog.com/2017/06/29/the-life-cycle-of-a-private-equity-or-venture-capital-fund/

[vii] https://en.wikipedia.org/wiki/Case%E2%80%93Shiller_index

[viii] National Venture Capital Association

[ix] https://www.cnbc.com/2017/04/07/you-can-buy-multiple-houses-for-the-cost-of-one-near-google-hq.html

[x] https://www.reuters.com/article/us-intel/intel-to-invest-7-billion-in-u-s-as-recession-deepens-idUSTRE5196WR20090210

Amazon (mkt cap ~$760B) recently paid more for Whole Foods ($13.7B) than the balance sheets of many mid-market grocers. This frames the obvious question for all grocers: how can your business compete long-term?
This is an especially challenging question for the smaller-cap grocers. Large companies such as Walmart (mkt cap ~$250B) and Target (mkt cap ~$40B) can afford sizable investments. To a lesser degree, the balance sheets of the next tier of grocers, like Kroger (mkt cap ~$21B), also allow them to focus on a couple of key moves and a few smaller initiatives, and to double-down if necessary.
Smaller grocery chains have to look more carefully, however. Except for mergers or sales, their balance sheets are not strong enough to complete large transactions on their own. Nor do they have the operating margin to buy with debt without materially impacting their P&Ls and carrying long-term risk to pay it down, especially if the economy takes a downward turn. With average pre-tax profits of 2% and an annual growth of 0.9% (2012-17), retained earnings can barely meet working capital growth needs, leaving limited capital for innovation.[i]

Mid-Market Innovation

Capital availability aside, the main question still remains: what should mid-market grocers do? To answer this question, let’s break it down into smaller questions and then explore those topics:

1. Without active strategic steps, can mid-market grocers survive over the next 1-2 decades? Do they have to counteract Amazon’s thrust and make similar moves to stay in business? Will they be weaker if they cannot or do not do so?

2. If they act, how should they proceed? Diversify into new markets? Consolidate with other mid-sized grocers? Or try to sell to Amazon, Walmart or Target assuming they are interested?

3. Or, should they build their own path by seeding and growing innovation, and grafting small acquisitions to accelerate growth and achieve scale down these paths?

Long-term Survival

The US grocery retail market stands at $649B today, with 3.4M (1% of the US population) employees across the 66,000+ businesses comprising this industry.[ii] Given a growing population and the fact that in times good or bad, we all must eat, demand for food is unlikely to go down, though there may be shifts in preferences (e.g., generics v. branded) depending on economic conditions.
In other words, the industry is not small, not consolidated, and not at risk for a decline in demand. Rather, it is large, fragmented, and diverse, with fundamentally stable or growing demand. This makes it difficult for disrupters to disrupt broadly or deeply, and for adaptive innovators, it presents many options.
Evolution favors innovation and adaptability over size and scale, and nature provides useful insight into this Darwinian paradigm. While size and scale produce advantages for certain species, it is no guarantee of future success- it is a sign of successful growth, of successful past innovation. Colossal dinosaurs once dominated the planet, but the reason they rose to prominence, and the only reason their lineage persists in birds is because of adaptive innovations.
With the universal need for food, severe consolidation of grocery chains is unlikely as long as the US economy grows. And with the diversity of ecosystem players, customer preferences, and products, those who innovatively adapt will continue to grow.

Capital: Strength or Weakness?

For over a decade now, Amazon has taken advantage of its strong balance sheets and scale to gain presence in groceries. Given that Amazon’s market cap is roughly twice that of Target’s and Walmart’s combined is a material factor in its choice of strategic weapon: capital. Amazon’s investments related to grocery retailing are approximately $15B.
However, it is incorrect to assume that lots of capital means inevitable success. Many acquisitions simply fail to take root in their new home, no matter how useful the innovation. And companies such as Webvan failed under the weight of their capital because they failed to establish product-market fit incrementally and left no room for adaptive course-correction.

How to Proceed?

If Darwinism tends to prevail, then capital is not an unequivocal advantage, and the existential factor is adaptive growth, not survival.
We believe the multi-part answer is to (1) seed the eco-system for knowledge and initial product-market validation, (2) place 1-2 larger bets (at any given time for focus) based on an understanding of the market forces towards new business models or diversification, then (3) strengthen them to achieve scale, and (4) in parallel, carve out or sunset lines of business with the strongest headwinds to free up cash and focus on growth.
The outcome of such steps can put a mid-market grocer into high-growth business(es) that may not collide directly with Amazon or Walmart, and possibly even set the stage for a valuable acquisition or merger.

