Features

From Startup to Grown-up

What it takes to make it. From Minnesota businesses that beat the odds

By Kevyn Burger
Tue, 2016-11-29 10:15

 

It’s a rule of thumb often quoted by bankers and MBA professors: Half the startups that get off to an optimistic start today will be toast in five years.

What does it take to beat the odds? What are the qualities needed to be among the startups that light five candles on their company birthday cakes and move from survival to success?

For Chad Halvorson, a key factor was timing.

The founder and CEO of the digital platform When I Work now sees that he was too far ahead of the curve when he first hit on his big idea.

The light bulb came on early, when Halvorson held an after-school job bagging groceries and stocking shelves at the Thief River Falls SuperValu.

“The manager would post the schedule on Sunday and I had to cart my butt into the store to check it,” says Halvorson, now 34.

That inefficiency led Halvorson to conceive an online portal that would let managers post schedules online and allow workers to log in and track their shifts.

It was 1998.

“The idea wasn’t resonating. There wasn’t ubiquitous access to the Internet and connectivity wasn’t at scale in the hourly workforce,” recalls Halvorson, who walked away from his startup in 2001 and started a tech consulting company.

When he resurrected the online scheduling idea in 2008, the concept was viable.

“I was able to recognize when things had changed enough for technology to solve the problem,” he says.

Today, When I Work serves 50,000 workplaces in 50 countries and employs 120 in its new Minneapolis offices; Halvorson expects to bring on another 100 workers in the next 18 months.

“In the second iteration, the likelihood for success also went up exponentially because I was able to surround myself with some people I’d met who could help me pull it off,” he says.

The right blend of personalities is one of the top indicators of which startups will go the distance, according to John Stavig, director of the Gary S. Holmes Center for Entrepreneurship at the Carlson School at the University of Minnesota.

“A strong team and a strong culture go at the top of the list of the essential qualities that enable success,” he says. “Secondly, the business must be focused on a problem worth solving. It seems so simple, but the majority of startups don’t have those basics.”

Stavig cites a few classic problems that trouble startups. He says that too often, the initial team is loaded with people with the same skill set when a diversity of traits and backgrounds is needed.  

“The research also shows that one of the biggest reasons startups fail is premature scaling, trying to grow too quickly,” he adds. “Founders and first-time entrepreneurs rush forward with a concept without a clear understanding of the value they’re providing. It’s hard to be patient.”

Home climate

A native of Rochester, Minn., Dug Nichols followed the path of a lot of young startup visionaries and headed west, working in Silicon Valley with several Internet ventures.

But the pull of home was powerful and led Nichols to investigate the Minneapolis-St. Paul outlook for tech-based entrepreneurs.

“I thought the startup scene had all the elements to grow rapidly,” says Nichols.

That was four years ago; he’s now ensconced as the “Chief Executive Kid” of Kidizen, which had been founded in Minneapolis two years earlier.

Noting that the startup, a platform for reselling children’s fashion, has raised almost all its money to date from local investors, Nichols thinks the region’s potential is being realized.

“I would argue that over the past four years there has been tremendous growth in the startup scene locally,” he says. “There are more venture capital dollars coming in from outside. We are seeing acquisitions and creating more jobs.”

His advice to startup newbies? Be persistent, be passionate and don’t go to investors with just an idea; make sure you can demonstrate that you can build something.

“Get the product fully ready and get yourself fully invested,” Nichols advises. “Take a second mortgage, find friends and family who believe in your vision, do whatever you need to do. That’s how you get traction to raise institutional money.

“Starting a business is incredibly hard and deeply rewarding,” he adds.

While the climate for startups may be on the upswing, Minnesota has much room for improvement. The 2016 Kauffman Foundation Index of Startup Activity put Minnesota 21st in its national rankings. That’s up from 24th place in 2015, but the state still lags behind Midwestern counterparts such as Ohio and Michigan.

Retail accelerator for startups

One of Minnesota’s best known Fortune 500 companies is taking a step to jump start entrepreneurship in its own backyard.

This year, Target hosted ten retail startups in a business accelerator at its Minneapolis headquarters. The finalists were whittled from 500 applicants representing 45 countries. Following the intensive 13-week program, some of the businesses went on to pursue fundraising while others prepared to go to market with their product.

Ryan Broshar, the managing director of Target’s partnership with Techstars, had to tease out the most important quality that would predict success in the applicants.

“The main thing we based the selection on was the quality of the team. Did they have the chemistry? That was more important that the product, sales or the marketing,” says Broshar, 32, who founded his first startup while studying entrepreneurship at the University of Minnesota.

This is the first of a three-year relationship between Target and Techstars, and Broshar hopes the presence of the program will bring more attention and energy to the metro area.

“We bring businesses to town that don’t necessarily have Minnesota on their radar. A few might stay and the others will leave with a positive view of the area,” he says. “The environment is on the upswing. We see more funding for startups and we’re demonstrating businesses don’t have to be on the coasts to find the right resources.”

Biz Briefings

When I Work
Headquarters: Twin Cities
Inception: 2010
Leadership: Chad Halvorson, CEO; Jeff Imm, president & COO; LeeAnn Belski, VP of talent and culture; Greg Wallace, VP of finance; Tamer Selim, director of product; Jason Hable, VP of growth; Daniel Olfelt, co-founder and chief architect; Shane Helget, VP of engineering
Employees: just over 100
Revenue: Undisclosed
Description: When I Work is the easiest way to schedule and communicate with employees. More than 50,000 businesses and over half a million users rely on When I Work for employee scheduling, time clock and communication.

Kidizen
Headquarters: Minneapolis
Inception: 2014
Leadership: Mary Fallon, co-founder and CCO; Dori Graff, co-founder and CMO; Dug Nichols, co-founder and CEO; Shane Ewert, VP Technology
Employees: 5
Revenue: Undisclosed
Description: Kidizen is the mom-powered platform to shop, sell, and share kidstyle.