Providing a non-partisan model for generating and sharing          

    essential information on public issues and proposed solutions              

10th Anniversary :  2005- 06 to 2015-16

   
                                                                                                  About Civic Caucus   l   Interviews & Responses  l   Position Reports   l   Contact Us   l   Home  


 Response Page - Johnson  Interview -      
                                                                      Please take one minute to evaluate our website. Click here to take the survey.

These comments are responses to the statements listed below,
which were generated in regard to the 
B. Kristine Johnson  Interview of
01-16-2015.

State should do more to support venture capital investment in promising startups

OVERVIEW

According to venture capitalist B. Kristine Johnson, president of Affinity Capital Management in Minneapolis, the State of Minnesota is not doing enough to encourage risk capital to support startup companies at the front end. She says Minnesota is falling behind, because other states are using state dollars to invest in venture funds that back companies located in their own states. She does not think, though, that the state should pick which industries should get the investments. And she believes that larger companies in Minnesota could also help make capital available to small startups.

Johnson notes that Minnesota companies receive less than one percent (0.9 percent) of all venture capital investments in the country. In 2013, that amounted to $270 million in investment in Minnesota companies. She says there are fewer, perhaps half as many, venture capital firms operating in Minnesota compared with 12 years ago, reflecting a national trend.

She points out that, nationally, venture-backed companies skew towards medical technology (a key area for Minnesota), biotechnology, IT and technology. Technology includes software, hardware, telecommunications and new consumer and enterprise applications. 2013 data show that venture capital investment nationally is going largely to California, Massachusetts, New York and other big states associated with technology investing. Those top three states accounted for 70 percent of the total national venture capital investment of $29.5 billion in 2013.

Johnson believes state support of the University of Minnesota is critical, since it's the state's only research university. But she says the Legislature shouldn't decide which areas of research the University should pursue.

For the complete interview summary see: Kristine Johnson interview

Response Summary: Average response ratings shown below are simply the mean of all readers’ zero-to-ten responses to the ideas proposed and should not be considered an accurate reflection of a scientifically structured poll.

To assist the Civic Caucus in planning upcoming interviews, readers rated these statements about the topic on a scale of 0 (strongly disagree) to 5 (neutral) to 10 (strongly agree): 

1. Topic is of value. (8.4 average response) The interview summarized today provides valuable information or insight.

2. Further study warranted. (7.5 average response) It would be helpful to schedule additional interviews on this topic.

Readers rated the following points discussed during the meeting on a scale of 0 (strongly disagree) to 5 (neutral) to 10 (strongly agree): 

3. Venture capital important to economy. (8.6 average response) Venture capital—a term used to identify financial investment in higher risk, startup companies—must be an important part of growing a state's economy.

4. Minnesota at a disadvantage. (7.6 average response) But a concentration of venture capital firms and investments in three states—California, New York and Massachusetts—places Minnesota at a competitive disadvantage.

5. State must encourage venture capital. (7.1 average response) Because the state now has fewer venture capital firms than in the past, Minnesota needs to do more to encourage risk capital, as several other states are doing.

6. State shouldn't chose beneficiaries. (9.2 average response) The government would be ill advised to select which firms should benefit from such state support.

7. Invest in MN-focused funds. (5.4 average response) To support promising new businesses in Minnesota, the state should invest in venture capital funds that have demonstrated a commitment to financing Minnesota startups.

Response Distribution:

Strongly disagree

Moderately disagree

Neutral

Moderately agree

Strongly agree

Total Responses

1. Usefulness of topic.

0%

0%

14%

50%

36%

14

2. Importance of further discussion.

0%

7%

20%

47%

27%

15

3. Venture capital important to economy.

0%

0%

13%

47%

40%

15

4. Minnesota at a disadvantage.

0%

7%

13%

53%

27%

15

5. State must encourage venture capital.

13%

7%

7%

40%

33%

15

6. State shouldn't chose beneficiaries.

0%

7%

7%

36%

50%

14

7. Invest in MN-focused funds.

13%

13%

20%

47%

7%

15

Individual Responses:

David Dillon (10) (10) (10) (10) (10) (10) (7.5)

1. Usefulness of topic. Thanks for spending more time and effort on economic issues. It is, after all, how we all create the wealth and incomes that provide for our personal and civic lives.

2. Importance of further discussion. There is more to be said and done. Minnesota has a legacy of great economic innovation and success from Honeywell, 3M, Medtronic, Control Data, Target, General Mills, The Mayo Clinic, Hormel Foods and many others. All of these examples, somehow, started here. Are the right policies in place for there to be more of these success stories or are we destined to be the next Ohio?

