Category Archives: Startups

Minnesota’s Technology Scene Needs to Break out of its Shell

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A recent report from personal finance website NerdWallet ranked the 10 best cities to start a business in the U.S. Among the cities, Minneapolis was ranked 8th overall. The report was based of information dealing in small-business lending in 2012, average income, population growth rate and business per 100 residents. But in order to get more attention, Minnesota needs to open up its communication borders.

Throughout all the events I’ve attended and folks I’ve talked to in the scene, it’s painfully obvious that more attention needs to be brought to Minneapolis and the state of Minnesota in general.

The scene is thriving, even if VC is down, and the excitement is here along with the traction and local user groups to keep things churning. The only issue is we are closed off. Social media isn’t used efficiently, and many publications in the Twin Cities refuse to step outside the boundaries of B2B.

It’s not emulation, it’s a refusal to take advantage of precedents set up in major technology hubs. What Minnesota needs to do is advertise itself and let go of the ‘Midwest pragmatism’ that we all suffer from. Sure, modesty is great, but taken to an extreme it can prevent prominent business interaction.

As my coworker Holden Page wrote on his blog, we need to have a voice for Minnesota’s thriving tech scene. The hesitancy and procrastination needs to stop. We could be Austin, albeit with worse weather, and we could drive web traffic to our region besides our own.

What we need is a grand, statewide marketing campaign. Someone needs to speak up and take action. Let the national public know what’s going on. The fact that Wisconsin is emulating our success in enough to show we have something going on. They have dominated us in small business for years, and now they’re starting to pay attention.

We need a collaborative movement to bring attention to the scene. Something that truly represents Minnesota. A local initiative, ready to deliver our skills and contributions as a state. There is nothing wrong with B2B publications, but in my experience it keeps the already interested up to date. What we need to do is bring in people to the growing scene. People that may have different ideas, and allow for more collaboration in a promising space.

Crowdfunding is Growing, but has Side Effects

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Today, analyst firm Massolution reported that crowdfunding in 2012 nearly doubled since 2011, raising funds upwards of $2.66 billion in 2012 as opposed to $1.47 billion in 2011. Analysts suggest that crowdfunding in 2013 could surpass $5 billion if the trend continues on its current trajectory.

While crowdfunding has become a major trend in early investment, it is important to remember areas where it falls short. Mainly, the idea of mentorship goes out the window. While this idea may seem a stretch, many early stage, first time entrepreneurs gather an assortment of skills through experienced investors.

Without this experience and mentorship, it can take longer to fully develop a product as well as a plan to get it out to the public. This takes away from efficiency  and could easily affect your reception and traction if the product takes too long to ship, and it can also take away form your products market placement.

That being said, if you are an experienced founder, crowdfunding could benefit you immensely. You already possess the skills needed to turn a product around and meet goals without the need for mentorship. In fact, you are most likely in the position to mentor, and have already had experience garnering the necessary funds for pre-Series A investment.

An important fact to remember is crowdfunding is a young idea to early stage investment. If it were a new drug to help concentration, the long term effects would not yet be known and the success stories could begin to have major side effects in the next 30 years.

Whether you go with crowdfunding, VC or bootstrapping it is important to measure the positives and negatives of either situation. Otherwise, your great idea could be squandered before it starts.

Coursera Blunder Could Affect U of M

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courseralogoAfter somewhat recovering from flu-like symptoms over the weekend and a 24-hour delay in posting to my site I’ve woken up at 4 a.m. to filter through the news and ponder: what is newsworthy nationally that I can also bring down to a Minnesota level?

If you have been reading Hot SQL Injection for awhile, you know how passionate I am about online education and how it should be viewed in the same way as universities and community colleges. Being an open advocate for free education, it brought a post-secondary tear to my eye when I read about Coursera failing to teach how to run an online class, with the causal effect of “Fundamentals of Online Learning” being taken down from the course catalog.

Through the Twitter backlash, founder Andrew Ng stuck by the teacher of the course, Fatimah Wirth, saying he really “believes in experimentation” and “gives her a lot of credit.” While this is an admirable statement, it is still a blunder to the movement of MOOCS, which Coursera has arguably led.

Having taken multiple courses on Coursera, I find it to be a very good experience. It caters more to my learning style than any class I took at the University of Minnesota – Twin Cities. I’m a person who doesn’t learn from lectures, but rather from reading the material on my own and digesting it as I see fit. That was always a huge issue with me in college, and led to lots of absences which showed in my GPA.

I currently work at the University of Minnesota Foundation, and through OIT know that Scott Studham, the CIO of the U, plans on integrating MOOCs into the University. This would be a huge step up for people that learn like I do. It allows for a more robust form of learning.