Topline Levers

Across these phases – seeding the ecosystem, placing 1-2 larger bets, and achieving scale – the two topline levers are greater share of wallet and new customers. These can come from new products and services.
Products (“SKUs”) such as staples and provisions, non-perishables, and fresh fruits & vegetables, all offer room for expansion. Depending on local demographics, preferences such as branded vs. non-branded, price vs. selection, organic foods, local produce, regional/ethnic items, and specialty items such as liquor and wine, define growth options.
SKU expansion does not require significant capital. Rather it requires a process that allows select experiments to be managed by the grocer, and a much longer ‘tail’ to be ‘self-managed’ by the SKU suppliers, where the grocer only provides limited ‘shelf space’ for a limited time (e.g., in-store endcaps or online kiosks) and charges for the service (and is able to do it without losing money). It is reasonable for SKU suppliers to be willing to pay for more visible use of physical space, differentiated presentation, or better ways to engage customers.
Online shopping enables choice extensions and endless aisles at a modest cost, whereas in-store options can emphasize experience. Demographic understanding of customer needs (healthy foods, organics, specialty foods, local/seasonal produce, etc.) can be assessed through affinity programs and community engagement combined with analytics. Going beyond food and provisions, adjacent businesses such as banking kiosks or medical ‘minute clinics’ can be evaluated in the same way.
Services such as partially- or pre-cooked foods, cellar management (a la VinCellar), produce delivery (a la Instacart or Peapod), meal delivery (a la Blue Apron), in-store eateries, and in-store convenient checkout without PoS lines can also be offered without material investment as vendor or partner offerings from established players and startups.

Bottomline Levers

The main bottomline levers are operational expenses such as rent, labor, and logistics including warehousing and supply chain management (e.g., inventory turns, lower margin items online); and financial items such as cash flow management or cost of debt. Many optimizations for these levers (e.g., robotic warehouses, robotic kitchen management, blockchain-based cold chain tracking, etc.) can also be enabled by partnerships with technology-based startups.

Capital Efficiency

In reviewing the above ideas, it becomes clear that many options are available in capital-efficient ways. Among these options, relationships with venture firms can facilitate access to both topline and bottomline tech-based innovation partners.
We are in an era of Software-as-a-Service (SaaS), which itself mitigates capex. Examples of services include online store builders and marketplaces (e-tail), security, brand/user preference analysis and brand promotion (martech, AI), customer service platforms (chatbots, CRM, KPO), and fleet management (IoT, gig economy apps). As federated web services with APIs, integration of SaaS offerings with the grocer’s enterprise software has become less expensive. With responsive design techniques, consistent desktop and mobile presentations for omni-channel access have become easy. And with integrated dev-ops processes, their deployment and upgrades have become easier as well.
Similarly, the gig economy mitigates capex and opex. Alternatives to home delivery by Whole Foods or Walmart Grocery (earlier known as Walmart-to-Go) can be made available without capex through third parties such as Instacart and Peapod. Federated independent couriers (e.g., Dispatch [iii])provide alternatives (figure 2). Also on the innovation frontier, though groceries are not the prime use case today, third-party drone companies offer drone-based services for commercial payloads of various sizes and type.

Figure 2. Which is better – owned delivery fleets, or independents marshalled with SaaS software? The answer may lie in the clash of medallions vs. Uber.
All of these services become easier to procure through relationships with VC firms that have a high awareness of these start-ups and use cases. The VC community has been quite active in grocery-focused investments. With 100+ investments, ~429 investors, and ~47 exits, grocery-focused VC firms have been active globally. Driving growth through capital-efficient innovation is necessary for mid-market grocers to stay competitive in the industry. Venture firms can provide options for adaptation, intelligence and diversification without billion-dollar expenditures.
[i] http://www.mngrocers.com/index.php/industry/stats
[ii]https://retailowner.com/Benchmarks/Food-and-Beverage-Stores/Supermarkets-Grocery-Stores#290291-profit
[iii] Dispatch is a Great North Labs investment

The Industrial Internet is the future- and it’s being built now.

IoT and Analytics are transforming industry, and who know industry like the upper Midwest?

Add to the decades of institutional experience a community of educated tech adopters, then just add water (liquid capital) and stir. BAM!
Forget Silicon Valley, this is Silicon Lakes.

