8 ms·

Greener pastures? A tale of the Minnesota startup that was

77 points by johns 16y ago

protomyth 16y ago
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.
- lloydarmbrust 16y ago
  It's not--want to see my excel sheets?
  - protomyth 16y ago
    I wish the Governor and the State House and Senate leader would see it.
- ryanricard 16y ago
  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 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.
  - protomyth 16y ago
    CA has those in spades (it overcomes the whole tax thing), MN does not.
  - ianb 16y ago
    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 16y ago
      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 16y ago
        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 16y ago
        I'm pretty sure its only SD, they have all the credit card companies. ND has its own bank though.
joshu 16y ago
What? I take everything seriously.
- lloydarmbrust 16y ago
  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.
txgleton 16y ago
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.
- maukdaddy 16y ago
  I think you mean seasoned CEOs and not those CEOs who only work during the summer or christmas ;)
- melito 16y ago
  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
  - lloydarmbrust 16y ago
    Ha, yeah, with a wife and two kids I can say that I can at least agree with the latter part of your assessment. :)
  - aliston 16y ago
    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 16y ago
      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.
seldo 16y ago
People are moving their startups from Minnesota to the Dakotas? Does your startup need hundreds of square miles of empty land?
- dottertrotter 16y ago
  No, but the tax system is better there.
- pragmatic 16y ago
  No, not miles of empty land, just a change from some of highest taxes in the country to the some THE lowest. http://www.census.gov/govs/statetax/09staxrank.html http://www.census.gov/govs/statetax/09staxrank.html
  - pragmatic 16y ago
    Why the down votes for linking to a supporting document? Haters going to hate?
    - cynicalkane 16y ago
      Because the supporting document shows total state taxes, not tax rates. In other words, the supporting document doesn't.
    - btmorex 16y ago
      Maybe because you linked to a document that ranks total state taxes instead of per capita taxes? (which is incredibly misleading regardless of whether or not it was deliberate)
      - roboneal 16y ago
        Minnesota is not going to fair well on the per capita basis either.
    - pragmatic 16y ago
      Tough crowd. Here goes, taxes are lower in South Dakota. http://www.taxfoundation.org/research/topic/37.html http://www.taxfoundation.org/research/topic/37.html "Minnesota ranks 43rd in the Tax Foundation's State Business Tax Climate Index." "Neighboring states ranked as follows: North Dakota (25th), South Dakota (1st), Iowa (46th) and Wisconsin (42nd)." "Minnesota's 2008 state-level individual income tax collections were $1,493 per person, which ranked 5th highest nationally."
rlyboslavsky 16y ago
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! ) :)
ryanricard 16y ago
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 16y ago
  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 16y ago
    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 16y ago
      One of the YouTube founders having loose ties to MN does not make it a MN startup. http://en.wikipedia.org/wiki/Jawed_Karim http://en.wikipedia.org/wiki/Jawed_Karim
    - protomyth 16y ago
      Youtube really doesn't count (see johns's comment). Unisys comes from the merger of Sperry and Burroughs which both had their origins in Philadelphia[1] and is now headquartered in PA. Cray started as a MN company, but after a long and colorful history (some would say tragic) it is now headquartered in Seattle, WA. Well, angels and VCs are needed by a lot of people and MN doesn't have the environment to support a startup community. [1] http://en.wikipedia.org/wiki/Burroughs_Corporation http://en.wikipedia.org/wiki/Burroughs_Corporation
Hume62 16y ago
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...
CitizenKane 16y ago
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 16y ago
  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 16y ago
    As?
- lloydarmbrust 16y ago
  It's true. Telling friends and family what we do usually ends in an awkward stare. It consistently blows me away that people would rather work for 3M or the government than build something awesome that they love.
apower 16y ago
Does Minnesota have the laws that protect employees to keep their inventions done outside of work?
- jcl 16y ago
  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 http://www.orinlaney.com/ipguideweb.html#legislative
bigsassy 16y ago
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/ 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 :)
- hockeybias 16y ago
  Whatever happened to Duluth's (I forget the name) 'Tech' builidng on Superior Street downtown? Is it home to some tech companies?
nnash 16y ago
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.
aaronbrethorst 16y ago
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.
nswanberg 16y ago
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 http://news.ycombinator.com/item?id=1514455
tednaleid 16y ago
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 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.
mltsy 16y ago
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.
kwhinnery 16y ago
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.

