Carta published its 2025 venture rankings a few weeks ago, and on the most charitable reading Minnesota comes in ninth in health-tech (if you look at Seed to Series B, we don’t rank at all).

Ninth is also Minnesota’s high-water mark. In every other tech category that matters, our state is not even in the top ten. Not software, or consumer, in the home of Target and Best Buy. Not fintech, in the home of US Bank and Ameriprise.

Let the 9th ranking sink in. The state that invented the pacemaker and spawned Medtronic, Mayo, and UHC/Optum, the largest employer of MDs in the country, ranks ninth in health tech funding, the one category where it places at all.

Carta runs the cap tables for tens of thousands of venture-backed companies, which makes it the gold standard for technology funding. It has no opinion about Minnesota. It summed up where 2025’s venture dollars landed, and Minnesota landed ninth.

Why does a state this wealthy, this educated, this practiced at medicine come in ninth in the one field it’s supposed to own, and doesn’t place anywhere else in technology at all? I examined the root causes in my previous essay.

The short answer is a market that hasn’t continually imported enough breakout founders doesn’t appear on a chart like this. The full diagnosis and the playbook for fixing it are in that piece, Escape Velocity.

After that piece ran, many of the comments were circling a different question, whether the real thing holding Minnesota back is its culture. I pick that thread back up next week.

Subscribe and you’ll receive that piece the minute it drops.

Links: Escape Velocity · Data: Carta, "Ranking the top startup ecosystems of 2025."

Michael Porter’s term for ecosystem was “cluster”: companies, investors, and talent concentrated in one geography, competing and cooperating until the whole begins to hill climb to higher productivity and competitiveness together. Cities that have a tech ecosystem (San Francisco, Seattle, Austin) compound wealth and talent for generations. Cities that don’t watch their best entrepreneurs leave and start companies elsewhere.

The world’s leading tech clusters have all been catalyzed by outsiders, past and present, to the incumbent local order: immigrants, transplants, refugees, military kids, first-generation strivers, college dropouts, technical obsessives, and people without a comfortable local corporate lane.

They built breakout companies, and when the companies exited, the money stayed within a tight founding team and local backers. Exited founders stayed local and backed their lieutenants. They learned product-market fit and scaling inside the “Mafia’s” founding company, earned liquidity from early equity, and were young enough to build for another 20 years. The PayPal Mafia, the mafia da 99, the Rappi Mafia, the Groupon Mafia, ex-Uber Mafia, etc. The qualification is hunger, density, and repeated exposure to company-building at scale.

The data follows the same pattern across seven decades. Reaching escape velocity has two requirements:

1. Breakout founder talent density.

2. Exits where the proceeds recycle locally and disproportionately to founding teams, early employees, angels, and investors.

Tax incentives, accelerator programs, university research parks, and quality-of-life campaigns are what most cities spend their money on.

None of that addresses either requirement. And if you don’t get both right, your market won’t be able to build a top-tier technology cluster.

The archetype

Silicon Valley

Fairchild Semiconductor, founded in Palo Alto in 1957, spawned 126 semiconductor companies by 1986. By 2014, more than 92 public Bay Area tech companies traced their lineage to Fairchild, worth over $2 trillion combined (Computer History Museum). Many of its founders and early leaders were refugees, immigrants, children of immigrants, or transplants who moved to California in search of a better life.

Eugene Kleiner fled Vienna at 15 in 1938 as the Nazis arrived. He co-founded Fairchild, then co-founded Kleiner Perkins, which financed 350+ companies including Google and Amazon. Jack Gifford, whose mother came from the Arkansas Dust Bowl and whose father was an orphan prizefighter, rose through Fairchild and founded Maxim Integrated, acquired by Analog Devices for $21B in 2021.

Victor Grinich, whose Croatian immigrant father worked the lumber yards of Aberdeen, Washington, co-founded Fairchild and returned to Stanford’s electrical engineering department, widely considered the academic birthplace of Silicon Valley, to train the next generation of founders. Harry Sello, who emigrated from Ukraine at age 2 to Depression-era Chicago where his father drove a milk wagon, led Fairchild’s device development through its most productive era and later founded Harry Sello and Associates.

