It may look easier, what with all the advice and money and services available. But it may be harder than ever to succeed.
STORIES HAVE A WAY OF BECOMING more dramatic in the retelling. War stories: "The enemy had us surrounded." Fish stories: "He was so big we couldn't haul him in the boat." School stories: "I used to walk 10 miles to school every day. Through blizzards. With no shoes."
Start-up stories have something of the same quality about them. Remember the bad old days when the enterpreneur was considered something of a social deviate, not a hero fit for the cover of Time magazine; when business plans were scratched with No. 2 pencils during long nights at the kitchen table, not farmed out to some freelance consultant with a personal computer; when Big Eight accountants laughed in your face rather than tripping over each other to lure your business with free advice and reduced fees? It used to be you couldn't beg, borrow, or steal seed capital. Today, there seems to be a bevy of angels and bankers and venture capitalists chasing the newest new business idea.
By all appearances, America has gone soft on start-ups.
Or has it? It's true, of course, that the number of businesses being started in the United States has more than doubled during the past decade, to 675,000 a year. But the percentage of those that survive has remained the same (according to Massachusetts Institute of Technology economist David Birch) or gotten worse (according to Dun & Bradstreet). Either way, figure that roughly 50% of the companies so bravely launched this year will close their doors by 1991, out of money or energy or both. In the face of such odds, it's hard to argue that the climate for start-ups is any milder than it used to be.
And what of the other 50%? The smart ones? The lucky ones? By 1991, managing growth will be their main concern; their gaze will be on the future. And by then the start-up will be only a bittersweet memory from the mid-'80s, an era, they will likely tell us, when things were really tough.
Minneapolis on the morning after a snowstorm is inspirational. Here is one city that has made its truce with winter. The roads are plowed before rush hour; traffic moves smoothly through the downtown grid of one-way streets as cars, buses, and police officers all cooperate with a midwestern bonhomie. Above, people move from parking garage to office, or from shop to shop, in heated glass walkways that connect most everything downtown. On the streets below, pedestrians bundled in down coats move briskly, heads bent into the wind. No one jaywalks: at crosswalks, they'll stop, stamp the snow from their boots, and smile to keep warm.
In much the same spirit, Minneapolis and her twin city across the river, St. Paul, have set about remaking their economy into a hothouse for entrepreneruship -- a haven for new companies from the cold winds of the marketplace. Colleges and universities run advisory management services for would-be founders. Public and private agencies vie for the title of the entrepreneur's friend. Incubators are everywhere. New businesses, once ignored, now have become a regular feature of the local business page, watched closely by an active community of academics, venture capitalists, and service providers. If launching a new company is getting easier anywhere, it should be getting easier here.
Like most things in Minneapolis, the newfound dedication to the business start-up is understated. You won't find anything like the cowboy-boots-and-Cadillac atmosphere of Texas or the open-shirts-and-gold-chains culture of Orange County, Calif. Other models inspire. George Pillsbury and Will Cargill both started here. More recently, William C. Norris's Control Data Corp. and Winston Wallin's Medtronic Inc. have provided the city with some of its entrepreneurial lore, to say nothing of the computer (Cray Research Inc.) and medical (Cardiac Pacemaker Inc.) firms that have grown up around them. By one estimate, one out of every 100 Twin City residents has helped start a new firm.
"This has been a good start-up town for 20 years," says John Kostouros, editor of CityBusiness, a local publication. "But now the support for start-ups is becoming institutionalized."
The institution most often cited is the Minnesota Cooperation Office. Founded in 1979 by Bill Norris and Willis K. Drake of Data Card Corp., the Cooperation Office collects $250,000 each year from local corporations, foundations, and law and accounting firms, which it uses to provide consulting services to half a dozen start-ups chosen from among the 300 that apply annually. Preference is given to companies with proprietary new technology and the potential to create 500 to 1,000 jobs within 10 years. And for an equity position of less than 5%, the Cooperation Office provides the start-ups with a year of intensive business counseling, helps with product testing and executive recruitment, and organizes an advisory board of local business luminaries.
Perhaps most important to its client companies, the Cooperation Office will fashion a financing package for the launch and help in the search for backers. "Our name usually makes something look good to the venture guys," says executive vice-president Ross Boerhave. That squares with the experience of Charles McNeil, who says his medical-products company, Surgidyne Inc., was "getting nowhere" with skeptical venture capitalists until the Cooperation Office was able to smooth the way for two private placements that raised the $1.6 million he needed. Now McNeil's company has 15 employees and posted revenues of $400,000 in its first five months; he expects sales to reach $2 million by the end of this year.
Of the 26 companies assisted by the Cooperation Office during its first four years, 23 are up and running. The group clusters tightly around high tech, but one of the start-ups produces feature films, while another markets chopped corn husks as animal bedding. President Ted Johnson boasts that the Cooperation Office will help create at least 22,000 jobs during the next decade. At the same time, he predicts the agency will soon become self-sufficient by cashing in each year on one of its 5% shares.
