Harlan moved from Des Moines to the Twin Cities in the early 70’s to be a part of  “a burgeoning high tech mecca.”  In 1979, he became the CFO of FilmTec Corporation (now Thin Film Technology), a (then) publicly traded thin-film composite venture started in 1977 by four scientists turned entrepreneurs.  After Dow Chemical bought the company in 1985 for $75m, Harlan began to re-invest his rewards through Genesis Business Centers, an incubator/consulting firm focused primarily on capital advisory services.

According to Harlan, Genesis has experienced two distinct high tech successes (NT International – sold to Entegris; Visual Circuits – sold to Focus Enhancements) as he continues to provide CFO & consulting services to other Minnesota tech companies by which he has a vested interest in, such as Cima Nanotech, Cymbet and Zivix.

“Over the years,” he says, “the halcyon days of abundant seed capital and wide/well practiced risk taking” have essentially eroded.   “It was once a good time and place for entrepreneurs, but sadly, looking back, we’ve lost our edge.”

“We have some talented people with world class technology — a good natural resource — but we’re a backwater when it comes to seed capital and the early stage venture capital needed to help these companies get started.  Too often I’ve seen companies have to move to the coasts because the investors who understand the opportunities and are willing to invest in early stage tend to want their companies in their own backyard…While we used to be known as ‘Moneyapolis‘,  it’s now more like ‘Miserapolis’ because of the paucity of seed capital. I’m concerned about a long-term secular trend — we’re in danger of becoming a larger (and colder) version of Omaha or Des Moises, who have stable but not dynamic high-tech economies like the Twin Cities have enjoyed over the past 50 years.  Now some people might say, ‘that’s fine’ and others would say ‘that’s not fine’; I’m in the latter category, I want Minnesota to be a leader…If the trend is not reversed, we’ll have done a darn good job of creating high tech jobs on the coasts at our taxpayers expense.”

Later in the conversation, he concludes  “…you wrap it all up and it could be the financial version of a perfect storm (although I don’t think it has to be that way permanently), but public and private policy leaders need to come to grips with the implications of this.”

Problems are easy – what’s the remedy?

“It’s going to take, somehow, the spirit of risk taking and the risk/reward ratio becoming attractive to people again.  I think there’s a generational problem:  profits used to be recycled into the next company and that’s not happening much anymore. There’s also awareness issue: reaching out to the money centers on the East and West coast so that they can invest in our companies [encouraging them to look at the arbitrage advances of investing here in Minnesota where the valuations are lower than on the coasts because the companies are domiciled here] while leaving them here.  But, I’m a perennial optimist and I think we can come out of this.”

And what about entrepreneurs?

“Work hard, work smart, be resourceful, make your cash go as far as possible. Keep knocking on doors, smile at people when they say no and hope for better times.”

While I played devils advocate to some extent, it’s difficult to challenge grounded reasoning from someone with such historical context — especially when, in the back of my mind, I know his sentiments are felt by many of Minnesota’s more talented and ambitious tech entrepreneurs. While it’s true that some Minnesota tech companies are receiving seed and early stage equity investment (not an absolute), the question is “why aren’t there more?”  As one Minnesota Internet entrepreneur recently put it, “It’s easier for me to raise $1m than it is $250k…too bad I don’t need $1m.”

Interestingly, this re-recorded interview was a few notches down from our original podcast recording (damaged), which was a few more notches down from our initial conversation (off the record). Still, consider it a rare moment of Minnesota candor…

Steve Mercil is the CEO of RAIN Source Capital, a multi-state network of angel investment funds that he founded in 1998. Steve is also Treasurer of the Angel Capital Association (ACA) and Chairman of the Board of Directors with the National Association of Seed & Venture Funds (NASVF).

RAIN Source Capital currently oversees 23 funds across six states with approximately $20 million in committed capital from around 450 individual angels. Since inception, the firm has  funded over 70 startups for which RAIN Source raised a cumulative $150m.

With two decades of early-stage financing experience, Steve has witnessed the ups and downs of risk capital on his mission to make RAIN Source the premier investment network of angel investors throughout the United States.

While the current economic landscape certainly isn’t helping to provide entrepreneurs with easier access to equity financing, Steve views the situation as favorable to the RAIN Source model. By networking and connecting investors with domain expertise, the potential for syndication and ongoing educational initiatives, RAIN Source offers an infrastructure that’s designed to save angel investors time while increasing  their own odds of successful angel investing.