Read the Full Story

New Investment

TeamGenius is player evaluation software for managing tryouts, coach evaluations, camps, and more. Team Genius is focused on building stronger young adults and communities through their powerful, simple software tool. Streamline scoring with the mobile application, add transparency to the evaluation process, and ditch the paper evaluation forms, clipboards, and spreadsheets!

Browse our Portfolio

Minnebar 13

With no formal workshops, “BarCamps” are user-generated and participant-led by tech and business community leaders. Over 100 sessions were held this year at Minnebar13. Participants, speakers, and staff braved the ridiculous Minnesota blizzard to hunker down at Best Buy HQ for Minnestar’s premier tech conference.

MinneStar is currently running a 100 Day Challenge where the Board of Directors is matching donations by new community members. Join Rob and Ryan Weber and contribute to this important part of the Twin Cities tech community!

Great North Labs at Minnebar

Ryan Weber presented How Running Lean Can Help You Raise Capital, about how the stages of funding correlate to the phases of customer development. His Exponential Technology and Leadership talk delved into disruptive technology and innovation.

Rob Weber focused on How Entrepreneurs are Impacting Cities. Participants learned core concepts on entrepreneurial thinking and leveraging local industry expertise to create the next big thing.

Upcoming Events

EntreFEST– May 17-18, Cedar Rapids, IA

State of Innovation: Ag-Tech– May 22nd, Minneapolis, MN

Drone Focus Conference 2018– May 30, Fargo, ND

New Venture Challenge– May 30, Chicago, IL

Welcome New Advisors, to the Great North Labs Team!

Brad Lehrman – Attorney, Soffer Law Group, PLLC
Jeffrey Robbins – Attorney for Entrepreneurs and Angel and Venture Investors, Messerli & Kramer
Mitch Coopet – Co-founder of Aftercode
Paul Borochin – Assistant Professor of Finance at UConn School of Business
Art Rosenberg – President and Owner, Capital Commercial Realty Group, LLC
Shawn Teal – President, Forest Hill Capital

See our Team

Healthcare Today

Some of the smartest minds work in healthcare, life sciences and biopharma. Yet the healthcare sector struggles to bring innovation into its ecosystem. The pace of innovation adoption has been much greater in other sectors, including in communication (Facebook, Skype), learning (Google, YouTube, Coursera), shopping (Amazon), personal finance (PayPal), and entertainment (Netflix).
This is not because of a lack of innovation in the pipeline. Healthcare sector innovators are hard at work on drugs and therapeutics, devices, and operational aspects of healthcare delivery. Breakthroughs have come in genomics-based precision drugs, machine-learning-based disease detection, EMRs, payment systems, patient adherence and education tools. In healthcare, the innovation tends to be evidence-based, with scientific papers that quantify results from well-designed experiments, and a highly-skilled academic research ecosystem at their source. That aspect is unique in the healthcare sector, and the sector has other ecosystem attributes not seen in other sectors. It’s this unique ecosystem that makes market insertion, growth and adoption at scale more complex, requiring specific insight and enablement.
The Upper Midwest has substantial healthcare anchors to promote a thriving ecosystem of clinical innovation and practice. Examples include the leading research, teaching and clinical centers of the Mayo Clinic and University of Minnesota; hospital systems like Minnesota Health System and CentraCare; device manufacturer Medtronic; software companies like Epic; payers such as United Healthcare; and the processors Optum and United. There are also hundreds of strong, related entities across the region. Healthcare investment is shifting from traditional hotspots like Boston, Houston, and Raleigh-Durham to Silicon Valley, and while the global ecosystem catches up, there is an opportunity to take advantage of this transition to strengthen the ecosystem in the Upper Midwest.
Strong healthcare research leads to breakthrough ideas which require mentorship and incubation to grow. Leading research institutions can organize ecosystem support, such as how the University of Minnesota encourages mentorship through their Venture Center’s Business Advisory Group which brings together entrepreneurs, funds (including Great North Capital Fund), and industry leaders to drive the successful commercialization of its academic research. This is big business, and the U of MN now generates roughly $1B per year from such efforts (two-thirds life sciences and one-third software/IT).
Geographic and industry-themed startup accelerators have also begun to proliferate in the region. Startup accelerators support early-stage, growth-driven companies through education, mentorship, and financing for a fixed period of time, among an admitted cohort of companies. The multi-city startup accelerator, Gener8tor, is managing a new Twin Cities med-tech accelerator backed by Boston Scientific, the University of Minnesota, and the Mayo Clinic. Venture studios and incubators are other forms of early-stage support available in the region. Minneapolis-based Invenshure has successfully launched multiple healthcare startups.
The region’s healthcare system is also significant on the demand side. For example, the cost drivers of healthcare in Minnesota reflect those in the US at large. Yet, while challenges in patient care are also similar to those of other regions, Minnesota’s efficiency is better. Healthcare spending accounts for over 16% of the US economy but is only about 13% of the Minnesota economy. So not only are Minnesota-based insights relevant, they are valuable. Innovations can be developed and piloted in Minnesota, then applied in other states. Startups developed here can be scaled nationally and, with adaptation, internationally.

