Carrot juice. Maybe not the stuff of Edison, but entrepreneur Eric
Strauss of Minneapolis saw an opportunity.
He invested $20,000 of his own money to incorporate the Crazy Carrot
Juice Bar in 1996 to get in on the ground floor of a retailing niche
in health-oriented fruit and vegetable juice outlets. Over the next
two years, Strauss sought investors to open up the first in a hoped-for
chain of stores. He went to friends and family, 30 of whom scrounged
up $80,000, which helped him leverage another $85,000 in government
With a prototype store up and running in 1998 in a fashionable
St. Paul neighborhood and sales "trending upward week in and
week out," Strauss and two new partners put in another $30,000
"and began looking in earnest for larger investors interested
in helping us expand the concept."
They settled on "a very well-heeled angel investor" with
experience in the restaurant industry, who ultimately poured in
$1.3 million that helped open three new outlets in Minneapolis and
one in Naples, Fla. But others saw the same opportunity, and competition
flooded the market. In the end, Strauss and others were bought out
by the angel investor for a small fraction of their original investments,
and each store was resold to competitors or transitioned to other
"Although the experience was not financially rewarding, I
certainly learned a lot and would do it again in a heartbeat,"
Strauss said. Showing his entrepreneurial bent, he leveraged his
juice experience into a new career in business plan writing and
launched EntrepreneursForHire.com "to enable start-ups and
emerging companies ... to more easily connect" with other companies
that can assist with business start-ups.
Such a lemons-to-lemonade mentality appears to be the rule rather
than the exception among entrepreneurs. Entrepreneurship itself
is a powerful elixir, but akin to a sweet-and-sour high. According
to one practitioner, entrepreneurship is part inspiration, affliction
and addiction. "It depends on what day of the week that you
Thanks to a variety of factorsincluding the rapid evolution
of the Internet, a global economy dominated by high-tech companies
and a high-flying venture capital industry facilitating the growth
of boththere appears to be renewed enthusiasm for entrepreneurship.
A report by the Global Entrepreneurship Monitor (GEM) noted that
the United States is "in the midst of an entrepreneurial revolution."
Most entrepreneurs still toil in relative obscurity, sometimes
for little or no financial reward as ideas never get off the drafting
table. But more attention is being paid to the collective impact
of entrepreneurs on an economy. For example, credit for strong regional
and state economies is often laid at the feet of young, fast-growing
"gazelle" companies seeing 20 percent growth annually.
Analyzing two years worth of data on 21 industrialized countries,
the GEM report found that such entrepreneurial companies accounted
for one-third to one-half of the gross domestic product variance
among countries, with the United States at the head of the entrepreneurial
But many, including the authors of the GEM report, also believe
there is a geographical imbalance in entrepreneurship in the country,
with capital and other resources concentrated in a handful of coastal
regions. There is a similar perception of imbalance in the Ninth
District, where most resources have pooled in the Twin Cities, though
even here many fret over entrepreneurial competitiveness. But where
many see market failure in such concentrations, the market for entrepreneurs
appears to be playing out much as economists would predict.
At issue is the ease with which entrepreneurial ideas are turned
into profitable endeavors. Depending on where an entrepreneur lives,
the path can be marked with stop signs or green lights. While most
associate entrepreneur-friendliness with ample venture capital,
it is but one element of a larger environment that either encourages
or discourages risk taking among people with ideas that have commercial
possibilities. As such, venture capital appears to be more of a
signa market byproduct, if you willof a healthy local
entrepreneurial environment, rather than the cure-all of economic
Habitat for human ideas
Once the idea bulb is lit, an entrepreneur's "first question
is, 'Where do I want to do this?'" said Patrick Von Bargen,
executive director of the National Commission on Entrepreneurship.
Most entrepreneurs want to stay where they are currently located,
he said, "but if this is a place where [entrepreneurship] doesn't
happen, they say, 'Why start with my arm tied behind my back?'"
When it comes to an entrepreneurial environment, most of the attention
is focused narrowly on the availability of capital. "The reason
there is an overemphasis on [capital] is [because] capital is the
most concrete," Von Bargen said. "You can count money
... [and] you don't have to explain yourself if you give that reason."