“People are going to get more creative in how they structure their deals:  put-backs, buy-outs, royalty streams. I think we’re going to see some experimentation on exits over the next 3 to 5 years,” says Mercil looking at what’s ahead.

RAIN Makers Conference:

On September 23rd and 24th,  between 150-200 investors, entrepreneurs and thought leaders from across the country will gather at the Hilton Minneapolis/Bloomington for the 7th annual RAIN Makers conference. Topics include: identifying bias, creative financing, building exits and corporate culture, etc.

Regular price admission to the conference is $495, but summer-sale registration is discounted $100 through the end of August by using code “SUMSALE10″.

For $1,000 startups can receive two conference passes, exhibit their product(s) and participate in networking functions.  Similar to that of the CrowdPitch format, six exhibiting companies will be selected to make formal 10-minute interactive presentations in front of an audience and panel of experts.

“…Next we have on our main guest, Steve Nielsen, to discuss his next adventure MacroVentures, an investor in early stage companies in the technology and medical spaces.

Most recently, Steve served as President and CEO of PartnerUp, a wholly owned subsidiary of Deluxe Corporation (NYSE: DLX) and is a veteran internet and technology executive, having started and led a number of technology-focused ventures since 1996.”

Read More…

Phrazer, GeaCom’s core technology, is the convergence of hardware, software and media.  As a hand held device, Phrazer aims to find a patients native language and culture (in 15 seconds or less), discover immediate medical issues, gather vitals and connect to medical history through an EMR system.

The application of Phrazer is intended for emergency medical and life-threatening situations, including but not limited to:  the emergency room, urgent care facilities or field use (rapid response/disaster scenarios).

For a more detailed overview of the company’s origins, leadership and Phrazer, see our earlier interview with CEO Mat Johnson. New product prototype images (Gichi, Bulldog, Phrazer Headphones) have recently been posted to the company’s website, reflecting both the innovative nature and global potential of this Minnesota startup.

GeaCom is a strong contender in the Minnesota Cup’s Tech Division and could very well end up advancing to the next round when the official announcement is made — as scheduled for later today…

“The Dolan Company, the Minneapolis-based corporate parent of Finance & Commerce, is taking a stake in BringMeTheNews.

Dolan and Padilla Speer Beardsley, a Minneapolis-based public relations firm, are investing a cumulative $1 million in the Twin Cities-based news aggregation and radio broadcast news service. As a part of the investment, The Dolan Company CEO James P. Dolan and Padilla Speer Beardsley CEO Lynn Casey are joining the board of BringMeTheNews, which currently includes company founder Rick Kupchella and GoKart CEO Don Smithmier.”

Read More…

“Field Solutions announced today completion of its first outside investment round of $1.5 million. The investment group is led by StarTec investments whose president, Joy Lindsay, will join the company’s board of directors.

Other investors in the consortium include Invest Northwest LP, L&C Private Equity II LP, and VKO Investors, Inc.”

Read More…

Field Solutions CEO,  Mac Lewis, is a also founding partner of  Sherpa Partners — a VC firm started in 2001 with Rick Brimacomb and Steven Pederson.

Aveso is a provider of thin, durable and flexible patented (6879424; 7599192; 7054050; 11/961,412) electro-active ink technology for high volume,  mass consumer applications such as credit cards, sensors and smart labels.  The company’s products are specifically designed for situations where it’s historically been impractical or impossible to integrate displays due to cost, form factor or scalability.

Aveso’s low voltage operation (<1.0V) allows for display drive code to be loaded onto customer-specific silicon or low-cost, general purpose microprocessors. The displays can also be driven via Radio Frequency (RF) energy for contactless applications.

Spun out of Dow Chemical in 2004,  Aveso closed $6.25m in series B in October 2006 then hit $6.6m of a $10m third round target last April.  Aveso’s investors include: ARCH Venture Partners, Duchossois Technology Partners, Kidron Corporate Advisors LLC, Frazier Technology Ventures and UPS Strategic Enterprise Fund — the private equity strategic investment arm of the United Parcel Service of America.