Max Levchin’s family fled religious oppression in Kyiv in 1991, arriving as refugees in Chicago with $600 among five family members. He found a broken television in a dumpster and used it to teach himself English. Four of his startups failed before PayPal. Elon Musk left South Africa as a teenager, sold Zip2 in a $307M Compaq acquisition, personally netted roughly $22M, and put much of it into X.com, which became PayPal. Peter Thiel was born in Frankfurt and moved to the U.S. as a child. Roelof Botha left South Africa for Stanford and became PayPal’s CFO at 28.

Most of PayPal’s senior people were foreign-born and had already remade their lives at least once. Their $1.5 billion eBay exit produced roughly 20 senior ecosystem builders: Thiel (Founders Fund, Palantir), Hoffman (LinkedIn, Greylock), Musk (Tesla, SpaceX), Levchin (Affirm), Rabois (Khosla, Opendoor), Sacks (Yammer, Craft), and a dozen more. Between them, PayPal’s alumni have founded more than 570 companies, over 300 of them venture-backed, raising more than $40 billion (Tracxn, 2025).

São Paulo

Paulo Veras gave up his early 30s to run Endeavor Brazil at subsistence salary because he believed entrepreneurship could restructure Brazilian society from the bottom up (see his book Unicórnio verde-amarelo, 2020). He failed five times and founded his first successful startup at 39. He signed the 99 Series B from the hospital during chemotherapy in 2015.

Paulo recruited me to Brazil as 99’s COO, to run the company and introduce peer to peer ridesharing while he recovered, from its Series B through its $1B DiDi acquisition (Brazil’s first unicorn exit).

Most of the next-generation of Brazilian founders were my deputies at 99. They learned hyper-scaling firsthand, then turned around and funded each other’s next ventures within months of the close. NeoFeed’s reporting on the “mafia da 99” tracks more than a dozen venture-backed startups with 99 lineage.

In addition to the incredible return for employees and our institutional backers like SoftBank, Tiger, and Monashees, training the 99 Mafia, and helping secure Brazil’s spot as a top-tier technology market, is one of the accomplishments that makes me most proud.

Bogotá

The current generation building Colombia’s tech ecosystem is 35- to 40-year-olds who were children during the Escobar years, when Medellín averaged 16 murders a day. The anchor unicorn is the delivery company Rappi (YC W16), currently valued at $5.25B.

Scaling a three-sided marketplace is hard, and the company almost closed several times. I’ve been deeply involved in Rappi from the early days, Simón used to say to me “you’re here to de-latinize Rappi, so we can really scale.” By which he meant imparting lean hyper-scaling operating teams and systems in each country.

Rappi has since spawned more than 100 alumni-founded startups in under seven years, many venture-backed, roughly half funded by the original founders. Marathon Ventures data shows the Rappi mafia has created more companies in less time than any other Latin American unicorn.

If you want to get a firsthand sense of Colombia’s incredible founder talent density, listen to Robbie J. Frye’s The Frye Show, which has systematically interviewed more than 300 founders and investors in the Colombian ecosystem.

Salt Lake City and Denver-Boulder

In Denver-Boulder, Brad Feld, a military kid born on an Air Force base in Arkansas, moved to Boulder in 1995 knowing one person. He reinvested through Foundry Group ($3B+ AUM) and Techstars, and the ecosystem compounded. Dan Greenwood, a Denver investor, told the Colorado Sun in 2018 after Zayo's exit: "When we have a success story, like Zayo, and people leave the company as millionaires, what I've seen is the money cycles back into the ecosystem." That same cluster now has ~75 lieutenants who are founders in their own rights, and 200+ startups.

In Salt Lake City, a similar local reinvestment mechanism has been at work. Josh James, a military kid and college dropout, built Omniture from Utah County and sold it to Adobe for $1.8B. James reinvested locally, seeding 30+ companies and backing first-time SaaS founders across the Wasatch Front. When Adobe opened a campus in Lehi, the area was, as Wade Sherman told CNBC in 2024, “orchards and farmland.” Today there are over 1,000 companies in Utah’s “Silicon Slopes.”

In every row of the above table, it’s hard to overlook that breakout founders have very different life-experiences and early constraints than other white-collar professions.

The same two-stage mechanics are at work in U.S. second-tier metros that have reached escape velocity and are now first-tier tech markets in their own right.

