Local investor Mary Grove on how corporations can help Minnesota’s startup ecosystem spark innovation.
When I moved from Silicon Valley to Minnesota in 2018, I was struck by many elements that make this state unique. The quality of life, the supportive business community, an amazing talent pool, the density of Fortune 500 companies, and a diverse economy stood out. All these things gave me confidence to leave a decade-and-a-half career at Google and take the leap to focus on early-stage venture capital. Together with Brett Brohl, I co-founded Bread & Butter Ventures.
After six years as a venture capitalist in this community, I’m convinced that a central key to growing Minnesota’s startup ecosystem is engagement of our corporate sector. It is one of Minnesota’s unique superpowers, and we need it to outpace other markets in a very competitive environment. It’s especially important today, given the challenging economic backdrop we’ve seen this past year.
Total VC funding raised in Minnesota in 2022 was $2.26 billion, down about $500 million from the previous year, per PitchBook data. Amid an environment that looks significantly different from several years ago, it’s more important than ever for corporations to play a strong role in development of our ecosystem.
At Bread & Butter Ventures, we invest in digital health, food tech, and enterprise SaaS across the country, and we lean into the corporate backbone in our backyard to support our companies after we invest. Our Bread & Butter Innovation Circle includes more than 15 Fortune 500 and large corporations, all based in Minnesota, that are interested in supporting and engaging with emerging startups in their verticals. They are critical to the growth of startups in the region.
So how can corporations help grow Minnesota’s startup ecosystem? Here are five important steps:
1. Sponsor, support local events in the startup community.
This is a great way to build awareness that your corporation is open and willing to play a role in the startup ecosystem. This can come via support for events like Twin Cities Startup Week, local accelerators and demo days, or ecosystem events organized by groups like Greater MSP’s Forge North.
2. Seek out opportunities to include startups and emerging businesses in your commercial work and partnerships.
Build a formal process for including startups in supplier sourcing. Consider how startups can solve a pain point for the business and provide direct ROI via opportunities to help generate revenue or provide cost savings to the business. Put some thought into the pilot/procurement process and whether there are factors that may make things difficult for a growing company.
3. Leverage startups to improve employee health and retention.
As you think about employee benefits, perks, leadership development, and culture, broaden your lens and get creative by working with startups that are innovating in this space. I see many examples in our Bread & Butter portfolio of companies innovating on issues like helping women assess and understand their risk of breast cancer at a much younger age (Gabbi); helping employers retain hourly workers by providing affordable health care (River Health); and supporting teams through loss, grief, and bereavement care (Betterleave).
4. Engage the startup community through mentoring and feedback.
Innovation happens both top-down and bottom-up. To know where industry is headed and where tech can disrupt or accelerate, we need to both understand key pain points of corporate leaders and pay attention to the key trends where emerging startups are building. This means engaging actively with different constituents in the startup ecosystem. If it’s tough to identify individual startups, consider engaging via accelerators (like Techstars), entrepreneurial support organizations (like Naturally Minnesota and BETA), and venture capital firms like ours.
5. Invest in and acquire the next generation of emerging tech in your verticals as a means of growing your core business.
Consider making investments in both venture funds that invest in sectors you care about as well as making direct investments into companies you’d like to build relationships with. This will give you access to proprietary deal flow you might not otherwise see, as well as a toehold to be able to partner more closely with, or perhaps even acquire, these companies to grow your business.
A common misconception is that corporations are too large to work with startups. I would argue that, in fact, forming a more permeable membrane between titans of industry and emerging tech in their verticals is a tremendous opportunity to spark innovation. I’m excited to see corporations across our state increase their interaction with the startup ecosystem. As our business community continues to grow, it’s important that our largest companies play a part to help differentiate and enrich Minnesota’s startup world.