3. Venture capital important to economy. Minnesota's future economic success will be defined by what we can sell to others. Or, to put it another way, what we can "export"? It won't be blockbuster movies; Hollywood has that down. Of course, saying what it won't be is easy, they hard part is saying what it will be. Don't try. Create an environment to encourage risk and entrepreneurship, and then celebrate both the effort and the successes.

4. Minnesota at a disadvantage. True. Think differently and get to work, or be Detroit and Cleveland.

5. State must encourage venture capital. True, keep up or fall behind. Lot's of folks think just getting money is all that a start-up needs. That is far, far from the truth. Who invests matters a lot. We want to be a place that can launch successful companies to provide for global needs. It is a shame that our best entrepreneurs think they are best served by going to other cities to talk with potential capital partners.

7. Invest in MN-focused funds. Maybe. We do need to compete. More importantly the state needs to create a competitive environment in tax and law to encourage this important activity.

Don Anderson (5) (5) (5) (7.5) (7.5) (7.5) (10)

Bruce Lundeen (5) (7.5) (7.5) (7.5) (5) (10) (2.5)

Anonymous (10) (10) (10) (10) (10) (2.5) (5)

1. Usefulness of topic. As an employee of the State in the area of Economic Development, and working with small business development, funding is a key component of success. Her insights were very valuable for me.

Dennis Johnson (7.5) (2.5) (5) (2.5) (0) (10) (7.5)

7. Invest in MN-focused funds. I think a lot of venture capital money is misspent and misdirected. There are plenty of incentives within a capitalist system to induce inventiveness without big venture capital investment. The speaker cites no statistics as to the impact of venture capital on invention. I would rather see Minnesota succeed without this uncertain fertilizer. "If you truly build a better mousetrap, the world will beat a path to your door."

John W. Milton (7.5) (5) (7.5) (5) (2.5) (10) (0)

7. Invest in MN-focused funds. I am more concerned with (1) our inability to reduce income disparities; helping the rich ones won't do a thing for this; (2) inadequacies in the public school system, according to recent surveys; (3) drop-out rate in higher education; (4) lack of funding for pre-school education for all Minnesota 3-4 year olds.

Scott Halstead (10) (10) (10) (10) (10) (10) (5)

2. Importance of further discussion. Much of the credit for development of the medical industry in Minnesota [goes to, and] was the direct result of, the computer industry. The large computer firms’ engineers started many high technology firms, many of which became very successful.

3. Venture capital important to economy. Minnesota's tax structure is a major impediment in financing high-risk startup companies. As wealthier business executives with the means to invest retire to much tax friendlier states, they take their [money] and time with them and don't wish to [be] considered a Minnesota resident because of the claw-back conditions of the Department of Revenue.

4. Minnesota at a disadvantage. Those states have greater wealth for investment.

7. Invest in MN-focused funds. I don't believe the state should be directly investing venture capital funds [in] new businesses. We should be investing in U. of M. research, perhaps [in] development of a research and development center/centers. [We should] encourage investment and a tax structure for these higher risk/reward new businesses and [a] tax structure that encourages older adult Minnesotans to retain their Minnesota residence and [we should] provide business guidance to these new businesses.

Mark Richie (na) (na) (na) (na) (na) (na) (na)

Great interview. This is the top challenge to Minnesota's future well being.

Bill Kuisle (8) (10) (9) (7) (8) (19) (1)

The state should look at its tax structure to see if there is a reason for lack of investment in the state. The state's responsibility should be a fair and low tax system for all venture capital. Creating a fund will only lead to someone picking winners and losers. Creating a business climate that attracts businesses through lower taxes and in less regulation will be fair to turn investors and all future investors.

Chuck Lutz (9) (7) (9) (8) (8) (9) (9)

Peter Hennessey (na) (na) (na) (na) (na) (na) (na)

You have got to be kidding. The state should support venture capital investment? What's wrong with you people in Minnesota? I think you'd serve your cause much better if you studied the history of Silicon Valley, going back to Hewlett's and Packard's garage, and follow the timeline of its development -- why it happened there and nowhere else, at least at that time in history. Then try to imitate that.

David Durenberger (na) (na) (na) (na) (na) (na) (na)

I admire Kris and the contributions the University of Minnesota and the medical device industry have made to health care around the world and in Minnesota. The point, however, is whether medical device technology (as opposed to all the other hi-tech opportunity for venture capital money and public investment) is or should be our future and the future of the University of Minnesota’s healthcare and technology research capacity. The investment focus in health care now and in the future is elsewhere than devices. And the former R&D talents of Medtronic, Boston Scientific, St. Jude, or 3M are now simply giant sales and marketing organizations acquiring and pushing into price-fixed worldwide device pipelines, devices invented anywhere. And you’ve plenty of folks who can tell you about it. Take a trip out here to the city by the bay and environs and you’ll see them at work. Obviously Kris has been doing this for some time.