Currently the U only offers partial online classes. Over the excitement of Coursera, Udacity and many others the talks ramped up about MOOCs here at the U. It is my hope that this current blunder does not affect the U’s moves towards online learning. It is the future, even if the courses don’t currently qualify for credit equivalency.

A Boost for Healthcare Funding

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CrowdfundingFor the duration of 2012 we saw many social media sites battle for status, innovation, and maintaining an audience. Facebook acquired Instagram, ultimately leading to Instagram being knocked off of Twitter’s API, followed by Twitter introducing photo filters, which allows users to take pictures and add some snazzy after effects.

In all the turmoil, many people were talking about an “Instagram for video.” This would allow people to create, edit, and share short moments in their lives. Last week, that idea came to fruition with Vine. The launch was less than perfect, but the enthusiasm and potential for the application has the masses buzzing.

With all this excitement and repetition in the national news cycle, it may have slipped by midwesterners in the startup scene that an innovative new crowdfunding site was announced. Minnesota-based LiifGroup, LLC announced the launch of Liifmed, which focuses on crowdfunding the world’s healthcare companies.

As you may recall, I mentioned previously the need for MN healthcare accelerators. While this is not an accelerator, it still allows for innovation in the healthcare marketplace. Better yet, your company won’t have to dig itself out of a financial hole.

One of the intriguing pulls of LiifGroup’s platform is the ability to receive all the funds people donate. Unlike Kickstarter and other crowdfunding sites, LiifGroup does not make you set a fundraising benchmark, and you don’t have to reach a certain goal to receive funds.

From the press release:

“Being in the heart of the medical device and healthcare center of Minnesota will allow us to provide options for upstart medical technologies that previously struggled to attract investment dollars,” Dr. Mark Connelly.

Minnesota has nearly 700 healthcare businesses and organizations. Headquartered in Savage, MN LiifGroup will have an opportunity to directly impact local companies. Having already received pledges, Liifmed is on track to accelerate a thriving industry that suffers from limited funding.

2013 Investment and MN Health IT Accelerators

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Along with all the 2013 listicles hypothesizing what will happen in 2013 and how 2012 differed from 2011 we were greeted with articles warming our hearts on investment, and how 2012 was a big year for venture capital.

The Upstart Business Journal reported that from 2011 to 2012, VC funding grew nationally by 10 percent. From $18.7 billion to $20.6 billion. However, while the amount of investment went up, there were fewer venture-backed deals.

This typically shows that either excitement in the market grew, which could arguably be tied to Facebook’s pre-IPO months, or that more promising companies opened themselves up for funding in 2012.

Since Facebook went public on May 18, 2012, it has been a roller coaster ride, with most analysts calling it the worst IPO in market history. Starting off at $38.23 a share, prices quickly fell, with the lowest point coming in at $17.73 on September 4, 2012.

It’s hard to believe that Facebook, the most anticipated IPO in recent history, would have such dismal numbers, but it came from the lack of evidence they presented to turning a profit. Where were they going to make the money?

With this in mind, it’s hard to imagine 2012 was the best year for IPOs since 2000. Facebook lead the new wave of companies going public, and while they opened today at around $31, the beginning of the roller coaster ride was severely undervalued.

It was not just a year for VC and IPOs, however. Amazon chalked in a record setting year with its highest priced shares. In the last 12 months, Amazon has seen its shares rise nearly 50 percent. They also recorded their best holiday season to date.

So after all this data, and the ability to see that the market is doing pretty well, what does this have to do with Minnesota?

According to the BioEnterprise Midwest Healthcare Venture Investment Report, investment in Health IT/Healthcare companies in Minnesota was down 23 percent. In 2011, 24 companies received $223.3 million. Looking at 2012, 17 companies received $164.7 million. And here is the kicker, Minnesota received the second highest amount of money. Trailing behind Ohio, which raised a whopping $291.7 million.

So why the gap? And why, after a year of solid national investment, are we down 23 percent in healthcare companies when it is a hot market? The answer may lie in accelerators.

Minnesota is surprisingly lacking in the number of health accelerators. President Kaler of the University of Minnesota has started a new initiative. Over the course of 10 years, Kaler is offering $20 million in investment to promising University startups. However, this funding is only for U of M students.

Another promising peak at an accelerator is Inceptis LLC., which will specialize in Class II medical devices, which Minnesota has been a leading provider in. But again, having such a tight focus doesn’t necessarily allow for broad innovation.

If Minnesota wants to compete with the likes of Ohio, or even on a national scale with its promising healthcare companies, we need to have more accelerators both keeping the talent here and providing incentive.

