launch minnesota first-year progress report

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First -Year PROGRESS REPORT

Launch Minnesota First-Year Progress Report | 2

STATE of the STATE:

OUR INNOVATION ECONOMY


STATE of the STATE: OUR INNOVATION ECONOMY

Minnesota has a robust history of patenting new ideas, developing leading-edge technologies and launching successful startups that have changed the world.

A remarkable number of Minnesota-born businesses have grown into global giants – 3M, Medtronic, Target, and Ecolab, to name a few. Countless more are thriving small- and medium-size companies.

Minnesota has a well-earned reputation as a world leader in medical device innovation – but we are much more diverse than that. Industries related to agriculture and food technology, fintech, retail, manufacturing, clean tech, information tech, and the internet of things are just a few of the areas where the state has strength.

Just look at some of the metrics related to our investment capital, patent and innovation rankings, and other ecosystem indicators.


* MassTech’s 2020 annual innovation report has a special analysis of entrepreneurial ecosystems.** ”The Innovation Impact of US Universities,” George W. Bush Institute, 2020.

STATE OF THE STATE: OUR INNOVATION ECONOMY

A top 10 state for innovation:Minnesota was named one of 10 “leading technology states” in 2020 based on its entrepreneurial ecosystem.*

Incubators/accelerators:Minnesota has more than two dozen accelerators and incubators offering support to startups across the state – and attracting innovators from other states and countries.

Business community:Minnesota and the Twin Cities respectively rank 4th and 1st in Fortune 500s per capita. Many large companies sponsor startup accelerators, including Allianz, Cargill, Ecolab, General Mills, Securian Financial, Target, United Healthcare.

Investment community:Minnesota ranks 1st in the Midwest and 9th nationally, per capita, in terms of venture capital investment. Bright Health is the state’s first home-grown unicorn ($1B+ in VC investment) while another unicorn, Arctic Wolf, moved its headquarters to Minnesota from Silicon Valley.

Federal research:Minnesota ranked 14th nationwide in SBIR/STTR award funding with $47M in 2019.

Higher education:University of Minnesota ranks as the 8th best university for innovation impact – surpassing Stanford, John Hopkins and Harvard universities.**

Government:MN state legislators allocated funding to the Minnesota Department of Employment and Economic Development (DEED) to accelerate startups and amplify MN as a leader in innovation through Launch Minnesota.

Coworking spaces:Across the state, 21 coworking spaces have formed a Coworking Collaborative – convened by Launch Minnesota – to share best practices and position themselves for the future.

MN’s Thriving Ecosystem

https://ssti.org/blog/masstech-annual-innovation-report-focused-special-analysis-entrepreneurial-ecosystems-10-

https://gwbcenter.imgix.net/Publications/Resources/gwbi-university-impact-report-ranks-exec-summary.pdf


VENTURE CAPITAL RAISEDMinnesota businesses raised $905M in 2019 and $782M in Q1-Q3 2020. Among the top 10 venture capital raises in the past four quarters (Oct. 2019 – Sept. 2020) were:

z Bright Health: $1.135B z Revol Greens: $203.7M z Conventus Orthopaedics: $69.75M z Arctic Wolf: $60M z Total Expert: $52M z CVRx: $50M z HistoSonics: $40.7M z ShiraTronics: $36M z Aria CV: $31M z Vyriad: $24.38M

Also: Bind Benefits raised $105M in October 2020Sources: PwC/CB Insights MoneyTree™ Report and Pitchbook.

A PATENT POWERHOUSEPer capita, Minnesota ranks:

z 1st in medical device patents z 3rd in health patents z 5th in agriculture patents

Source: U.S Patent and Trademark Office.

INNOVATION RANKINGS z 6th: Health IT z 7th: Technology and innovation z 8th: Technology and science z 11th: Most innovative state

Sources: 2020 State New Economy Index of the Information Technology & Innovation Foundation (ITIF); CNBC, 2019; Milken Institute 2018 State Technology and Science Index; Bloomberg Markets, 2020.



Innovation in a Time of CrisisHistory shows that innovation flourishes during times of crisis. Innovators are natural problem-solvers – and crises can inspire people to seek new solutions.