Requirement 1: Sustained Founder Density.

Each city mentioned above followed the same trajectory. Outsider founders arrived, built, IPO-ed or sold their companies, and reinvested in local founders. With nurturing, a tree or two can become a dense forest in a generation.

In September 1957, eight engineers walked out of Shockley Semiconductor in Mountain View and founded Fairchild Semiconductor in Palo Alto. Fairchild’s outsider founders produced the original Silicon Valley cluster: 126 semiconductor companies by 1986. And more than 92 public Bay Area tech companies traced to Fairchild founders and employees by 2014, with combined market value above $2 trillion. One tree became a forest because the alumni stayed local, reinvested, and replicated their successes.

That same year, in Minneapolis, William Norris left Remington Rand’s UNIVAC division and founded Control Data Corporation with Seymour Cray and a team of ERA veterans. As often happens on the front end of a hot tech cycle, lieutenants who are most ready will strike out when the opportunity is most rife. Control Data’s spinoffs produced Cray Research, Ceridian, and begot Medtronic and Minnesota’s Medical Alley ecosystem.

The two early mainframe companies dominated their segments, and within a decade spawned dozens of spinoffs.

And for 30 years, the two ecosystems looked remarkably similar.

Then in the late 1980s and early 1990s Minnesota lost its computing cluster. CDC, UNIVAC, and Cray kept building mainframes and supercomputers while the world moved to PCs, software, and the internet. The founding generation retired, the capital dispersed, and nobody was left to restart Minnesota’s tech industry.

Medical Alley did survive and thrive. Medtronic, St. Jude Medical, 800+ companies, 95,000+ jobs. It kept compounding, precisely because its founders (Bakken, Villafaña) stayed local, kept founding companies and reinvesting locally.

Regardless, as the Chinese proverb goes: a sentinel tree, no matter how grand, is not the same as a forest.

Minnesota’s tech and medical clusters were disproportionately built by outsiders. Norris was an import from Nebraska; Cray, a self-described nerd from Wisconsin. Villafaña came to Minnesota from Puerto Rico via the Bronx. Parker from Massachusetts and Maine. Medtronic founder and pacemaker inventor, Earl Bakken, built an electroshock weapon to fend off bullies as a kid. I wrote about these founders individually in a previous piece on Minnesota’s missing civic power brokers.

Despite similar starts, while the medical industry reached escape velocity, Minnesota’s tech ecosystem never did.

The comfort trap: why markets like Minnesota under-index on founder talent

To much wringing of hands, Minnesota’s new entrepreneur rate is 0.17%, 50th nationally.

But that’s what happens when your economic identity is UnitedHealth Group, Target, 3M, and General Mills. Your best entrepreneurial talent emmigrates, and remaining top local talent takes corporate jobs.

The Fortune 500 base peaked at 22 in 1995, and it has leaked companies and career quality ever since (Norwest to SF, Honeywell to NJ, Northwest Airlines to Atlanta, St. Paul Companies to NYC).

While Minnesota, like many midwestern cities, focused on retaining headquarters, it missed the PC revolution, the internet revolution, the mobile revolution, and has so far been a spectator rather than an active participant in the AI wave as it breaks on us.

Requirement 2: Local Ecosystem Yield.

In the tech sector, it’s common knowledge that outcomes aren’t linear. Not just on a macro level, but also from the point of view of local cluster development. In addition to breakout founder density hitting critical mass, it also takes high quality exits to build an ecosystem.

An excellent exit means dozens and potentially hundreds of local people make millions (founders, lieutenants, angels, GPs, LPs). Whereas a ‘solid’ exit means one local person, maybe three (e.g., co-founders and the first angel check) do.

The difference is something I’m calling local ecosystem yield:

Local Ecosystem Yield = exit value × founder/angel/employee ownership (ie cap table quality) × local reinvestment rate.

Between excellent and solid is about two orders of magnitude difference in how many local breakout founders an exit produces. One lifts prosperity for generations and turns the market into a tech talent magnet, the other generates a few second homes.

PayPal’s $1.5 billion was an excellent outcome. Proceeds went disproportionately to founders and early employees who shared an operating playbook and continued wanting to work with each other. They stayed in the Bay Area and reinvested in each other’s projects. That one unicorn exit yielded 20 ecosystem builders.

