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.
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.
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.
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?
One thing people always seem to forget: startups are almost never profitable. Meaning, they don't pay dividends, and they expense everything else, so (with a decent accountant) the corporate tax thing is more or less irrelevant.
Much more germane to startup costs are the salaries (which are strongly influenced by personal & real estate tax rates), benefits (health can be 2X or more in expensive areas), and space.
> 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?
It isn't fatal at current levels given their other properties. If you don't have those other properties, you're competing with low-tax places that also don't have those properties.
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.
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.
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.
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.
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.
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.
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):
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.
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.
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.
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).
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.
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.
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.
It must have been many years ago. Today it is part of the union and is actually 2 states, North and South Dakota.
Kidding aside, I don't see either state as a real Mecca for start ups. The money is on the coasts. The people with the know how to get big name recognition are on the coasts.
If you want to start a bank or a paper box company, SD is cool. If you want to build a startup that needs facetime with angel investors and social ties to facebook, et al, I don't think the midwest is the place to be.
I did a ton of research recently on this issue, and other cost-of-living issues, because I live in an RV full-time. I'm currently paying California taxes, because that was my most recent permanent residence...but everything is insanely expensive in California, including vehicle insurance, health insurance, taxes of all sorts, vehicle registration and licensing, etc.
On my way back from Alaska in a couple of months I'm going to take a detour east to setup my domicile in South Dakota (I want to see Mount Rushmore and the Crazy Horse monument, anyway). It will save me at least a few thousand dollars next year.
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)
I grew up in North Dakota and was there over the 4th. My parents live in a town of 1300 people, and their house had just been wired with fiber optic for cable and internet. I'm also pretty sure they pay much less than I do in Minneapolis.
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...
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.
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! ) :)
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.
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 :)
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.
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.
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.