We have already witnessed this in Minnesota. Since the COVID-19 pandemic began, we’ve seen innovators helping develop new testing and treatment options and improving people’s safety and quality of life in countless ways.

Past recessions have sparked the creation of many small businesses – and the current one is no different. In the third quarter of 2020, business starts in Minnesota kicked up nearly 60% compared to a year ago.

Businesses that get their start here have good odds. Minnesota ranks fourth in the country for its 5-year survival rate for new companies.

Time to hit the gas, not the breaks on innovationDuring an economic downturn, people with innovative ideas may find themselves free to try something new.

Lowering the barriers to launching a startup is at the core of Launch Minnesota, an initiative started last year with bipartisan approval and funding from the Minnesota Legislature and Governor Tim Walz.

Since its kick-off in October 2019, Launch Minnesota has focused on growing the state’s innovation economy by:

z Putting capital in the hands of startups, z Building a collaborative corner-to-corner statewide network, z Growing entrepreneurial talent.

The bottom line is that Launch Minnesota aims to be the front door for startups, to get the connections to resources, access to funding, and the education they need to grow. This report highlights that work. Visit LaunchMinnesota.org for more.


http://LaunchMinnesota.org


September 2019 - October 2020Created a front door for MN startup community: Aim to serve as a point of contact to connect startups and organizations across the state with each other and with Minnesota’s vast wealth of knowledge and resources.

Awarded dollars to startups: Created a grant program that put over $2M/year in the hands of innovative startups.

Connected MN corner to corner: Developed a first-of-its-kind hub and spoke model to connect six regions, seven hubs and over 60 program partners.

Increased entrepreneurial talent: Developed lean startup educational opportunities across the state to increase entrepreneurial talent; over 380 received training.

Incentivized investing: Awarded $10M in Angel Tax Credits to spur over $40M in investments.

Partnered with higher education: Worked with the University of Minnesota to help create and host the Minnesota Expert Exchange and lean startup education to engage and grow talent.

Leveled the playing field: 55% of innovation grants went to targeted populations and 56% of education grants went to Greater Minnesota.

Grew regional ecosystems: Encouraged organizations and cities to work with others in their region to build capacity and save startups time navigating resources, education and capital.

Amplified MN’s innovation story: Launch MN received 80 mentions in national and local publications with a total reach of more than 65.9M.

LAUNCH MINNESOTA IMPACT


PUTTING CAPITAL IN THE HANDS OF STARTUPS

Goal #1Increase access to capital through our grants, tax credits, and direct & in-kind investments by our private sector.


Innovation GrantsIn the first year, Launch Minnesota has developed, promoted and awarded 63 unique startups $2.03M in funding through 84 Innovation Grants requiring a 1:1 match. These grants support business operations and help entrepreneurs cover housing and child care expenses so they can focus on growing their businesses. (See list of grantees on page 22.)

Seven of these innovation grants were SBIR/STTR Phase II matching grants totaling $291K.

MNSBIR: Separately, the Minnesota SBIR/STTR Accelerator, one of Launch Minnesota’s partners, helped these startups facilitate $9.8M in federal SBIR/STTR funding that also supported technology transfer and subawards with the University of Minnesota, Mayo Clinic and other academic institutions.

Unique awardees by industry Unique awardees by targeted/non-targeted status

Unique awardees by geography Percent of unique awardees by targeted group

Ag Tech

Biotech

Clean Energy

Fintech

Medical Devices, Diagnostics, and pharmaceutical

IT/Software

Other Manufacturing

Other

11%

14%

3%

6%

27%

27%

6%5%

44% 56%

21%

79%



Angel Tax Credit Every startup needs capital to get going, and our Minnesota Angel Tax Credit exists to make that easier. Minnesota provides a 25% credit to investors or investment funds that make equity investments in innovative startup companies. (CY 2019 results below.) The Minnesota State Legislature has allocated another $10 million for 2021.

72 Businesses 32% Targeted Businesses

569 Investors $9.8M Tax credits issued $39.9M Total invested

INNOVATION GRANTS DASHBOARD (6-Month Progress) Our first 28 grantees, at their six-month review, responded to a survey designed to measure the impact of our Innovation Grants. Grantees are surveyed on a rolling basis as part of Launch Minnesota’s regular review process. Here are survey responses to three questions from those 28 grantees.

