This week, Peter talked with Mary Grove and Brett Brohl, founders and managing partners of Bread and Butter Ventures, a new early-stage venture capital fund based in MSP and investing globally. They talked about the future of the innovation economy, MSP’s startup ecosystem, and the region’s bold goal to double the number of startups accessing early stage capital in MSP. Mary Grove spoke discerningly to the geographic location of MSP – in the dead center, the “bread and butter” of the country- being a huge advantage for our region and making it an excellent place to grow and invest. In 2019, the GREATER MSP Partnership, having also recognized this opportunity, invested in and launched Forge North, the region’s startup and innovation ecosystem-building initiative. The coalition brings together MSP’s massive startup ecosystem of entrepreneurs, investors, corporate innovators and other allies. Both Mary and Brett serve on Forge North’s Leadership Council and were instrumental in building the coalition. This week, the intel team is analyzing venture capital deal data for 2020-to date to see how venture financing activity is trending through the COVID-19 pandemic and to examine trends for our regions core sector verticals.
MSP venture capital deals slow during COVID-19 pandemic, but mimic national trends.
Source: GREATER MSP analysis of Pitchbook data
In their conversation with Peter, Mary and Brett affirmed that MSP’s innovation economy is strong, with opportunities abound, but we need more business formations to accelerate startup growth. This is especially true in light of the economic effects of the global COVID-19 pandemic. The Greater MSP intel team examined data from PitchBook, finding that the number of companies raising venture capital during the first half of 2020 is roughly 21% lower than that of the first half of 2019, on par with the national year-over-year decrease in the number of companies raising venture capital. The number of deals closed in MSP during the same time period is roughly 23% lower than that of the first half of 2019, also in line with the national year-over-year decrease (24%). Among our highest performing peer regions, most saw roughly 20% decreases in the number of companies raising venture capital, similar to MSP. While the number of deals dropped consistently across peer regions, the year-over-year change in total capital invested varied widely across regions; Boston and Silicon Valley have seen dramatic increases while other high-performing areas like Denver saw significant decreases in total capital invested during the first half of 2020.
MSP home to industry verticals driving the innovation economy, with health tech leading deal activity.
Source: GREATER MSP analysis of Pitchbook data. Health Tech includes verticals: digital health, healthtech, wearables & quantified self. Enterprise SaaS includes verticals: SaaS. Food&Ag Tech includes verticals: food tech, ag tech.
MSP’s sectors of strength include medical device and life sciences, food and agriculture, software and technology, headquarters, and financial services. These are the Greater MSP region’s strongest, most concentrated, sectors. They also happen to include industry verticals that Bread and Butter Ventures considers “backbone” sectors of our national economy: health tech, ag/food tech, and enterprise software. The intel team examined venture capital deal data over the last five years for these high-growth industry verticals and affirmed that they have been strong drivers of MSP deal activity. Combined, the three verticals accounted for 37% of all venture capital deals in the region since 2016 and 37% of total dollar amount of venture capital invested in MSP-headquartered companies. MSP’s health tech sector alone accounts for 16% of venture capital deals over the past five years and 24% of total venture capital invested in MSP-headquartered companies. The average amount of capital invested in MSP health tech startups is $9.6 million, over $3 million higher than the average of all MSP venture capital deals in the past five years.
Leaders and partners in the Forge North coalition are working actively to make our region the best place in the world for people from every background to start and scale ventures. In partnership with GREATER MSP’s intel team, we are tracking data closely to inform strategy and build solutions. In the works is an Innovation Dashboard, a companion to GREATER MSP’s Regional Indicators Dashboard, which will track MSP’s progress on a number of startup and innovation-related metrics including business starts, jobs created by startups, venture capital deals and dollar amounts raised, patents, and more. We’re getting to work to support and grow the entrepreneurial ecosystem already in place in MSP using data-driven strategy and leveraging the Partnership at every point along the way. We can’t wait to see what’s in store for our future of innovation economy.