The Rappi mafia, mapped below, shows the same reinvestment pattern in Latin America.

Minnesota’s exits are mostly ‘solid’ grade from a ecosystem yield perspective: i.e., much of the value accrued to dispersed public shareholders, PE owners, strategic acquirers, or founders no longer active in the local startup ecosystem.

From what I’ve been able to track down, our $30B in exits this century have generated just 4 breakout local founders:

• Phil Soran (Compellent, $960M Dell acquisition) sits on the boards of Piper Sandler and SPS Commerce and is the most active ecosystem builder in the Twin Cities.

• Chip Pearson (Jamf) runs When I Work and co-founded Bootstrappers.mn.

• Ben Edwards (SmartThings) advises Great North Labs and helps run Minnebar.

• Justin Kaufenberg (SportsEngine) runs Rally Ventures with over $1B in AUM and $100M+ deployed into 13 Minnesota companies.

Almost everyone else of note either retired from tech or has left the state.

The local growth stage funding gap

In a market like ours, when a successful local startup needs a $30M–$120M round, the lead check has to come from Sequoia, Andreessen Horowitz, Insight Partners, or another coastal growth investor. Those investors then sit on the board and pull founders and their companies toward their networks.

The board center of gravity shifts first. Then the executive network shifts. Then growth-stage hiring follows. We’ve seen the leakage pattern around the Twin Cities too: SmartThings had Minnesota talent in the founding mix and a Minneapolis developer center, but after Samsung the center of gravity moved to Palo Alto. Bright Health moved to Florida.

It’s a halting problem: until a market has sufficient founder talent density, the few VCs that do exist in markets like ours face LP preference for coastal deployment. Institutional allocators don’t trust a local market with a trickle of solid exits to compete with the returns their money could be making on the coasts.

The growth equity gap is at the same time a further symptom of the Ecosystem Yield problem. Low conversion of exits into local founder wealth, local operator liquidity, and local startup reinvestment, means less local venture capital to be deployed, along with fewer growth shops that can underwrite and write $30-50M lead check that keeps a team local.

Quantifying the gap

So if over-indexing on founder talent is the first step to getting the technology flywheel spinning, how much is enough?

The general rule of thumb, whatever your starting point: you need to import about 20 lieutenants of Tier 1 unicorn founders.

To be clear: you can’t fill this gap with retired Fortune 500 executives who join advisory boards and write $25K angel checks. The advisory class is not the founding class, and this level of founding team does not need such advisors.

Below is a comparison of four peers that started out this century as second or third tier technology markets.

Looking each metro’s stats above, the ones reached escape velocity had 2-3x the breakout founders and 5x the number of killer lieutenants.

Salt Lake City has a civilian labor force one-third the size of the Twin Cities and produces seven times the exits. The difference is breakout founder talent density and local ecosystem yield.

Where is your city on this curve and what can you do about it?

Every year, dozens of cities reach out to multi-exit founders like my friends and me. It’s always the same script. A boutique consultant hired by the city manager or economic development team, tells you on video call: “If you open an office and hire our employees here, we’ll give your company a tax benefit.” That’s it, that’s the pitch. This recruits caretakers, not breakout founders with something to prove.

Until your city gets both stages of this strategy right, every dollar spent on enabling conditions, rather than founder talent density, is a waste of time and taxpayer funds.

The winning playbook is both simple and hard at the same time:

1. Go recruit 20 breakout founders from companies like the ones in this article.

2. Give them a reason to move to your market over staying put. Sell your standard of living advantages hard, and make an explicit ask of them to come help you build your ecosystem.

3. Connect them with their first few local checks, customers and employees.

4. Figure out the $30M–$100M growth gap before the first cohort needs it to ensure their series B doesn’t pull their focus back to the coasts.

5. Measure what matters: how many founders stayed, how many started something new, how much capital recycled locally. Not second headquarter deals, or plant sitings.

The cities who already made it to first tier tech markets didn’t run a playbook, they just got lucky. If you want to catch them, you don’t have that luxury.

Founder talent density and exit wealth recycled through tight local networks are the foundation of every ecosystem in this dataset that reached escape velocity.