Propelled Business in these ways % Propelled Business in these ways %

Moved technology forward 89% Connections to people and resources 39%

Acquired new customers 39% Participation in investor pitch/ competition 21%

Secured private dollars 29% Received other grant funding 25%

Building strategic partnerships 4% Accessed lean startup education 11%


1. Has the Innovation Grant helped accelerate your business?

Yes: 96%

2. Progress made?

https://mn.gov/deed/business/financing-business/tax-credits/angel-tax-credit/


UMN Technology Commercialization

3. Resources cited as helpful by grantees...

1 Million Cups Angel Tax Credit

AURI

Beta.MN

Collider

E1 Collaborative

EdNorth

Fueled Collective gBETA

Impact HubMayo Clinic’s Lean Launchpad

Meda

Medical Alley

MIN-Corps MN Cup

MNSBIR MinnInno

Northwest Minnesota Foundation IDEA Competition

NRRIRed Wing Ignite

SBA

SciTech Internship Program

SCORE Southern Minnesota Initiative Foundation

Tech.MN

The ReserveTwin Cities Startup Week

UEL (University Enterprise Laboratories)

UMN Discovery LaunchPad



Nhat Nguyen, Co-founder and CEOOtrafy (St. Paul)Otrafy helps food manufacturers and retailers track and manage the collection, storage, and transfer of certification data across the food chain. Nhat Nguyen and his co-founders moved to Minnesota from Australia and Canada after taking part in a 13-week Techstars Farm-to-Fork Accelerator program in St. Paul.

“The grant has allowed us to move our headquarters to St. Paul. We have made a lot of progress since we received the grant award. It really helped us to have a strong pilot with both Cargill and Kemps by providing them with amazing customer support. Additionally, it really helped us keep a consistent development cycle by turning our customer feedback into real features within two months.”

Grantee Profiles

Wesley Wierson, Founder and CEOLEAH Labs (Rochester)LEAH Labs, a biotech company, uses gene editing to cure canine diseases.

“Launch Minnesota grant funding is an incredible resource for Minnesota startups. Since receiving the Launch MN grant, we were able to hire our first full-time research scientist, we’ve gone on to close our first investor funding round, received a grant from Regenerative Medicine Minnesota, and an NSF Phase I SBIR grant. Launch MN funding came at a time we needed it the most, and we’re so grateful to the state of Minnesota that this program exists.”

Michelle Tran Maryns, Sparkler-in-ChiefWe Sparkle Co. (St. Paul)We Sparkle provides business management software that helps businesses schedule appointments, answer customer questions and upsell business products and services.

“I appreciate the great work you’re doing around the MN Angel Tax Credit Program and Launch Minnesota grants! You’re helping us build a stronger and more inclusive economy here in Minnesota. The funding allowed me to hire my first full-time employee, and the software that we’ve built together has now helped several small businesses in Minnesota connect with over 400 new customers and earn more revenue (despite this pandemic)! Your programs are having a ripple effect.”



BUILDING A COLLABORATIVE STATEWIDE NETWORK

Goal #2Create a collaborative statewide network bringing together academic, government, business and community partners to support entrepreneurs at every stage of their startup journey.



Launch MN Network We created the Launch MN Network, uniting six regions, seven hubs and over 60 public and private partners to support startups by improving coordination and increasing capacity across the state’s startup ecosystem to help entrepreneurs navigate the wealth of resources available in Minnesota.

We allocated $450K designed to help begin the formation of partnerships that will, in turn, enhance the visibility of each region, our vibrant startup community, and of our state as a national leader in innovation. Grantees and their partners provided a 2:1 match for the state funds.

The network began forming in March 2020, during the start of the pandemic. In the first three months (April-June 2020), partners provided lean startup training to 270 entrepreneurs; technical assistance to 176, 1:1 mentoring to 152, office hours for 284 and recruited 144 startups during that time frame.

Our hub-and-spoke model creates a density of people, talent and resources in each of these regions and builds off the strengths of other organizations. Best practices and other statewide resources such as access to investors can be provided through these access spokes.

Launch Minnesota does not yet have a regional hub or partners in Northeast Minnesota, but it has a statewide partner – the National Resources Research Institute (NRRI), part of University of Minnesota Duluth (UMD).