Capital is important to launching a new concept, said carrot-man
Strauss, but "it is less important than finding an experienced
management team and being able to network and bounce ideas off others
operating in the same space, whether they be mentors, competitors,
partners, strategic alliances or the like."
Jay Hare, partner of the technology industry group at PricewaterhouseCoopers
in Minneapolis, said a good entrepreneurial environment constantly
mixes three main ingredients: technology, money and entrepreneurial-minded
people. "Money as a stand-alone resource is not enough,"
he said. "If you go into Minot [N.D.] and drop $1 million,
what's going to happen? Probably not much."
"What you want to do is create a habitat, an ecosystem if
you will," Von Bargen said. Along with physical infrastructureroads,
telecommunications, airportsa healthy ecosystem for entrepreneurs
needs a social infrastructure, which Von Bargen described as "the
existence of networks to connect entrepreneurs with each other"
and with other pieces of the support structure. That support structure
consists of other professionalslawyers, accountants, real
estate agents, academic researcherswho understand the difficulties
of starting a new company and can problem-solve for entrepreneurs.
The support structure also extends into more basic areas like workforce
preparation. A feasibility study looking at technology incubation
in the Chippewa Valley in northwest Wisconsina region that
includes Eau Claire and is noted for its comparative high-tech sophisticationfound
a dearth of seed and venture capital. But the report also identified
a lack of technology-based, upper management professionals and an
"insufficient array of science, engineering and entrepreneurial
degree programs" at local universities. The report's main recommendation
was to first establish an "innovation network" to link
entrepreneurs with the technical and financial resources necessary
for young companies to develop.
This wide net of support mechanisms is particularly absent in rural
areas. "Instinctually, [rural areas] are very entrepreneurial.
... It goes back to the requirement of being self-sufficient"
in out-of-the-way places, said Bruce Davis, executive director of
the Northwest Regional Planning Commission, a public development
agency in Spooner, Wis. But these areas usually lack a formal system
or environment to take advantage of opportunities. "People
might have all these ideas, but they don't know what the heck to
do with them."
Also overlooked is the role of culture on entrepreneurship. Von
Bargen said entrepreneurs need a culture "that is supportivenot
a place that views failure as a bad thing, but a learning experience."
"Clearly, the culture of a region has a huge impact"
on entrepreneurial activity, said Greg Sandbulte, president of Northeast
Ventures Corp., a for-profit equity fund in Duluth, Minn. "From
our perspective, it's hardest to find the people with the vision
to fund with our money. ... Capital is very much a problem for us,
but it's still the people driving the plan."
Long dependent on mining companies headquartered elsewhere, entrepreneurship
in Minnesota's Iron Range "is not widely regarded," Sandbulte
said. Most of Northeast's $15 million in capitalization has come
through public and foundation grants. As such, part of the fund's
mission is social in nature, trying to incrementally increase local
entrepreneurship and business ownership. To date, investments in
28 local companies have generated 650 jobs. The fund has "exited"
five successful businesses now valued at $5 million, but seen "four
flops" and a write-off cost of $2 million, Sandbulte said.
"We are not the answer or solution to the diversification
of the economy of the region," Sandbulte said. But he added,
"I think we've made some progress" toward educating people
about entrepreneurship. "It is significantly less difficult
today [for entrepreneurs] than it was 10 years ago."
Differing lifestyle expectations can also influence the entrepreneurial
environment, as rural attitudes might not always fit urban stereotypes
of an overworked, poorly nourished entrepreneur. The laid-back attitude
in Montana can be a "significant obstacle" to financial
success for Montana entrepreneurs, according to Cliff Grant, president
of LocalFund.com, an online matchmaking service for entrepreneurs
and investors located in Billings, Mont.
"I know of several entrepreneurs, myself included, who would
do much better in business if they were not located in Montana.
We're competing with entrepreneurs all over the country who eat,
live and breathe business," Grant said. But he won't be changing
his address anytime soon simply to make more money.
"You read about offices full of dedicated people who drink
their daily case of Mountain Dew, have pizza delivered every day
and even sleep in their office. Montanans just shake their heads
and say, 'no thanks,'" Grant said. "We're willing to sacrifice
a wildly successful business for a strong personal life rather than