business

Minnesota is holding its own in venture capital, unemployment and innovation jobs. For more than 20 years, I've worked with hundreds of entrepreneurs, investors and innovators and watched them as they started or invested in a wide variety of businesses in this state.

It seems everyone in this difficult economy is focused on jobs these days -- and with good reason. The state's unemployment rate is at its highest in decades. There is also discussion of Minnesota's slowing growth rate. Again, reason for concern to be sure.

There are certainly some cracks around the edges, but I am not convinced by the suggestions from some circles that the higher unemployment and slowing growth rates are signs of that Minnesota has lost its innovation edge. There is always room to improve, but from where I'm sitting I'd like to suggest that Minnesota's place in innovation has hung surprisingly tough over the past few years.

• Minnesota's unemployment rate is higher now than it's been, but at 7.4 percent for March, it's still well below the national rate of 9.7 percent and is one of the lowest rates in the country.

• The U.S. Labor Department issued data in March ranking the Twin Cities as the top metro area in the country for least job losses from January 2008 to January 2010. Our unemployment rate increased just 2.8 percent, while the national average increased more than 5 percent over the two years.

• The Wall Street Journal's Marketwatch.com site ranked the Twin Cities No. 1 in their "Best Cities for Business Rankings" in both 2007 and 2008.

I'll leave it to smarter people, but in analyzing our slowing growth and/or job losses, we need to evaluate specifically where we're losing the jobs leading to the perceived slowing of growth. Minnesota got hit particularly hard in construction, construction products and manufacturing. Stalwart employers to be sure, but perhaps their increased job losses are being incorporated into assessments of our state's innovation economy performance, which at least as measured with venture capital statistics, is doing pretty well.

OK, so is Minnesota losing its place in the entrepreneurial hierarchy? The race of states? The innovation sweepstakes?

I would say not so much.

Venture capital-backed companies are a fraction of the total number of businesses. There are approximately 25 million businesses in the United States. In the past 40 years, just 27,000 U.S. businesses have been financed by venture capital. A tiny fraction, but they can have a significant impact, leading new trends for society and potentially growing entire new industries. Think Google, Apple, FedEx, etc.

In 2008, according to a report issued by Global Insight, U.S. venture capital-backed companies employed more than 12 million people and generated nearly $3 trillion in revenue. Respectively, these figures accounted for 11 percent of private-sector employment and represented the equivalent of 21 percent of U.S. GDP during that same year. Venture capital-backed companies have also grown at higher rates over the past three years both in terms of revenues and jobs than the rest of the economy.

Specific to Minnesota, and according to the same Global Insight study, 2008 revenue generated by Minnesota venture capital-backed companies was $159 billion and employment by those companies was 365,584. That's a lot of jobs. As a matter of fact it was the fifth-highest state total of venture-capital-backed jobs in the nation, according to the study.

Minnesota is also the leader among the 12 surrounding states in venture capital investment. (In order: Minnesota, Illinois, Indiand, Ohio, Micihgan, Iowa, Wisconsin, Missouri, Kansas, North Dakota, South Dakota and Nebraska.) Minnesota companies raised more than $730 million in new venture capital over the past two years and have put much of that dough to work in the form of hiring.

Illinois ranked second at $640 million. I find it striking that Minnesota consistently attracts more venture capital investment than Illinois, which has an economy and population 2 1/2 times our size. Coming in third and fourth are Ohio and Michigan, with a little more than half Minnesota's total, and it goes down the line from there. These venture capital numbers come from Thomson Reuters.

And Minnesota companies raised 10 times as much venture capital as companies in eighth-ranked Wisconsin in 2009. Wisconsin has been brought up on occasion in some of the innovation competition discussions -- as have Ohio and others.

If it's jobs you're after, then attracting venture capital investment can be a good strategy to have in your toolbox. And as Bill George, the Itasca Project and others have pointed out, we're also very fortunate to have an outsized share of large company innovators here.

Both venture capital-backed companies and Fortune 500 firms recruit highly paid taxpayers to our state. These employees want to work in a fertile ecosystem of possible career opportunities. We need to shine a light on our innovation-based job creation as compared with other states.

Of course there is room for improvement in Minnesota. Our total venture deal volume is down from previous years and 2010 VC investments are off to a pretty slow start. We'd love to see even more Minnesota entrepreneurs be successful.

But there is also room to celebrate what we have. So if you see an entrepreneur out there, thank her for being in Minnesota, paying taxes here and creating some jobs.

She deserves it.