So why isn't Minnesota more like the Valley? Can it be? Should it be?

On a sunny, windy day in May--Saturday, May 22, to be exact--when most of us were out playing or gardening, technology and design professionals gathered deep inside the sprawling, futuristic BestBuy headquarters in Bloomington, MN, to grapple with this question and scores of other issues, from how to use social media to how to reform the news industry. MinneBar 2010 brought between 600 and 700 people together for some 50 workshops.

MinneBar is a barcamp, which is the geek's answer to the conference; events like these are often known as "unconferences." They're gatherings of design professionals and other players in the technology world who share a desire to learn from each other without having to be overly formal about it.

"We're trying to facilitate an exchange of ideas about technology in general," explains Luke Francl, owner of Fundamental Constant, a software development company in Minneapolis. This year's MinneBar was the fifth, organized by Francl and Ben Edwards, principal and founder of Refactr, a software development company in Minneapolis.

Sparking More Startups

One of the hottest items was how to get more startups funded and off the ground in Minnesota. A session devoted to this topic--straightforwardly titled "How Can Minnesota Be Better?"--was standing-room-only in a room that seated 250.

Although there was sharp disagreement about whether the onus to do more was mainly on the investors or the innovators, panel and participants agreed that not enough risks are being taken here. "I think the [entrepreneurial] community here is great, but it's very risk-averse," said Dan Grigsby, who has founded several businesses, including Merchant Planet and Mobile Orchard. "It's part of the cabin culture--I know a lot of people with two mortgages, one for the house and one for the cabin, and that makes it harder to take risks."

Several panelists described factors that play into what they saw as the timidity of the entrepreneurs' partners, the investors. Panelist Marti Nyman, managing director of Altavail Partners, that he hopes a bill passed by the Minnesota House and Senate in March will help. The legislation created a five-year, $50 million tax credit for angel
investors who fund high-tech start-ups. "That will give firms an incentive to invest in high-risk companies in the early stages and hopefully stimulate more active investors," he said.

Panelists discussed various frameworks for startup incubation, including the Y Combinator model. Y Combinator is a venture capital firm that makes seed investments of less than $20,000 in exchange for a 2 to 10 percent stake in the company. It gets innovators through the early stages of the startup process.

Jon Dahl of Zencoder, which got its start from Y Combinator, said that although the model holds promise, innovators often need mentoring and connections even more than money. "Y Combinator makes programmers and designers into people who can run startups," he said. "But that isn't enough if you don't have the best current and former entrepreneurs in the area willing to help mentor the new ones."

Risk Factors

In a conversation after the barcamp was over, Francl and Edwards agreed that Minnesotans may be more risk-averse than dwellers in the Valley, but they suggested that they've got reason to be. Francl points out that it's harder to find funding for marketing and other necessary costs here than in northern California, and the innovator ends up shouldering those alone. "In the Valley, the only opportunity cost is often your lost salary," he says. "Out there, if you build a prototype, you either get funding for it or you go back to your job. But here, if you build it, you have to take it to market, and often you have to shoulder a lot of that cost. I think that contributes to thinking smaller, to people who keep their day job on the side or come up with ideas that require you to pull yourself up by your own bootstraps."

The Valley is a better community for support, too, Francl explains, and mutual support is key in making innovation work. "In a lot of places, including here, there's this idea of the solo entrepreneur who goes into the basement alone and comes out with a fully-formed, million-dollar idea. But that's not how it works. In the Valley, people cross-pollinate, they talk to each other, and all the investors know each other and hear about ideas."

Francl's point resonated with something Dan Grigsby said during the panel discussion. "There's not a deep pool of startup CEOs here who have experience with starting up a company, and who have done the prerequisites to get a deal funded," he told the group. "There are a lot more CEOs who have been through that cycle in San Francisco than here."

On the plus side for Minnesota, Edwards suggested that although there is a definite cabin culture here, that isn't the reason for caution; for some, it's the goal of their risk-taking. "Here, having that kind of lifestyle is part of people's aspiration for success," he says. "Maybe people here are less likely to aspire to build billion-dollar companies because they have certain lifestyle goals, of which the cabin is part."

Into Action

At several points during the panel discussion some participants registered frustration with the whole topic of getting more energy into the local tech-startup scene, which has been a perennial one. "What can we do so that we don't keep having to have this conversation?" asked a member of the audience.

"I think it's good that we keep having this conversation," countered Francl, and panelists agreed that continuous improvement, not a permanent solution, is the right goal for the startup community. Edwards and Francl want to keep that conversation going, and in order to not only talk but do, MinneBar is putting some money where the ideas are. Three innovators learned at the barcamp that they had won the organization's first MinneSpark awards, which were created to encourage potential entrepreneurs in the early stages.

Frequently.at, created by Andrew Kaiser, is a smart-phone application for customer loyalty programs. Sky High Harvest Rooftop Farm (Dayna Burtness) will use the 2010 growing season to research methods for building successful rooftop farms. Train Brain (Andy Atkinson) is an app for accessing public transportation schedules.

Each will get $2,000 in cash and $4,000 worth of services--hosting, working space, legal services, and other essentials for the startup entrepreneur--over the next year. "It's too early to tell what will come out of these ideas, but we're excited about their long-term potential and hopefully the awards will help to develop that," Francl says. It's clear that MinneBar wants to do its bit toward making the upper Mississippi Valley as tech-rich as that other Valley--cabins and all.

Holly Dolezalek writes on technology and business for MinnesotaBusiness, Finance & Commerce, and other publications.