“Great things are happening in our region and it’s because of the fire Launch Minnesota lit.”– Tim White, Business Development and Intellectual Property Manager at NRRI/UMD


STATEWIDE PARTNERUniversity of Minnesota Partners include:

– Holmes Center for Entrepreneurship, Carlson School of Management

– Grow North – MIN-Corps – MN Cup – MN-SBIR – Minnesota Technology Association – UMN Technology Commercialization – UMN Extension – UMD Natural Resources Research Institute

Highlights: z Trained 211 entrepreneurs in value proposition design courses and workshops.

z Awarded $500K in non-dilutive cash prizes to 30 leading MN startups in 2020 MN Cup competition.

z Launched online mentor platform with 230 mentors supporting the University’s MN Cup and MIN-Corps programs; now partnering with Launch Minnesota to host MN Expert Exchange.

z Hosted 17 online seminars on challenges facing Minnesota entrepreneurs.

Highlights: z Created the first-ever regionwide focus on supporting startups by collaborating and building the regional ecosystem.

z Developed a system to provide locally based, geographically dispersed entry points into the support system, called NoW navigators.

z Held over 50 online education and training opportunities for entrepreneurs in the region with 1,200 attendees.

z Provided over 1,000 hours of advice and counsel to 150 potential and emerging entrepreneurs.

z Linked 15 entrepreneurs with mentors and peer-to-peer consults.

z Supported, on average, 60 coworking members in the region.

z Estimate 50% of entrepreneurs supported are female, 5% BIPOC, and 2% veterans.

NORTHWEST MINNESOTARegional Hub: Greater Bemidji Launch Pad

Partners include: – Advance Thief River Falls – Bemidji State University – Fosston Economic Development Authority – Headwaters Regional Development Commission (Bemidji)

– Heartland Lakes Development Commission (Park Rapids)

– Lake of the Woods Economic Development Authority (Baudette)

– Northwest Regional Development Commission (Warren)

– Northwest Technical College (Bemidji) – Northwest Minnesota Foundation (Bemidji) – University of Minnesota – Crookston – Warroad Discovery and Development Hub



SOUTHEAST MINNESOTARegional Hub: Red Wing IgnitePartners in the Entrepreneur 1st (E1) Collaborative include:

– Collider Foundation (Rochester) – Community and Economic Development Associates (CEDA) (Chatfield)

– Destination Medical Center EDA (Rochester) – Garage (Winona) – GreenSeam (Mankato) – Hispanic Advocacy and Community Empowerment Through Research (HACER)

– Launch Austin – Northfield Enterprise Center (NEC) – Port Authority of Winona – Rochester Area Economic Development Inc. (RAEDI)

– Saint Mary’s University – Kabara Institute for Entrepreneurial Studies (Winona)

– St. Olaf College (Northfield) – Small Business Development Center (Rochester) – Southern Minnesota Initiative Foundation (SMIF) (Owatonna)

– University of Minnesota Extension – Winona State University/Startup Winona State

Highlights: z Branded the Southeast region as the E1 Collaborative. Created a joint website and social media channels @E1Entrepreneurs on LinkedIn, Facebook, Twitter and YouTube.

z Hosted collaborative events such as E1 Ignite Cup, multiple Tech Talks and a Fall Expo.

z Provided lean startup education and training to 307 entrepreneurs over 24 sessions.

z Hosted 74 educational webinars with 2,397 attendees.

z Provided technical assistance to 112 entrepreneurs during 250 sessions.

z Worked together to provide 1:1 mentoring, serving 282 entrepreneurs for a total of 689 hours.

SOUTHWEST MINNESOTARegional Hub: Minnesota State University, MankatoPartners include:

– MN State Center for Innovation and Entrepreneurship

– MN State Center for Workforce Professional Education

– MN State South Central Small Business Development Center (SBDC)

– Mogwai Collaborative (Mankato) – Regional Economic Development Alliance – Southern Minnesota Business Development Network


Highlights: z Made progress on building a collaborative regional ecosystem to focus on startups.

z Partnered with private and public partners to grow new ventures.

z Assisted six high-tech companies with @80 hours of technical support.

z Hosted three regional roundtables with 72 people attending.

z Hosted four virtual workshops for high-tech, growth-oriented companies.


