An early-stage venture fund with a focus on tech startups may have its sights set on Sioux Falls’ emerging market.
Spearheaded by an experienced team of tech investors and entrepreneurs, Great North Labs is a Minnesota-based fund committed to bringing powerful capital to the Midwest.
Ryan Weber is co-founder and one of three managing partners of the fund, which was established in 2017.
During college, Weber and his brother, Rob, started a company which they then grew and scaled, with offices in St. Cloud, the Twin Cities, and San Francisco. The brothers became active in the Twin Cities’ startup environment as angel investors, and they have witnessed its growth firsthand.
“It’s hard to point to a single event, but it went from a nascent startup ecosystem to a very hot ecosystem in a period of about 10 years,” said Weber.
How does this affect the startup ecosystem in Sioux Falls?
With growth in larger Midwest markets like Minneapolis and Chicago skyrocketing in recent years, Weber believes smaller markets aren’t far behind.
“I think what we’re seeing is that communities like Sioux Falls will be going through a transition or are already going through a transition, like the Twin Cities,” said Weber. “Having scaled a tech company in St. Cloud, there’s some advantages to working in a smaller market.”
That’s where Great North Labs comes in.
With experience ranging from the small, Midwestern city of St. Cloud all the way to Silicon Valley, the team at Great North Labs has the connections necessary to bring impactful capital to smaller markets.
“One of the challenges we see in the Upper Midwest is that, historically, people didn’t have connections to the networks to source the capital and talent needed to scale these businesses and be able to compete with Silicon Valley,” said Weber. “So that’s essentially what Great North Labs is trying to do for the region, trying to help be that connector and really be a catalyst for growth.”
According to Weber, venture capital has begun to slowly increase its percentage share outside of its three major markets: Boston, New York and San Francisco. Until recently, these cities held approximately 75 percent of the venture capital investment in the country.
“They’ve been gradually losing share, and we think that trend is going to continue,” he said.
One of the primary issues surrounding the spread of venture capital investment is the struggle to deploy seed and pre-seed investment in smaller markets. However, the combination of increasingly active smaller markets and connections fostered by funds like Great North Labs is beginning to fill that void.
“We want to be a bridge to these epicenters of the venture capital and startup ecosystems in the country right now,” said Weber.
Along with his team, Weber believes smaller markets have a unique advantage when it comes to starting a business. He attributes that to their ability to build and retain talent.
“There may not be the breadth of talent that you see somewhere like the Twin Cities or San Francisco, but when you have a good company, it tends to stand out,” he said. “And the great companies? They’re kings of the town.”
In smaller markets, business owners have the opportunity to develop and invest in their talent because the probability is high that they’ll be able to retain it for an extended period of time.
According to Weber, markets like Silicon Valley struggle to maintain loyalty within their pools of talent.
“You see people jumping from one startup to the next as soon as their options open up, so that’s a big advantage of a smaller market, that ability to really develop a team and build loyalty over time,” he said.
And of course, as with any venture capital fund, Great North Labs is ultimately looking for high returns.
“With our connections, we think it’s a great period of time to focus on this region,” he said. “And we believe that will deliver strong returns.”
How to get involved
So, what does it take to interest an investment fund like Great North Labs?
Great North has a 10 percent reserve in their fund set aside to invest earlier in startups based in underserved markets in the Upper Midwest. As such, they will invest earlier in startups from Sioux Falls than they would in Chicago or the Twin Cities to help ensure there isn’t a gap in the earliest stages for startups in those emerging markets.
In addition to the focus on underserved markets, they aim to assist underrepresented markets as well, such as females and minorities.
The fund is split between preseed (10 percent), seed (40 percent), and growth equity (50 percent).
Regarding preseed investment, Weber says it’s a stage where funds aren’t typically invested.
“We don’t even require you to have built your product yet,” he said. “To get that first $100,000 or $200,000, you just need grit and validation.”
Unfortunately, Weber says many entrepreneurs struggle to articulate that their idea is worth pursuing.
This is where Great North Labs’ Startup School comes in.
Through this bootcamp-style program, the team at Great North Labs aims to coach founders on researching and launching their ideas successfully, using lean methodology. The program meets once a week for four weeks and costs only $25.00 for startups or individuals.
The next class begins May 29 in St. Cloud, MN, but Weber says interested persons who aren’t able to attend can email him [email protected] to request the materials. If enough interest develops in the class, Weber says the team would certainly consider hosting in Sioux Falls.
Ultimately, if you’re interested in pursuing funding through Great North Labs, the four criteria to keep in mind are technology, location, market potential, and business model.
“In order to build a high growth company, you’re either a tech-first or tech-enabled company,” said Weber. “That’s very general, but that’s our intention because creating efficiency in industries is usually enabled through tech.”
As aforementioned, the fund is Upper Midwest-focused, and both market potential and business model should be strong and inclined toward rapid growth.
For more in-depth information, view the investment criteria here.
Two Things You Can Do This Week:
- Sign up for the Great North Labs newsletter to receive blog updates and other news. You can also follow the organization on Twitter, Facebook, and LinkedIn.
- Submit your materials for funding consideration. Weber also suggests creating a monthly newsletter and sending it to potential investors to demonstrate your progress.