Now that you’ve read the research, and hopefully better understand the mechanism for getting to escape velocity, your city doesn’t have to rely on luck.

The question for your city: are you willing to do the playbook’s hard work to lift your city to Tier 1?

Or are you banking on your culture and Lake Wobegon talent odds to jump-start your ecosystem?

Bibliography

Primary Data

Fairlie, Robert W. “Indicators of Entrepreneurial Activity: 2023.” UCLA Luskin School of Public Affairs, June 2025. Link

Greater MSP Partnership. 2025 MSP Regional Indicators Dashboard. August 2025. Link

Startup Genome. Global Startup Ecosystem Report 2025. June 2025. Link

U.S. Bureau of Labor Statistics. Local Area Unemployment Statistics (LAUS). 2025. Link

U.S. Census Bureau. American Community Survey 2023 1-Year Estimates. Link

World Values Survey. Wave 7 (2017-2022): Colombia. Link

Books

Feld, Brad. Startup Communities: Building an Entrepreneurial Ecosystem in Your City. Hoboken, New Jersey: John Wiley & Sons, Inc., 2012.

Hall, Donald M. Generation of Wealth: The Rise of Control Data and How It Inspired an Era of Innovation and Investment in the Upper Midwest. Minneapolis: Nodin Press, 2015.

Price, Robert. Eye for Innovation: Recognizing the Possibilities and Managing the Creative Enterprise. New Haven: Yale University Press, 2007.

Soni, Jimmy. The Founders: The Story of PayPal and the Entrepreneurs Who Shaped Silicon Valley. New York: Simon & Schuster, 2022.

Veras, Paulo. Unicórnio Verde-Amarelo. São Paulo, 2023.

Wynwachhorst. “In the American Mold: The Founders of Fairchild and the Pioneer Ethos.” 2013.

News and Periodicals

Axios Twin Cities. “Which Minnesota Companies Could Be the Next to Join the Fortune 500.” December 1, 2025. Link

Bring Me The News. “Minnesota Still Has 17 Fortune 500 Companies.” June 3, 2025. Link

Chuang, Tamara. “Denver’s tech ecosystem is a work in progress.” Colorado Sun. October 22, 2018.

CNBC. “How Utah’s ‘Silicon Slopes’ tech sector is making a run at Silicon Valley.” December 10, 2024.

Endeavor. “Endeavor Untold: Letting Go.” Paulo Veras. July 2025. Link

Fortune. “The PayPal Mafia.” Jeffrey M. O’Brien. November 26, 2007.

Fortune. “The wildest, craziest, most death-defying (Mormon) mogul on the planet!” February 5, 2014.

Fortune. Fortune 500 List, 2025 Edition. June 2025. Link

Ha, Anthony. “The Fairchild Family Tree.” TechCrunch, November 2014.

Hoefler, Don C. “Silicon Valley USA.” Electronic News, January 1971. Updated genealogy maintained by SEMI.

NeoFeed. “Mafia da 99.” São Paulo.

Rest of World. “Rappi mafia: How a delivery startup took over Colombia’s tech scene.” July 2022. Link

Borrero, Simón and Hermanos Bilbao. “Colombia puede ganar el mundial.” Substack, May 10, 2026. Link

Twin Cities Business. “Dynamic Changes to Fortune 500s in Minnesota.” September 2018. Link

Twin Cities Business. “Fortune 500 List Contains Some Warnings for Minnesota.” June 2025. Link

Twin Cities Business. “Minnesota’s Fading Fortunes.” May 2017. Link

Corporate and SEC Filings

Abbott Laboratories. Form 8-K: Acquisition of St. Jude Medical. January 4, 2017.

Francisco Partners. Press Release: Acquisition of Jamf Holdings. October 2025; acquisition closed January 2026.

Piper Sandler Companies. Board of Directors. Link

SPS Commerce, Inc. Board of Directors. Link

For a recent Bay Area tech transplant, both belong to yesterday’s Minnesota.

Minnesota needs to be explicitly pro-growth, to become a tier 1 technology state on par with Salt Lake City or Denver-Boulder, and to actively compete for founder talent. The shift in policy needs to happen in the next nine to twelve months before the die is cast for the AI technology cycle.