TWIN CITIES METRO

Regional Hub: Forge NorthPartners include:

– BETA – FINNOVATION Lab – Lunar Startups – Minnestar – Social Impact Strategies Group – Startup Space – The Coven – University Enterprise Laboratories

Highlights: z Convened weekly sessions of 15+ metro-based entrepreneurial support organizations.

z Held 40+ educational sessions and events with 2,200+ attendees.

z Had 65+ experts share content, knowledge and support.

z Provided 200+ hours of technical assistance. z Attracted 250+ attendees to investor-led, funding-specific educational events.

z Tracked 1,750+ website visits to Forge North Resource Compass with 575+ local resources.

z Received 2,250+ website visits to aggregated COVID resource page compiled by partners.

Regional Hub: Meda Highlights:

z Provided technical assistance to 28 high-potential, high-growth BIPOC businesses, totaling 364 hours.

z Conducted third Million Dollar Challenge which awarded $1M in financing to high-growth, high-potential BIPOC-owned businesses; had over 300 applications from BIPOC-owned businesses.

WEST CENTRAL MINNESOTA

Regional Hub: Greater St. Cloud Development Corp.Partners include:

– Alexandria Area Economic Development Commission

– College of St. Benedict’s and St. John’s University – gBETA Greater MN St. Cloud (gener8tor) – Great North Labs – Greater Fargo/Moorhead Economic Development Corp.

– Greater Fergus Falls – Greater MN Development Services – ILT Academy – SCSU Herberger Business School

Highlights: z Saw active engagement and investment in new ventures by Great North Labs.

z Increased gBETA applications by 71% – from 28 to 48 – due to greater outreach across the region.

z Had 93 participants in learning webinars focused on topics facing startups.

z Supported the four gBETA Fall 2020 companies which gave a total of 72 investor pitches to investors from four states.

z Spent 29 hours meeting 1:1 with entrepreneurs through mentoring.

z Attracted 134 attendees to the gBETA Virtual Pitch Night.

z Made 34 mentor connections with a total of 136 meetings entailing 68 hours over seven weeks.



Goal #3Develop entrepreneurial talent by ramping up lean startup education, access to expertise & other coordinated statewide efforts.

GROWING ENTREPRENEURIAL TALENT



Tools and Training for Startups An entrepreneur may have a great idea but learning how to turn that idea into a viable business requires education and knowledge. Launch Minnesota is working with partners across the state to help launch, grow and scale new ventures.

Educational OpportunitiesLean startup classes are being held across the state. Participants use lean startup tools and receive feedback from experienced instructors. Industry experts and mentors offer insights, advice and connections. Total trained across the state: 382 University of MN: Holmes Center for Entrepreneurship: Offered a lean startup course to 211 tech entrepreneurs across the state. It’s a hands-on course to assess and refine business concepts and to accelerate progress toward market launch.

z Expanded access to training to 131 entrepreneurs; 62% of participants weren’t part of UMN.

z 93 received a Value Proposition Design Certificate from UMN’s Holmes Center for Entrepreneurship; 68% of certificates went to startups outside of UMN.

Startup School (Red Wing Ignite & ILT Studios): Taught 175 entrepreneurs the startup innovation process and how to find an idea.

z 92 students have taken the combined Customer Driven Innovation workshops.

z 19 entrepreneurs received certificates from the Lean Startup School (ILT Studios and MN State).

Access to Expertise Statewide The Minnesota Expert Exchange is a new statewide program initiated by Launch Minnesota in partnership with University of Minnesota to help entrepreneurs find the right support. It will connect entrepreneurs to individuals based on expertise, needs and interests.Those with expertise can engage at the level of their choice, providing:

z Subject matter expertise z Project-based support z Ongoing business mentorship

This program will be launching soon. More details to come!