Now, it seems, is a ripe time to start the debate. Investment is hot, Health IT is blossoming, and Minnesota has the means to secure a leading position in the field. The only real question is who will step up to the plate?

The Series A Crunch

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Below is a response I had to an article on the Upstart section of the Business Journal that discussed what the “Series A Crunch” means for entrepreneurs, VCs and even young technology journalists. It was in agreement with a blog post by ReadWrite editor Dan Lyons, which highlighted the same sentiments but with less tact.

“The Series A Crunch is definitely something to look into, but what about Sarah Lacy’s other article which came out the day after which explained Series C investment jumped from $55 million to $70 million and Series D stayed at $100 million? It seems investors are already compensating for the flood of startups given that information. Sure early stage investment is declining, but if you can hold onto customers and show a credible plan for growth, the investment dollars are still there.

Also, you mention Facebok’s IPO which was, indeed, a horrible stint in public offerings. However, they have recently been applauded with the introduction of Facebook Exchange (FBX). Some publications have even hinted at it being more efficient than Google’s Ad Exchange. So while the initial public offering was bad, it seems that FB could potentially recover.

Now this is all from a recent journalism graduate, most likely inexperienced and optimistic, but without optimism, is there even entrepreneurship?” 

This is the natural ebb and flow of startups and markets in general. Something gets hot, and people respond. However, this doesn’t mean investment is done and a new dotcom bubble is resurfacing. It means investors are getting smarter in the later rounds where it counts.

A Leveling Playing Field

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The University of Minnesota announced today that in fiscal 2012 the Office for Technology Commercialization launched a record of 12 startups, up from the previous record set last year at 9. Six years ago the Office’s mission was revamped, and since then a total of 38 companies have rolled out of the U’s campus, 30 of which are still active.

The growth of Minnesota’s startup community has become a recent trend. In 2010, the Minnesota legislature passed the Angel Investor Tax Credit (AITC), which allocated $60 million in credits to be distributed over a five year period. In its first year, which allocated $11 million, the fund was depleted by November.

While the AITC spurrs high income investors to fund fledgling startups, recent crowdfunding efforts through Kickstarter have proven there is interest in the Minnesota tech scene as well. In less than one week, SmartThings, a company “connecting your physical world to the internet,” reached its goal of $250,000 in funding. Eventually, SmartThings would be backed by 5,694 people and raise a total of $1.2 million.

What this means for the Minnesota economy is boundless. Being able to keep entrepreneurs and technology professionals in the state would be an obvious advantage. Too many times young professionals in the technology industry move to coastal havens where they see better prospects, but with legislation and education fueling entrepreneurial growth, and showing that we can also compete, is huge for retaining talent.

Already there are talks about allocating more money towards the AITC. They are running out of credits quickly, which means there is demand for serious growth in a sector that’s proving very useful. It will be exciting to see what happens in the coming months and years. With the JOBS Act there is even more potential for a young company to get off its feet, and seeing what companies arise in Minnesota from crowdfunding, seed capital and angel investment will be an exciting ride.

Facebook Could be Looking to Acquire Opera

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The Next Web’s Robin Wauters reported today that a deal between Facebook and Opera could be underway. If the rumor mill is correct, it could spell out a huge acquisition for Facebook. Since their IPO debacle, it has been rumored that Facebook is both a Ponzi Scheme and an overvalued social media company with no real revenue besides advertising.

If these rumors are true and Facebook buys Opera it could set up an interesting browser war between Google, Microsoft, Mozilla and most recently Yahoo!. Facebook has been trying to figure out a strategy that will focus on bringing revenue to their mobile site since over 50 percent of users access Facebook with their mobile device.

As of March 2012 there were 168.8 million Opera Mini users that viewed over 117 billion pages. Opera also recently bought two mobile advertising companies.

TenKsolar Garners Global Financing

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Bloomington-based startup tenKsolar, designer of photovoltaic solar panels, announced on Wednesday that it successfully raised $15.5 million in financing from South Korea-based Hanwha Corporation and European investment firm ESB Novusmodus in its Series B round.

With the support of these two financial entities, tenKsolar now has a global financial base. The company has only been manufacturing its panels for two years, and this marks a huge step forward. In those two years, tenKsolar has filed 40 patents around solar PV packaging solutions.

Tim Johnson, director of tenKsolar’s product marketing, told the Pioneer Press the funding will be used to expand tenKsolar’s sales force and add capacity along with working capital.

TenKsolar offers the RAIS PV module, which runs at 92 percent efficiency as opposed to the typical 80 percent. This module also allows for a more balanced approach for harvesting the suns energy, using reflection to efficiently distribute power.