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.

Table of Contents

By Susan T. Schuster 

Do you have the eyes to see opportunity? The inner-spark that says “hey, this might be crazy, but I think it could be the next big thing?” I’ve learned over the years that often the very best ideas sound not only crazy or unlikely, but downright impossible. How do these ideas, these innovations, often come about? Cross-pollination. Take the best of two worlds and mix together into something unique—be it people and ideas or opportunities and organizations. 

People often ask, “how can I learn to be innovative, to see potential where others don’t?” Just like a lot of things in life, innovation is part art, part science, but it is more than that. To be innovative, one must be able to clearly see the connectivity and possibilities between seemingly unrelated people, organizations, and opportunities. Do you feel a surge of energy and excitement over an idea? Take that and run with it. What can you draw from different areas of expertise, interest, or knowledge to build a team to make it possible? Start with an open slate—as Walt Disney said, “It’s kind of fun to do the impossible.” 

What do you bring to the table? What diverse strengths do you have on your team? StrengthsFinder is a great start, but use tools like that to dig even deeper. Who are you? What defines you? I am more complex than my top five strengths: ideation-strategic-achiever-maximizer-individualization. What is your internal driver? Passion and enthusiasm for seeing connections is the primary catalyst for me. I absolutely get a thrill from connecting people, organizations, and opportunities—whether it’s the perfect volunteer gig; an unexpected new job for a friend; or even the best plumber, roofer, or seamstress in my neighborhood—to make the perfect match is just plain fun.

Can you define your personal brand in just one word? Doing this can help you see how you might initially approach innovation. My word, my personal brand, has always been Fun, with a capital F. Not silly fun, but energizing, exciting, “get on The Energy Bus with me” fun. Non-negotiables in my definition of fun include energy and growth, mutual trust and respect, and a healthy sense of humor with an energizing vision for the future. What is your personal brand? Try on different perspectives, like De Bono’s classic thinking hats; would your perspective change with a different approach?

Want to be innovative? Start by educating yourself. The basics keys are Associating, Questioning, Observing, Networking, and Experimenting. Associating is all about cross-pollination, making connections between two seemingly unrelated thoughts, processes, or situations. Indeed, innovation skills can be developed.

To support your learning, connect with like-minded people from different walks of life that care about innovation. In the Twin Cities, check out the ground-breaking Social Innovation Lab to experience cross-sector assemblies that seek to transform ideas into action.

Learn, then keep learning; link different interests together. Read books like Creativity. Look at and learn from the new interdisciplinary majors open to college students—again, the benefits of cross-pollination. We are not a world of silos any more; diverse abilities and interests are where the power to innovate resides.

What pulls it all together? For me, I see with passionate clarity, innovation is about relationships, being curious about the world, about other people, their needs, their strengths, their hopes, dreams. Have the eyes to see opportunity; this is where the innovators excel. See the potential in others—people have so much untapped potential that you as a catalyst can help them unleash. See the potential in organizations—new ways to collaborate or approach the work. Most of all, see the synergies between the people, the organizations, the challenges—this is where the opportunities lie. See with fresh eyes. Change up where you sit at work, talk to new people, keep an open mind. Say, “what if?” Be curious! "To innovate, find what's hiding in plain sight."

“A culture of innovation starts with engaging the hearts and imaginations of people around you.”

—Susan T. Schuster

Have you noticed that some of the most innovative people have diverse interests, diverse networks? They seem to have their hand in many worlds, plucking ideas from here, new thoughts from there, and then come up with a whole new approach. There is unharnessed power in cross-pollinating across industries, professions, communities, and (particularly) sectors—public, private, nonprofit. It is often said that the most important innovations in the future will be the innovation of ideas, not necessarily what we have traditionally thought of as innovation, e.g. gadgets, such as smartphones, iPods, etc.

A great example of cross-pollinating is Springboard for the Arts’ Community Supported Art (CSA) program, which uses the model of community supported agriculture (the original CSA) to bring artists and patrons together. Bringing even more worlds together to cross-pollinate is a project like Irrigate, which blows apart all boundaries, linking public, private and arts sectors to build community.

CSA pickup (photo by Scott Streble)  

Even when something innovative does burst forth, it takes leadership and vision to support and nurture that innovation. Communities and organizations that are successful not only support, but prize their innovators. An environment conducive to innovation draws more energy to it, leading to exponential impact. Innovation is just a glimmer of an idea to start; you must know it when you see it and be the catalyst to move the idea forward.

A great local example of this is the Blue Cross and Blue Shield of Minnesota Community Giving Garden. It all started with three women from Blue Cross and Blue Shield of Minnesota’s IT department (Joan Barrett, Susan Brousseau, and Magda Surrisi) who, in 2007, had the simple idea to grow produce on their corporate campus to provide access to healthy food for women and children at a local domestic violence shelter. They were innovators, taking the seemingly unrelated resources of corporate land and company volunteers and matching that with a community need—feeding hungry people. They were supported; their good idea was allowed to germinate (pun intended), to grow, and now has become part of the fabric of their community.

Joan Barrett, thinning carrots. Photo courtesy of Magda Surrisi.

Innovation is a powerful and inspirational force that propels others to get on board. The success of the Blue Cross giving garden, started in 2008, brought initial and growing interest from local corporations. Responding to this interest and enthusiastically sharing best practices and a mutual commitment to making a difference in our community led to the 2010 creation of the Twin Cities Corporate Giving Garden Network. This network of fifteen (and growing) companies now provides well over 10,000 pounds of fresh produce to hungry people in Minnesota and beyond.

Land O’Lakes, Inc. Giving Garden. Photo courtesy of Land O’Lakes. 

And guess what—an urban designer that I needed for a new innovative community project? I found him through a serendipitous and timely connection made possible by our very own Pollen, cross-pollination of the very best kind. Your network matters. 

Susan T. Schuster is a board member at Springboard for the Arts, senior community affairs consultant at Blue Cross and Blue Shield of Minnesota, creator and founder of the Twin Cities Corporate Giving Garden Network (the 2012 CVC-TC Innovation Award winner), and a passionate advocate for innovation in community involvement.