Rochester Entrepreneurial Roundtable Discusses Future of City's Startup Ecosystem: Part 2

A few weeks ago we sat down with some of Rochester’s entrepreneurs for a roundtable discussion about the startup and entrepreneurial ecosystem in Rochester, where the community is headed, and what it will take to get there.  This is part two in a three article series covering the conversation. 


Our esteemed entrepreneurial panel:

  • Mike Rolih, Founder and CEO of GoRout, a sports wearable display and sensor company and recent graduate of the Mayo Clinic Business Accelerator.
  • Xavier Frigola, Director of the Mayo Clinic Business Accelerator that houses twenty-two life science companies.
  • Nate Nordstrom, Founder of BrandHoot, a company that designs websites, mobile applications, and additional products.
  • Hunter Downs, Founder of Area 10 Labs, a hardware and software product development company, and Co-owner of Café Steam.
  • Chris Lukenbill, Founder of AbleBright Agrotech software to connect produce farmers that have the passion grow, with the knowledge they need to be successful.

  • Jamie Sundsbak, Founder of BioAM and Program Director at a new coworking and business incubator space called Collider.


Now that we had defined a startup, startup ecosystem, and the key ingredients for Rochester’s startup success in Part 1 of the discussion, we next asked how we should build up and feed Rochester’s startup ecosystem and encourage more prospective entrepreneurs to take risks.

“I think as entrepreneurs, we always wish, I always wish, and I think everyone will agree, things would happen faster, bigger, and better.  And so I think all of a sudden, you’re just anxious to make this grow and change faster.  But I think we’re doing a lot of the right things,” explained Nate.   He viewed Cube, Rochester’s first coworking space, as that first connection point in our entrepreneurial community.  And from that moment, things just propelled forward.

Rochester’s entrepreneurs also need to utilize the energy within the community to make startup growth possible.  As part of this process, we need to clearly identify the roadblocks impeding our success and craft solutions to these problems.

It’s also essential to learn from the experience of other cities that have undergone dramatic growth in their startup and entrepreneurial systems to avoid committing similar errors and to accelerate our own growth process.  “When the entourage went to Madison, it was ‘Oh we built a lot of space.  We should have been investing in those companies.’  And I think that’s a strong lesson.  Don’t build it and expect them to come.  Go the other way around.  Make them be there, then fill the space,” said Hunter.

Things are happening in Rochester’s entrepreneurial scene that made the panel believe we are pointed in the right direction.  Take Café Steam, for example.  Something that didn’t exist eighteen months ago has now become a hot spot for Rochester’s entrepreneurial force.  You can’t go in there to work or hold a meeting without bumping into someone else you know who is working on their own business in the coffee shop.  Café Steam has become a location in Rochester where entrepreneurs can interact in a low key fashion.

The Mayo Clinic Business Accelerator has also taken off.  “I’m excited because when we opened the accelerator…it was a public effort.  But now, we have the private sector doing something.  Which to me means that the model has been proven and there’s opportunities for a business itself to help other businesses, which will only exponentially keep helping out our companies,” explained Xavier.

There’s also a changing community perspective on entrepreneurship.  Nate explained that perhaps the first stage of an entrepreneurial ecosystem is skepticism or even lack of trust in the process because it’s just so foreign and new.  He explained when Cube first open its doors, people thought it was insanely weird.  The next stage in building that entrepreneurial ecosystem might be curiosity. 

“And now maybe we can get to a point where it’s more like faith and trust in, ok this is actually a real thing.  It’s not just some random people just playing around and having fun.  They’re trying to build a business and make a big impact here.”

We’re not only seeing a trust or acceptance of entrepreneurship in Rochester, we’re seeing a change in the actual face of the city itself.  There’s a real push in infrastructure investment now where residents see noticeable changes to the cityscape.  “If I was to steer DMC more in terms of what it was doing, I would say let the buildings get built but focus on, and I know Patrick Seeb is working on this a lot, is how do you get people in and out of downtown quickly?” asked Hunter.  Poor traffic flow could be a literal roadblock to entrepreneurial ecosystem growth.

Positive developments are occurring in the Rochester entrepreneurial scene.  But at what point will we know if all these efforts have been successful?

“I’d say like every day, if you could have an announcement like [GoRout’s] round of funding closed.  It would be like boom, today [GoRout] closed.  Tomorrow, every person down the line,” Hunter explained.

A key event happening in Rochester every day would mean two things.  First, it means that ideas are coming to maturity.  Second, it means that capital is flowing into the city.  This daily announcement would not need to be limited to the close of a funding round.  It could include things like major hires, launches of clinical trials, or major exits.

People in Rochester increasingly want to hear more about the entrepreneurial world.  Maybe it’s due to the rise of things like Shark Tank, but we’ll be optimistic here.  Perhaps this means we are moving through what Nate termed the “curiosity” stage of entrepreneurship. 

“To me things [in the entrepreneurial community] are happening pretty much every week, I don’t know about every day.  But things are happening pretty often here and there are people that want to know that live in this town,” Xavier summed up.

Rochester may be pointed in the right direction as far as entrepreneurial development is concerned, but overall the business environment in Minnesota may not be all that favorable to new ventures.  Hunter spoke about his previous experience in Hawaii, a state where tourism is a major contributor to the economy.  However, this industry took a huge hit after 9/11, virtually grinding to a halt.  The state realized it was time to diversify the economy.  In 2001, Hawaii passed Act 221, a high tech tax credit with a 100% return on investment, which fueled growth in the industry. 

We do have income tax incentives in Minnesota, like the Angel Tax Credit, where qualified investors can be credited up to 25% of any new investment.  However, the credit is maxed out at $125,000 for an individual and $250,000 for a joint filing couple.  That’s not such a bad deal if you want to invest $100,000.  But larger investments, such as in the $1M ballpark, are not all that attractive.

With already difficult regulatory requirements in place to get products like medical devices to market, a poor business growth environment adds even more barriers to entry for startups.

One solution?  If the game is not working, just break it.

“Then we have to change the rules.  Conversations like that start in rooms like this.  If we can find out what is impeding that progress, we can build some momentum.  There could be a case asking for the state to change the rules,” suggested Xavier.