50 years ago the University of Minnesota Medical School was instrumental in creating new approaches to restoring heart health, and out of those efforts rose the medical device industry, of which Covidien (aka Medtronic) is the best and the best known. But the 50-year ride is over as the venture capital investment data can show you, as can people running hospital based systems around the country and the world. Minnesota public investors, unlike the private capital folks, have not sought to prepare themselves well for this new future of health care.

The Minnesota Legislature invested $570 million in creating a destination city for the Mayo Clinic. Having done that, much more will have to follow, starting with the so-called Zip Train or hi-speed rail to get Mayo staff to Minneapolis’ vibrant life style and their patients from MSP to Destination City. The Governor wants to invest $30 million in the University of Minnesota Medical School in order to tempt high tech medical talent to come "North" and create research jobs. (Compare that with the Mayo investment). California voters invested $2 billion of their tax money starting five plus years ago into building the capacity to invent solutions to currently unsolved medical problems. Come on out and take a look at the new UCSF medical campus - and take in a Giants game; you can walk to from the campus. My point: The rest of the world has caught up to and passed Minnesota’s 1960’s med device lead quite some time ago. Kris is investing now in a start-up that is manufacturing in Uruguay. How many are operating in Ireland, etc.?

Four old former pols like Roger Moe, Dean Johnson, Don Loeslie and me have been wondering why the future of Minnesota’s economy, and its public investment in education and research and jobs, might not focus on something that involves absolutely the entire state: food, and related renewable resources. Some of the biggest agricultural companies in the world (including the biggest) are creating lots of jobs in Minneapolis-Saint Paul and elsewhere in Minnesota. We thought to tie this into better health, into greater investment in maybe 150 years of ag research at the University of Minnesota (which is already making a difference all over the world, but it could save the planet!) and into turning the red/blue post election maps of Minnesota voters into 6 million purple people.

Point being not that we’re necessarily right; but that someone needs to take a look at what we do best in this state, always have, and always will. Because that’s who we’ve always been and [what] the world is also likely to need in the future. We don’t have that much competition; it doesn’t take a billion dollar new public investment. It takes a vision, a decision, and then the private capital will go to work making a lot of it happen. If it were more sleep apnea devices I’d be for med tech.

Wayne Jennings (10) (7) (9) (7) (8) (9) (5)

Larry Schluter (9) (9) (9) (8) (8) (8) (7)

She does not talk about what amount of dollars would be necessary to accomplish this goal. We have a legislature unwilling to put $1 million to other good projects.

Paul Hauge (9) (9) (8) (9) (9) (5) (7)

Bright Dornblaser (10) (8) (10) (8) (10) (10) (8)

Tom Spitznagle (9) (7) (10) (10) (10) (10) (7)

Kevin Edberg (7.5) (5) (10) (5) (0) (7.5) (0)

4. Minnesota at a disadvantage. The stated reason for investment in other places is that the capital is going to tech sectors that are not particularly strong in Minnesota. I'm not sure that places us at a disadvantage unless we're going to try to grow sectors that are not particularly strong.

5. State must encourage venture capital. The argument is that the State needs to provide capital to firms who will put our money to work, (for a healthy fee, I presume) to help buy down the risk of those who have capital but who are unwilling to place all of it at risk. Someone needs to distinguish how placing public capital at risk to aid the investments of those with capital provides a unique benefit to Minnesota. What protections are there that firms will repay the state with the kind of outputs and outcomes we desire? It's a bad play. The fact that states with historically under-performing economies (Indiana, Michigan, Ohio) are making such investments is not a reason for Minnesota to join the fray; it's also not likely a coincidence that all three of those states have Republican governors.

6. State shouldn't chose beneficiaries. We shouldn't be investing at all.

7. Invest in MN-focused funds. We should invest in human capital and continue to do what has worked for us in the past.

    

The Civic Caucus   is a non-partisan, tax-exempt educational organization.   The Interview Group  includes persons of varying political persuasions,
reflecting years of leadership in politics and business. Click here  to see a short personal background of each.

  John S. Adams, David Broden, Audrey Clay, Janis Clay, Pat Davies, Bill Frenzel, Paul Gilje (executive director), Dwight Johnson, Randy Johnson, Sallie Kemper, Ted Kolderie,
 Dan Loritz (chair), Tim McDonald, Bruce Mooty, John Mooty, Jim Olson, Paul Ostrow, Wayne Popham, Dana Schroeder, Clarence Shallbetter, and Fred Zimmerman


©
The Civic Caucus, 01-01-2008
2104 Girard Avenue South, Minneapolis, MN 55405.  civiccaucus@comcast.net
Dan Loritz, chair, 612-791-1919   ~   Paul A. Gilje, coordinator, 952-890-5220.

contact webmaster
 

 

 

Hit Counter