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Is Minnesota successful in entrepreneurship?

By Scott Litman, co-founder and Managing Partner of Magnet 360 and co-founder of Minnesota Cup, and John Stavig, Director of the Gary S. Holmes Center for Entrepreneurship, Carlson School of Management.

Minnesota has consistently been at or near the bottom among all states in the formation of new business entities per capita and the headline from the latest Kauffman Foundation report reinforces this. Business formation rates per capita are one measure of entrepreneurial activity, and since 2007 our state has not placed above 40th. Many have voiced concern over this data, but business formation rates per capita can be a misleading measure, as it does not distinguish between high growth ventures, lifestyle businesses and sole proprietorships.

For example, if a high rate of business formation includes volumes of businesses with no more than one employee, it could easily be tied to high unemployment and the necessity for individuals to incorporate while consulting or other measures. The items we should be measuring to determine the success of entrepreneurship in our state are businesses that through their success will create jobs, innovations that better the world around us and ultimately ventures that reward their investors as well.  These factors do not show up in the business formation data.

Minnesota’s future entrepreneurial activity is much more important than its quantity. Minnesota fares far better by other measures of entrepreneurial activity such as patents, workforce capability, or even venture investment – although there is room for improvement in these areas as well.  As we look at this data and other measures, we do need to strive to improve our ecosystem for entrepreneurship so we can attract, retain and support our most successful entrepreneurial endeavors.

Ways to Improve the Minnesota Entrepreneurial Ecosystem:

In order to increase both the quality and quantity of entrepreneurial activity in Minnesota, we need to do the following:

1) Create an end-to-end ecosystem that inspires, educates and supports entrepreneurs. 

  • Inspiration: Change the mindset to encourage and support taking calculated risks and constructive failure, entrepreneurship experiences at primary/secondary levels
  • Education: Primary education, STEM initiatives, innovation and entrepreneurship education and experiences at collegiate levels
  • Support & Resources: Resources and mentoring for entrepreneurs

2) Create a framework that incents formation and job creation:

  • Investments in education and workforce training
  • Angel tax credit
  • Other business tax incentives to create quality jobs
  • Favorable tax climate

Entrepreneurship and the University of Minnesota

In entrepreneurship education, we recognize that we cannot create entrepreneurs.  For individuals with the inherent capabilities, we can provide experiences and develop skills to make them more likely to succeed, as well as provide them with resources to get started and be connected with the business community. We can also work, over time, to change the cultural mindset that looks down on the inherent entrepreneurial failure. This is a long term investment.

Across the University of Minnesota, we’ve created and hosted new experiential classes and competitions (Minnesota Cup, pitch competitions, Startup Weekends) to spur entrepreneurial interest and activity. Along with our alumni co-founders, Scott Litman and Dan Mallin, we organize the largest statewide new venture competition in the country – the Minnesota Cup – that has supported more than 8,000 entrepreneurs since its launch in 2005.

Year after year, the Minnesota Cup continues to see an increase in participation and quality of applicants. Since 2009, finalists alone have raised more than $60 million dollars in capital to support the development of their ideas.

Through the results of our efforts at the University of Minnesota, we are seeing an increase in both the quality and quantity of the number of our students seeking to launch new ventures. This year alone, we have supported the testing of more than 100 student new business ideas, with [25] proceeding with their launch and development.

Keeping Entrepreneurs in Minnesota


Minnesota has its shortcomings when it comes to policies and incentives for entrepreneurs but we make up for it with our strong business community. Minnesota-based industries such as medical devices, food, manufacturing and retail, have created a healthy community of services providers and financial institutions. These large companies directly support Minnesota’s entrepreneurial community through spinouts, mergers and acquisitions, workforce development and through ready buyers of scale being right in our backyard. There is a sense from some that better programs exist next door in Wisconsin or entrepreneurs need to move to the coast. Minnesota is a great place to start a business, but we need to continue to develop and support our ecosystem for entrepreneurship to keep quality entrepreneurs in Minnesota and even attract entrepreneurs to move here.

The important thing to focus on is once there is entrepreneurial success, we need to tie the accomplished entrepreneurs back into the ecosystem to help the next generation learn from their mistakes and successes. These successful entrepreneurs will not only support future entrepreneurs through mentorship but also through investments and new ideas.

Promoting our Successes


In Minnesota’s high tech community alone, we’ve seen some terrific success stories in the last few years. We need to remember and share these high points because they encourage entrepreneurs to take risks and think big.

Early last year, Minneapolis-based Code 42 Software, a company providing online backup for consumers and enterprises, raised $52.5 million to advance its sales and marketing profile. In May of this year, enStratius, an award-winning enterprise cloud-management software and services provider that delivers single and multi-cloud management capabilities, was acquired by Dell. In 2010, Dell also acquired Compellent, a rapidly growing provider of highly-virtualized storage solutions with automated data management features for enterprise and cloud-computing environments for $960 million.

Going Forward


To remain competitive and to continue strengthening our entrepreneurial ecosystem, we must focus on our current assets and work to establish resilient incentives that encourage entrepreneurship.

Resources available to entrepreneurs have improved significantly in Minnesota over the past decade.  Organizations and competitions such as the Minnesota Cup, MinneBar, Collaborative, CoCo, Tech.MN, LifeScience Alley, MHTA, CleanTech Open and many health care industry groups and accelerators now provide additional support for emerging entrepreneurs.

The future of Minnesota’s entrepreneurial activity is far more important than a ranking on a list that doesn’t include multiple factors that are important to determining the overall health of a state’s entrepreneurial ecosystem. The silver lining to a last place ranking provides us with an opportunity to analyze what we’re currently doing for entrepreneurs and determine our strategy for the future. Minnesota needs to focus on job creation through entrepreneurship, innovations that lead to new industries and ongoing investment into startup companies.  

LEFT: John Stavig / RIGHT: Scott Litman

About the authors:

Scott is a Minnesota entrepreneur, co-founder of The Minnesota Cup and previous CEO and co-founder of Imaginet. Today, he serves as the co-founder and Managing Partner of Minneapolis based Magnet 360. 

John is currently the director of the Gary S. Holmes Center for Entrepreneurship at the University of Minnesota’s Carlson School of Management. His professional background is in management consulting, private equity, and the communications industry, having served as CEO, CFO and board member for several start-up and early-stage technology firms.

This article was originally published at BePollen.com.

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