*Aveso did not comment on this article

While innumerable opinions were cast about the fate of Venture Capital back in July when the initial Q2 press release went out, we stayed calm and quiet since there wasn’t any relevancy around Minnesota tech startups at the time.

But — what can we learn from the new data revealed?

Looking at the defined North Central region (Minnesota, Iowa, Wisconsin, North Dakota, South Dakota, and Nebraska) shows an aggregate total of $147,431,900 invested amongst 16 deals with $133m, or 90% in Biotech & Med device (nothing new here). Minnesota tech startups  (software, electronics, computers, digital media, etc.) captured 3 of those deals and $1.5m*:

• mPay Gateway raised $1m from Appian Ventures, GRP Partners and “other individuals”.
• Hardcore Computer raised $500k from Capital Midwest Fund, L.P. .
• Bloom Health Corporation raised an unknown amount from Sandbox Industries and an “undisclosed investor”.  No record of this found in Q2…was it was closure on this round which began in Q4 2009?

While the Mpay Gateway & Hardcore Computer deals were previously known/announced, it is always interesting (and equally valuable to entrepreneurs) to know more about who’s  actually investing in early-stage Minnesota tech.

In these specific cases, we saw capital coming from Denver (Appian Ventures), LA (GRP Partners), Milwaukee (Capital Midwest Fund) and Chicago (Sandbox Industries).

You read that correctly: according to the PricewaterhouseCoopers & National Venture Capital Association MoneyTree Report (PWCNVCAMTR), based on data by Thomson Reuters, 0% of capital for Minnesota tech startups came directly from Minnesota sources.

Of course, it’s true that (a) there are more tech deals happening than revealed in this report and (b) that these deals, while out-of-state, do likely involve local individuals to one degree or another.  For example, both the mPay & Bloom fundings refer to “other individuals” and “undisclosed investors”;  sometimes, it’s through these quiet local angel liaisons that deals find greater (and smarter) money through larger syndicate networks.

What a positive sign that regional — even national — investors are seeing real potential in what Minnesota tech has to offer.  Perhaps local tech entrepreneurs seeking capital can benefit by aggressively expanding their fundraising prospects beyond the border?  It’s worth a reminder that “natural persons” (and funds of 3 or more natural people) are eligible for a 25% discount (regardless of home state — no MN tax liability necessary) on qualified Minnesota startups, thanks to the Minnesota Angel Tax Credit.

*the $1.5m does not include the unreported figure from Bloom Health.

The company develops software and visual animation tools to “improve how coaches teach, how players learn and how spectators enjoy their games.”

Listed on the website are two unique products (with a third forthcoming):

1)  3D Playbook is a play drawing and play animation software for football coaches that promises to “teach players faster than ever before.” The technology automatically turns a coaches real-time drawing into a 3D motion of the play that’s viewable from multiple angles.

2) Mocap is proprietary software that captures data for analytical assessment.  Wearing a special suit, athletes send movement signals through a computer, which in turn, enables trainers and medical personnel to improve performance.

3) Animation – TBA

Former Minnesota Vikings running-back coach turned ESPN football analyst Dean Dalton appears to be at the helm of things; he’s listed as a Director, Chief Development Officer and “content expert” in the football segment of the companies vertical markets. Content experts “provide leadership, content design, credentials as well as access to all levels of players, coaches and suppliers of sports equipment.”  Other listed experts include: Trent Tucker, NBA Champion & NCAA All Big Ten player; Lou Nanne, Olympic Champion &  NHL player, coach and GM; and Alan Merrick, UK &  USA professional player, coach and owner — amongst others.

There are 12 sports/activities already listed and the company anticipates an additional roll-out of 30+ sports and athletic related activities says the site.

Earlier this year, it was announced that 3D Sports Technology and local domainer DigitalTown had formed a three year content development/revenue share partnership aimed at DigitalTown’s 27,000 high school spirit sites.

According to the document, 3D Sports Technology has only raised a small fraction — $50k — of the total round in common stock equity with no minimum.  While they’re in the game with some very intriguing niche products and a credible network, time will tell if they can score in this tight market.

3D Sports Technology could not be reached for comment.

“Fair Isaac Corp. announced Wednesday it has completed a private placement of $245 million of senior notes.

The notes were issued in four series, with maturities ranging from six years to 10 years. On average, the notes have an interest rate of 5.2 percent and maturity of eight years.”