
Greener pastures? A tale of the Minnesota startup that was - johns
http://tech.mn/news/2010/07/14/greener-pastures-a-tale-of-the-minnesota-startup-that-was/
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CitizenKane
As a former Minnesotan I can say that it goes beyond taxes. The culture in
Minnesota is very risk averse and if you're starting a software company
finding able software developers is very difficult. Because of that culture,
finding funding is very difficult as well which pretty much confines the field
of potential startups mostly to ones that can be bootstrapped.

It's a shame because there is a pretty vibrant tech community in the Twin
Cities. But it leans very heavily to contracting and consulting. I'd suggest
going elsewhere to start a company and moving to Minnesota when you're ready
to raise a family.

~~~
johns
This is exactly my experience in the Twin Cities as well. Having recently
moved to Boulder for spousal career support, I can't even really describe how
different the mindset is here. It's not even close to the same.

~~~
delano
As?

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ryanricard
As a lover of the Twin Cities, this is definitely a saddening read. Minnesota
is a pretty great place to work in tech as an employee, but it's not currently
the thriving area of tech innovation I'd love to see it become. It's too bad,
too, since in theory the Twin Cities has a lot going for it for startups:
lower cost of living, highly educated workforce, and theres nothing like a
long, bitter, winter to justify long periods of time spent indoors hacking ;).

Obviously there's no simple button-press solution for a city to become a
startup capitol, or else every city would have pressed that button by now, but
I do think that the focus on Corporate Tax rates is particularly wrongheaded.
Just about every survey of "Business-Friendly Tax Rates" tends to put CA, MA,
and NY near the bottom, surely a higher tax rate can't be _that_ discouraging
to potential startups?

~~~
protomyth
It can if there is no historical technology culture. MN is in a bad spot
because it has high taxes and no history. Plus, the government (both state and
local) really don't care about technology startups. Heck, most of the large IT
shops in the area are run by people who don't want tech startups because that
would increase their costs. They already recruit from around the area (Iowa
and ND) for tech to keep the price down.

~~~
mml
mn has plenty of history (you may have heard of youtube, or unisys, or cray),
and a good number of entrepreneurs. just no angels. angels can go to hell
imho. i'll bootstrap thanks.

~~~
johns
One of the YouTube founders having loose ties to MN does not make it a MN
startup. <http://en.wikipedia.org/wiki/Jawed_Karim>

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tednaleid
The healthcare startup scene in MN is actually pretty vibrant, but other
sectors aren't quite as strong.

I've been involved in a number of healthcare start-ups in the Twin Cities over
the years, including my current VC-backed one, Bloom Health
(<http://gobloomhealth.com>).

There's quite a bit of startup work to be found if you look around. It isn't
as barren as some would have you believe.

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txgleton
Welcome to Austin! Not only taxes are lower here, but the city has a real
downtown, tons of interesting and educated people, great outdoor activities
and a nice dating scene. I can't think of a more balanced place to start a
company.

The only drawback is lack of VCs in the area. Austin Ventures are the only
girl in town and they tend to favor "seasonal CEOs" over young engineers and
are extremely conservative with their investments.

~~~
melito
Austin is a great town with a lot of great people and it's a lot of fun,
but...

I was absolutely miserable living here.

If you're young, you should head to one of the coasts. That's my opinion.

Austin would be great if I was older and in a position to buy a house/ start a
family / etc

~~~
aliston
Why so down on Austin? I've heard really good things about the nightlife scene
and other things young folks would enjoy... do tell!

~~~
melito
I love Austin. I think it's an awesome city.

Right place at the wrong time I suppose. Just wasn't happy while I was there.

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aaronbrethorst
I bailed on Minnesota for Washington state almost as soon as I received my
Computer Science degree. Seattle may not have the best tech scene or startup
community in the US, but it's a far sight better than what I've seen in the
Midwest.

It's really a pity, too. There's some great stuff in the Twin Cities, and I
think it would be well served with more diversification in availability of
high tech jobs.

From what I can tell, unless you're into doing ERP/CRM consulting, EE for 3M,
IT work for Target Corp, or biomedical engineering, you're pretty well SOL.

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nswanberg
For those in the Minneapolis area that want to discuss Minnesota's startup
potential or exchange tips on moving to Boulder or the Valley, or other HN-
related topics, here's tonight's meetup details (6pm at the 5-8 Club):

<http://news.ycombinator.com/item?id=1514455>

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protomyth
On radio in the Twin Cities, you continually hear advertising for companies to
move to Sioux Falls, South Dakota. The Tax Foundation rates SD #1 and MN #43
in their State Business Tax Climate Index.

Texas is rated #11, and I am pretty sure it is not hyperbole that if all their
MN staff moved to TX they could hire another developer.

~~~
ryanricard
That Tax Foundation survey would seem to suggest that CA (48), NY(49), and MA
(36) aren't good places to start a startup either.

<http://www.taxfoundation.org/files/bp59_es.pdf>

I think that the other factors mentioned in the article: innovative incentives
for investors, locality to VCs and experienced (successful) startups, and a
great community of developers all factor in more heavily than tax policy.

~~~
ianb
It would also be wrong to think that lowering taxes would change something
dramatically; . The Dakotas were in bad shape economically and could sacrifice
existing tax revenue and responsible fiscal oversight (remembering a lot of
what they attracted was financial industry drawn to low regulation and low
consumer protections -- thanks a lot Dakotas!) Minnesota's economy is going
relatively well, and there's no dearth of successful companies. And generally
there's a good standard of living and a strong sense of community
responsibility, which is why those companies are staying -- there's real
people behind any decision to move, and a lot of people aren't willing to move
even if there might be financial incentives.