Figure 1: Health Care Cost Drivers: Spending and Shares of Growth by Service, 2011 to 2013.
(Source: Minnesota Department of Health).

Change is Accelerating

Each decade brings its own set of innovations that transform industries. The healthcare industry will undergo vast changes in the next 10-20 years. The growing spate of investments and partnerships among tech innovators is signaling an increasing rate of change in this sector. The most visible examples of these innovators include Amazon, Apple, Google, Qualcomm, and Walmart. Google Ventures alone did 27 healthcare deals in 2017, up from 9 in 2013.
These companies you wouldn’t normally think of as bastions of healthcare innovation, yet they are all allocating large talent pools and budgets in the industry. Until Tesla, who would have thought that the next innovation in cars would come from Silicon Valley? More than their balance sheets, the noteworthy attributes of these companies are their culture of observing ecosystems, and their practice of inserting innovation in a stepwise and sustained manner to upend markets.
When you combine such entities with those like Berkshire Hathaway and Goldman Sachs (both of whom are partnering with Amazon in healthcare), and the financial and corporate venture groups that work with them, a disruptive landscape begins to take shape in which other innovators and incumbents alike can find new opportunities. For innovators, it means aligning their innovations with insertion points with high economic value and low resistance. For incumbents, at minimum, it means awareness and being prepared; more proactively, it means proactive engagement with capital (e.g., investments through VC firms), pilots, and adoption. For example, the Mayo Clinic has partnered with Google on leveraging its Knowledge Graph smart search algorithm for patient education, and Optum’s venture arm (based in Boston and Silicon Valley) has allocated $250M to venture investments
The range of innovations in the pipeline is equally stunning. Early examples include smartphones coupled with wearables for clinical-grade data. Today’s pipeline includes voice assistants (trained Alexa-like products) for health-related questions, machine vision for detecting physical anomalies (in skin, bones, retinae, or genes) or even bacteria in food. There are AI and visualization-enabled robotic surgery tools for doctors (e.g., Verb Surgical); machine learning in patient-specific onset detection for things like allergies and COPD; big data in early cancer detection (e.g., Freenome) and other diseases like multiple sclerosis, Parkinson’s and autism. The Mayo Clinic and AliveCor have shown that an AI can be trained to identify people at risk for arrhythmia and sudden cardiac arrest despite normal EKG results. There is also analytics-optimized underwriting for individuals and small businesses (e.g., Oscar), Medicaid (Clover) and self-insured populations (Collective Health).

Enabling the Innovation

Applying capital to create, enable and grow innovation platforms, align disruption with practical value in startups, and engage institutions for initial adoption, deployment at scale, and sustained growth requires a deep understanding of the ecosystem and cross-disciplinary skills to navigate it. This is especially true in healthcare given the ecosystem’s unique attributes and complexity, the importance of human health, government regulation, and the depth of incumbency among some players.
Startups benefit from focused enablement of resources including mentors, partners, lab space, hardware/software development expertise, and communication and data analysis platforms. Healthcare enterprises benefit from investment partners who understand their service goals and the need to balance innovation within financial constraints and with operational realities such as the need for patient privacy and the limitations of government regulations.
At Great North Labs, we focus on bringing such forces together to apply capital and expertise effectively and efficiently. We study ecosystems and leverage experts as advisors. We bring people together at events and entrepreneur training, through referrals, and with investment, mentorship and thought leadership by our team. We apply our capital and resources locally, with a deep connection to innovation hubs nationally, and with the goal of scaling globally.

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!