Connection to InvestorsLaunch Minnesota developed a searchable online directory of investors and investment funds active in helping fund startups.

https://mn.gov/launchmn/capital/investors/


Coworking CollaborativeLaunch Minnesota convened coworking spaces across the state that meet regularly to share best practices and learn from each other. These spaces are now working together to address the new and future demands of work. Almost 30% of Minnesota’s coworking spaces are part of the Coworking Collaborative – and all are welcome.

z Apiary Coworking, St. Cloud z Collider Coworking, Rochester* z CoLoft, Barnesville z Connect Cowork, St. Michael z Discovery and Development Hub, Warroad z Evolve Workplace, West St. Paul z FINNOVATION Lab, Minneapolis z Fueled Collective, Minneapolis z Impact Hub MSP, Minneapolis z LaunchPad Bemidji z ModernWell, Minneapolis z Mogwai Collaborative, Mankato z New Rules, Minneapolis z Red Wing Ignite z The Commons, Excelsior & Hopkins z The Coven, Minneapolis & St. Paul* z The Outlet, Albert Lea z Wellworth Cowork, St. Paul

*Co-hosts our monthly discussions

Forums for our Startup Community We convened forums to allow startups across the state to seek guidance and learn from individuals with diverse expertise. An average of 60 people attend each month on the 4th Friday. Featured topics include fundraising, resources of DEED, accelerators and the basics of Lean Startup education.

The Coven, Twin Cities

Mogwai Collaborative, Mankato

FRIDAY FORUMS A forum to learn and discuss the topics and questions facing Minnesota’s startup community.

BY

4TH FRIDAY @ 8:30 A.M.

Ultimate Resource GuidesTech.MN developed three “Ultimate Resource Guides” for the startup community with support from Launch Minnesota:

z The Ultimate Guide to MN Entrepreneurship Education z The Ultimate Guide to MN Technology Education z The Ultimate Guide to MN Accelerators 2020

And more to follow!


https://tech.mn/news/2020/06/24/minnesota-startup-accelerators-the-ultimate-guide

https://tech.mn/news/2020/08/28/minnesota-technology-education-ultimate-guide

https://tech.mn/news/2020/06/24/minnesota-startup-accelerators-the-ultimate-guide


Launch Minnesota Advisory Board

Christine BeechExecutive DirectorKabara Institute for Entrepreneurial Studies

Adam Choe Managing Directorgener8tor Minnesota

Xavier FrigolaDirector of EntrepreneurshipRAEDI – Rochester Area Economic Development Inc.

Dave HengelExecutive DirectorGreater Bemidji Inc.

Lindsey HillesheimPortfolio Manager – AI Strategy and SolutionsHewlett Packard Enterprise

Jodi HublerManaging DirectorLemhi Ventures

Rick HuebschExecutive DirectorTechnology Commercialization, University of Minnesota

Aneela IdnaniCo-founder and Marketing/Design Lead

Lisa Lavin Founder, Chairman and CEOŌmcare

Staff Neela Mollgaard Executive DirectorLaunch Minnesota


Launch Minnesota Grantees (through September 2020) z Agitated Solutions Inc. z Anatomi z Aurora Concussion Therapy z Berd LLC z Better Time Company z Bibliate z Binary Bridge z BioMagnetic z Blue Water Farms z Bus Stop Mamas z Cambridge Technologies z Char Energy LLC z Cytotheryx Inc. z Darcy Solutions z Educharacter z EmpowerU LLC z Extempore (Deeloh Technologies) z Farm Vision Technologies z General Probiotics z Geneticure Inc. z GRIP Molecular Technologies z Guardian Athletics z HabitAware z Halo Ramp Co. z ImagoAI Inc. z InControl Health Inc. z Insight Sensing z Kennedy Research z LEAH Labs z Live.Give.Save z Marblehead Medical z Metselex

z MFr Technologies z Mobility 4 All z Nanodropper z Neurotype Inc. z NeuroVASx z NovoClade z Odonata Health Inc. z Otrafy z Phenomix Sciences z Phraze Inc. z Poma 22 z Primal Health z Quench Medical z Radwave Technologies Inc. z Remote Insights z RenewPower z Sasya z Stratix Labs z TerraCOH z Terrafore Technologies z Thrivors z Tychon Biosciences z UR Turn z Vemos LLC z Virtue Analytics z Virtuwoof z Visana Health z Visyn z Vonzella Inc. z We Sparkle z Yonder LLC

Appendix: PUTTING CAPITAL IN THE HANDS OF STARTUPS

#LaunchMN @LaunchMinnesota LaunchMinnesota.org

November 2020

launch minnesota first-year progress report

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