77 points by johns 16y ago

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.

lloydarmbrust 16y ago
It's not--want to see my excel sheets?
- protomyth 16y ago
  I wish the Governor and the State House and Senate leader would see it.
ryanricard 16y ago
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 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.
- protomyth 16y ago
  CA has those in spades (it overcomes the whole tax thing), MN does not.
- ianb 16y ago
  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 16y ago
    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 16y ago
      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 16y ago
        I'm pretty sure its only SD, they have all the credit card companies. ND has its own bank though.

joshu 16y ago

What? I take everything seriously.

lloydarmbrust 16y ago
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.

txgleton 16y ago

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.

maukdaddy 16y ago
I think you mean seasoned CEOs and not those CEOs who only work during the summer or christmas ;)
melito 16y ago
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
- lloydarmbrust 16y ago
  Ha, yeah, with a wife and two kids I can say that I can at least agree with the latter part of your assessment. :)
- aliston 16y ago
  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 16y ago
    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.

seldo 16y ago

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

dottertrotter 16y ago
No, but the tax system is better there.
pragmatic 16y ago
No, not miles of empty land, just a change from some of highest taxes in the country to the some THE lowest. http://www.census.gov/govs/statetax/09staxrank.html http://www.census.gov/govs/statetax/09staxrank.html
- pragmatic 16y ago
  Why the down votes for linking to a supporting document? Haters going to hate?
  - cynicalkane 16y ago
    Because the supporting document shows total state taxes, not tax rates. In other words, the supporting document doesn't.
  - btmorex 16y ago
    Maybe because you linked to a document that ranks total state taxes instead of per capita taxes? (which is incredibly misleading regardless of whether or not it was deliberate)
    - roboneal 16y ago
      Minnesota is not going to fair well on the per capita basis either.
  - pragmatic 16y ago
    Tough crowd. Here goes, taxes are lower in South Dakota. http://www.taxfoundation.org/research/topic/37.html http://www.taxfoundation.org/research/topic/37.html "Minnesota ranks 43rd in the Tax Foundation's State Business Tax Climate Index." "Neighboring states ranked as follows: North Dakota (25th), South Dakota (1st), Iowa (46th) and Wisconsin (42nd)." "Minnesota's 2008 state-level individual income tax collections were $1,493 per person, which ranked 5th highest nationally."

rlyboslavsky 16y ago

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! ) :)

ryanricard 16y ago

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 16y ago
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 16y ago
  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 16y ago
    One of the YouTube founders having loose ties to MN does not make it a MN startup. http://en.wikipedia.org/wiki/Jawed_Karim http://en.wikipedia.org/wiki/Jawed_Karim
  - protomyth 16y ago
    Youtube really doesn't count (see johns's comment). Unisys comes from the merger of Sperry and Burroughs which both had their origins in Philadelphia[1] and is now headquartered in PA. Cray started as a MN company, but after a long and colorful history (some would say tragic) it is now headquartered in Seattle, WA. Well, angels and VCs are needed by a lot of people and MN doesn't have the environment to support a startup community. [1] http://en.wikipedia.org/wiki/Burroughs_Corporation http://en.wikipedia.org/wiki/Burroughs_Corporation

Hume62 16y ago

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...

CitizenKane 16y ago

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 16y ago
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 16y ago
  As?
lloydarmbrust 16y ago
It's true. Telling friends and family what we do usually ends in an awkward stare. It consistently blows me away that people would rather work for 3M or the government than build something awesome that they love.

apower 16y ago

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

jcl 16y ago
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 http://www.orinlaney.com/ipguideweb.html#legislative

bigsassy 16y ago

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/ 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 :)

hockeybias 16y ago
Whatever happened to Duluth's (I forget the name) 'Tech' builidng on Superior Street downtown? Is it home to some tech companies?

nnash 16y ago

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.

aaronbrethorst 16y ago

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.

nswanberg 16y ago

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

tednaleid 16y ago

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 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.

mltsy 16y ago

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.

kwhinnery 16y ago

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.