Minnesota built the first technology ecosystem outside Silicon Valley. UNIVAC’s 76 spinoffs rivaled Fairchild’s Fairchildren. Both flywheels started in 1957, and ours kept spinning for three decades. Then between 1986 and 1995, Minnesota kept building mainframes, while California pivoted to PCs, mobile phones and the internet. We then doubled down on Fortune 500 headquarters, and that divergence has been compounding for the past 30 years. Our Fortune 500s have been shrinking, along with the Minnesota Exception, and we don’t really have a plan to replace or restore their weight in our economy. As Churchill said, “wars are not won by evacuations.”

The once-every-thirty-year technology window is open again, and it’s hard to overstate the impact it will have on our Fortune 500 employment base. The C-suite and other executive roles, our best paying jobs, will consolidate into a handful of AI oversight and accountability roles per company over the next 4-5 years. Along with them, the financial analyst, the operations manager, the junior SWE, the sales and marketing coordinator, swathes of great-paying corporate jobs, will be replaced by agents. Every major corporation will face the same restructuring, and Minnesota’s 17 Fortune 500 headquarters, the largest per capita concentration on earth, according to Greater MSP, will not be exempt.

Whether our F500 survives this restructuring is a question worth asking now. Marc Andreessen laid out his favorite rule of thumb earlier this week for picking industries: look at the founders of the leading corporations. If they’re still alive, still at the helm as CEO, chairman, or on the board, the industry is young and there’s opportunity everywhere. If the founders are dead or long gone, then the industry is run by second or third generation caretakers who inherited pre-built companies. Beware.

Based on that definition, in Minnesota our 17 Fortune 500 are all caretaker companies. Not one is founder-run today or has been in the modern era. That matters, because the restructuring of white-collar work now underway is also an opening.

We are now in the early phases of AI doing to the F500 what the Allied decartelization did to the German industrial giants in 1948. What followed that cartel breakup was the Mittelstand, the most durable small-business export economy in modern history. That opportunity for a Cambrian explosion in new company creation, brought on by the rise of AI-first companies, is ours to take.

And yet entrepreneurialism in our state is going in the wrong direction. The Kauffman Foundation has tracked our entrepreneurship rate declining for a decade, bottoming at 0.17 percent, the lowest in the nation. Uff da. We are home to the world’s leading medical device cluster and have watched Austin, Salt Lake City, and Boulder build software economies that dwarf ours. We’ve had $30 billion in startup exit value over two decades, and yet we’ve managed to pay almost none of it forward into the next generation of founders.

This new Mittelstand will not look like the old one. It is not a machine tool company in a Swabian village making piston rings for Daimler. It is a founder with a laptop running three to five niche companies simultaneously, with a structured agent harness (e.g., vault system, Openclaw, Paperclip), needing almost no headcount and very little capital beyond a modest token budget.

That founder apprenticed inside a unicorn, in San Francisco or New York or Seattle or Boston. Most often they are immigrants who put themselves through a top engineering program. They have the network, domain expertise, and enough capital from equity or an earlier exit to start. Now AI has handed them the rest of the team, for free save a modest token budget.

What they need is anchor customers, welcoming local policies, and the chance to come together to build a new tech community, not be founder number 67 in someone else’s ecosystem. They are ten-ish years into their careers and also need quality schools, cohesive neighborhoods, and our clean lakes and air.

Minnesota is one of the only places remaining in the US that can make that offer credibly, and not just in the metro. The founder we are calling has scant connection to Minnesota. They can find what they need in Duluth, Mankato, Rochester, or a dozen smaller cities that nobody has ever asked them to consider. It doesn’t hurt if they can start their morning in a cozy coffee shop, like Ruby’s Roost in Victoria. My family and I moved here from San Francisco. This calculation could not have been simpler.

The response from our political leadership to the most significant restructuring of the knowledge economy in 80 years has been a social media tax and a Governor’s Council on the Future AI Economy. A commission is how you study a wave. Not how you ride one.

What we need is a targeted recruitment operation aimed at 1,000 battle-ready founders. A two or three person team does not need a $50 million incentives package or a plant siting. It needs a warm introduction to Mayo Clinic or Cargill as a first enterprise customer, a modest performance-based forgivable loan, and someone making the ask explicitly: come build the next Minnesota Exception here.