Minnesota is missing tech entrepreneurship... well, even that isn't true, as
medical technology is doing quite well. Y Combinator style startups aren't.
This is unfortunate, but overall changes to the economic structure of the
state is hardly called for.

~~~
protomyth
uhm.. North Dakota is doing fine fiscally (budget surplus) and has a lot of
money coming in from oil. Perhaps you are referring to South Dakota which is
home to a lot of credit card companies? Minnesota is running the 10th worst
budget deficit (14.7% of state's general fund).

~~~
ianb
Yes, I'm referring to those states (at least I believe it's both North and
South Dakota, though maybe it's only the South?) being lax on financial
regulation of companies.

~~~
protomyth
I'm pretty sure its only SD, they have all the credit card companies. ND has
its own bank though.

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seldo
People are moving their startups from Minnesota to the _Dakotas_? Does your
startup need hundreds of square miles of empty land?

~~~
grellas
Hey, I grew up in the Dakotas many years ago - it is not empty land but _flat_
land with lots of ten-foot-high snow drifts through most of the year. Just
wanted to clarify.

On a serious note, the people in the midwest are wonderful and it would be
great if there were more opportunities to launch and build startups there. But
you need to build a critical mass of entrepreneurs, investors, advisors, and
resources that will nurture such startups and, without that, it will remain
hit or miss for any given locale that supports only intermittent startup
activity. The good news is that it is possible to launch from such places
(where, even a decade ago, this would have been almost unthinkable). As this
piece points out, though, it is not easy to sustain the company beyond the
earliest phase without the connections and resources that will facilitate
growth.

~~~
yesimahuman
I wonder how MN compares to Wisconsin, specifically Madison. I feel like the
modern tech/startup community here is growing (besides bio science which is
the big thing here), but it is really hard to find talented programmers who
are willing to work for a startup (despite there being plenty at the
university). I don't know what it is exactly, but established companies seem
to draw the most talent, despite the jobs being pretty mundane. I think the
biggest problem is a lot of people don't believe in the possibilities of
starting a company. The biggest thing I've learned from starting a company
here is just how much support there is, and people who want to see you
succeed. You never realize it until you take the first step and venture out.

As for talent, I've learned to be patient. The right people _do_ come along if
you wait. I've posted jobs several times and I get new applicants each time
that restore my faith in the local community.

Finding investors is pretty doable here from those around me that have
received outside funding (my company is friends and family right now), and
there is a noticeable interest from the government, the university, the
community, and investors, in growing Madison to become a hub of innovation.

Finally, one big thing I've noticed is how under served the community is with
the whole web 2.0 thing (non techies don't have time for another website).
People here really value a personal touch. Couple that with less local
competition and there is a lot of opportunity here.

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Hume62
I'm sure tax rates play a role, but think the bigger issue is the lack of
depth and/or interest among angels/VCs for software start-ups in MN. Now, if
you have a medical device start-up spinning out of Medtronic or the U of MN,
that's another story...

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rlyboslavsky
_It helped through the learning curve and cut through red tape with
connections. I mean, you can�t just walk up to a guy like Paul Buchheit or
Joshua Schachter and have them take you seriously._

When I was reading it I thought "sure you can!" (I was thinking about me
talking to Paul Bucheit at startup school in 08) but then I realized "oh, that
event was actually organized by YC too! ) :)

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joshu
What? I take everything seriously.

~~~
lloydarmbrust
Okay, that statement was incorrect--but I'm not sure how to phrase it.

My point was that if we were still in Minnesota, there is a 0% chance that you
or any of our awesome investors would have given us a chance. Being a part of
YC gave us the chance to meet and interact with some of the greatest minds in
the Valley.

Our idea is essentially a unique approach to a sales model--it's hard to
convince someone of that over e-mail.

I do apologize for phrasing it incorrectly.

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apower
Does Minnesota have the laws that protect employees to keep their inventions
done outside of work?

~~~
jcl
According to the following article, not only is Minnesota one of the eight
states with such laws, but it was actually the first:

<http://www.orinlaney.com/ipguideweb.html#legislative>

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nnash
I was completely unaware of the law mentioned in the article. Minnesota is a
great state, and I love living there its a shame that it seems I'd have to
move if I ever wanted to create or join a startup.

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bigsassy
That's such a pity to hear. Duluth, MN is a GREAT town, but with only a
handful of companies doing any real software development (web or otherwise)
I'd imagine it would be pretty hard to get funding.

I know Points North (<http://www.points-north.com/>) managed to obtain quite a
bit of angel investment about 4 years ago. I guess Lloyd and Jason just didn't
know the right people. Anyway, congrats on their success outside of the
Northlands :)

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mltsy
I've never lived outside of the midwest, so I don't know enough about how
Minnesota compares, but do I love living here. I plan on leaving to help make
Seeing Interactive successful, which I'm not torn up about, but I hope to move
back before too long. I say if there's anyone successful out there who loves
MN, move your started up start-ups (aka companies) to MN and make it work. You
too can be an angel some day :) The midwest is long overdue for a tech mecca.

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kwhinnery
Minnesota has several good, small software shops doing interesting work. Also
plenty of active contributors (or founders) in prominent open source projects
(JRuby guys live here, two Appcelerator employees, jQuery and Dojo committers
and more, and this is just people I know personally). It's true, you don't
hear of many VC or Angel funded start-ups around these parts. But we do have
plenty of start up companies engineered to, you know, MAKE MONEY from day 1.

