Wednesday, April 20, 2011

Awakening Minnesota’s Hibernating Entrepreneurial Economy

Each year at this time, the bears, wolves, and other animals native to Minnesota awake from their long winter slumber. Like these beasts, Minnesota’s entrepreneurial economy has been in hibernation for years. However, recent efforts undertaken by the State of Minnesota may yield an awakening.

In 2010, the Minnesota Legislature passed the Minnesota Science and Technology Act, which created the Minnesota Science and Technology Authority (MSTA). The mission of the MSTA is to “promote a business environment that fosters lasting and inclusive prosperity through the growth of innovation-based businesses and jobs.” Earlier this year, the MSTA distributed its strategic plan for Minnesota. The plan is informational and enlightening.

After reviewing the plan I was surprised to learn that Minnesota’s entrepreneurial economy really is in hibernation. I knew from firsthand experience in working with numerous start-ups trying to launch, raise capital, and grow that Minnesota start-ups faced financing and other challenges. But I was surprised to learn that in measuring entrepreneurial activity, Minnesota ranked near the bottom when compared to other states. In 2010 entrepreneurial activity, Minnesota ranked 42nd, a significant drop from 24th in 2007. Entrepreneurial activity is calculated by dividing the total number of entrepreneurs starting businesses by a state’s total population. In addition, in net high-tech business formation, Minnesota ranked 41st.

After several years of effort by various organizations that promote entrepreneurial activity, the State of Minnesota has recognized the hibernation and has taken its governmental stick and begun to poke at Minnesota’s slumbering entrepreneurial economy. In 2010, Minnesota adopted an angel investment tax credit, which provides angel investors with a credit of up to 25% of the dollar amount invested in qualified Minnesota start-up companies. While this tax credit came several years after similar credits were adopted by surrounding states such as Wisconsin and North Dakota, the effort was welcomed and necessary to catch up with these neighboring states. The state has also supported the establishment of the Minnesota Angel Network, an organization that will assist entrepreneurs in launching and funding new companies.

It will take more than a couple of pokes from state government to wake up Minnesota’s slumbering entrepreneurial economy. But at least the beast’s eyes are now open.

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