Grant Gibson Apr 30, 2024

April Newsletter

Sergio Angelini, Luis Morales, Patricio Naumann

Rob Weber Apr 09, 2024

Great North Ventures Invests in Mangxo to Revolutionize Credit Terms in Latam’s Construction Sector

Rob Weber Mar 12, 2024

WithMe: A Startup Growth Story Fueled by Profits

Rob Weber Mar 06, 2024

HLRBO Raises $1M Seed Round to Better Assist Landowners in Leasing Their Land to Hunters

Great North Ventures Jun 29, 2023

June Newsletter

Pradip Madan Jun 27, 2023

Revolutionizing Medical AI Development: Flywheel Announces $54 Million in Series D Funding led by Novalis LifeSciences & NVentures

Rob Weber Jun 01, 2023

Grant Gibson Joins The Great North Ventures Team

Rob Weber May 01, 2023

Demystifying Startup HR

Rob Weber Apr 26, 2023

Joseph Daher Joins The Great North Ventures Team

Great North Ventures Mar 29, 2023

Head of Finance & Fund Administration- Venture Capital Firm (Remote)

Great North Ventures Jan 05, 2023

Demystifying Startup HR

Great North Ventures Sep 03, 2022

3 Portfolio Companies Make Inc. 5000 + Quicklly & Instacart Expand

Great North Ventures Sep 02, 2022

Mike Schulte, Principal at Great North Ventures, on Episode 15, “Execution is King” (Part 2)

Great North Ventures Sep 01, 2022

Mike Schulte, Principal at Great North Ventures, on Episode 14, “Execution is King” (Part 1)

3 Portfolio Companies on The Inc. 5000 List

Great North Ventures Aug 23, 2022

3 Portfolio Companies Ranked on The Inc. 5000 List

Great North Ventures Aug 04, 2022

iraLogix closes $22M + Branch expands with Uber

Great North Ventures Aug 01, 2022

iraLogix closes $22M Series C

Great North Ventures Jul 11, 2022

Flywheel lands Gates Foundation grant

Great North Ventures Jun 30, 2022

Venture Capital Analyst

Great North Ventures Jun 23, 2022

Orazio Buzza, Founder and CEO of Fooda – on Episode 13, “Execution is King”

Great North Ventures Jun 03, 2022

$40M Fund II Raised!

Great North Ventures May 26, 2022

Eric Martell, Founder of Pear Commerce: Episode 13, Execution is King

Great North Ventures Raises $40M Fund II

Great North Ventures May 23, 2022

Great North Ventures Raises $40 Million Fund II

Great North Ventures May 18, 2022

Investment Thesis: Fund II Strategy

Investment Thesis: Community-Driven Applications

Great North Ventures May 13, 2022

Investment Theme: Community-Driven Applications

Investment Themes: Digital Transformation Through AI

Great North Ventures May 13, 2022

Investment Theme: Digital Transformation Through AI

Great North Ventures May 13, 2022

Investment Theme: Solving Labor Problems

Great North Ventures May 02, 2022

Trends in the Gig Economy + Work in the Metaverse

Great North Ventures Apr 20, 2022

Tipatat Chennavasin, General Manager and Co-Founder of The Venture Reality Fund: Episode 12, Execution is King

Great North Ventures Apr 04, 2022

Portfolio raises $125M + talking fundraising with Branch CEO

Great North Ventures Mar 17, 2022

Omnia Fishing closes $4M round, joins Great North portfolio!

Great North Ventures Mar 09, 2022

Atif Siddiqi, Founder/CEO of Branch: Episode 11, Execution is King

Great North Ventures Feb 24, 2022

Michael Martocci, CEO and Founder of SwagUp: Episode 10, Execution is King

Great North Ventures Feb 04, 2022

Yardstik new to portfolio, closes $8M Series A

Great North Ventures Feb 01, 2022

First venture studio startup comes out of stealth!

Great North Ventures Jan 31, 2022

Insights for founders from a data guru, + FactoryFix raises a Series A!

Great North Ventures Jan 26, 2022

Una Fox: Episode 9, Execution is King

Rob Weber Jan 24, 2022

Start With a Mobile App, Not a Website

The rise of rapid detection technologies

Pradip Madan Jan 13, 2022

The Rise of Rapid Consumer Detection Technologies: A 2022 Outlook

Great North Ventures Jan 03, 2022

2ndKitchen acquired by SoftBank-backed REEF + advice from an early Googler

Great North Ventures Dec 29, 2021

Joe Sriver, 4giving: Episode 8, Execution is King

Great North Ventures Dec 22, 2021

2ndKitchen Acquired by REEF

Great North Ventures Dec 04, 2021

Venture studio startup jobs + advice for founders from founders

Great North Ventures Nov 24, 2021

Best Advice from the Great North Annual Event: Episode 7, Execution is King

Great North Ventures Nov 01, 2021

Newsletter: Do you fit our investing themes?

Great North Ventures Oct 21, 2021

Jonathan Treble, PrintWithMe: Episode 6, Execution is King