The most differentiated first client Minnesota can offer founder talent is the state itself. Castells and Himanen, in their 2002 study of the Finnish model, argued that a government's job in the information age is not to digitize paper forms but to act as a node in a wider societal network, facilitating two-way information flow between state, private sector, and populace. Call it ‘societal networking’. Finland and Singapore are the two canonical examples, and Estonia’s capabilities have since surpassed both.

No American state has built it. Minnesota could. We are a well-run state with the governance substrate to lead, and we just lived through a $500 million pattern of state fraud across Feeding Our Future, child care, and autism services that is a solvable technology problem in plain sight.

Permitting, licensing, DMV, tax, social services, unemployment insurance, service-delivery compliance. Agent-native redesign at state scale. These are all founder problems, not commission studies.

Senator Klobuchar has spent years fighting the dominance of the very platforms now disrupting our economy. That work points directly to what Minnesota needs next: a federal package with three legs: a portable performance-based forgivable loan for founders who relocate here, a founder-visa pathway, and a federal matching fund for state-level founder recruitment programs like the one we are trying to build. Call it the AI Homestead Act.

Migration patterns among mobile, high-value founders will be set a year from now. Ecosystems tip early and they compound, and the cities that establish a scene in 2026 will be difficult to dislodge in 2036. After missing on the PC, the internet, and the mobile phone, we cannot miss the AI wave too. The business community that stayed so silent during Metro Surge cannot afford to stay silent about this. If you are a Minnesota business leader, make a direct introduction to a founder you know. Offer your company as a first customer reference. Call Senator Klobuchar’s office. The founders we need are one conversation away.

The postwar boom did not happen because Germany formed a council to study the opportunities presented by cartel dissolution. It happened because founders recognized the structural opening, communities welcomed them, and they got to building. Minnesota built one exceptional economy by being deliberate about its advantages. The window to build a second Minnesota Exception is here, in greater Minnesota and in the metro, in small towns and mid-sized cities, wherever a founder with a laptop wants a good life and a place that needs exactly what they have.

Minnesota is my adopted home. The local conversation about Renn’s piece these past few weeks has fixated on his non-profit analysis (well intentioned, cohesive, insufficient power to affect growth). The more important discussion to be had is our missing founder-power-broker layer, and the once-in-a-generation opportunity AI gives us to rebuild it this year.

The archetype, in Minnesota, by name

Minnesota’s historical tech industry was built by imports. The founders who turned the region into a national computing and medical device hub between 1946 and 1980 were almost entirely not from here.

John Parker (Massachusetts born, raised in Maine) founded Engineering Research Associates (ERA) in St. Paul in 1946 with a team of Navy codebreakers. ERA built the first commercial computers in the United States and seeded what would become the Twin Cities computing industry. Remington Rand acquired ERA in 1952; the operation became the UNIVAC division.

Bill Norris (Nebraska native) co-founded Control Data Corporation out of UNIVAC in 1957 with Seymour Cray. CDC scaled to 60,000 global employees. The CDC 6600 (1964) and 7600 (1969) were the fastest computers in the world. Norris also organized the Northwest Growth Fund, the Minnesota Seed Capital Fund, the Minnesota Cooperation Office, and Minnesota Wellspring, civic infrastructure that compounded for decades after his retirement. There are 76 distinct companies that traced their lineage back through UNIVAC and ERA. Minneapolis-St. Paul was, briefly, the most important computing region in the country.

Manny Villafaña, the “Puerto Rican kid from the Bronx”, was hired into Medtronic in 1967 as international sales administrator. From Medtronic, he went on to found Cardiac Pacemakers Inc. in 1971 and St. Jude Medical in 1976. Abbott bought St. Jude for $25 billion in 2017. He is on his eighth startup, Medical 21, which filed an S-1 in February. Although no longer based in Minnesota, October 27 is still Manny Villafaña Day here.

Three imports. All of them built here, scaled here, and turned the region into a national tech hub for three decades. Their personal and company fortunes rose and fell together, and they treated Minneapolis-St. Paul’s success as their own.

Minnesota built its computing industry, and the med-tech cluster that would follow, by recruiting founders from other markets.

Why did Minnesota’s first wave end?

The founder-power-broker layer disappeared for a deeper structural reason. Parker, Norris, and Villafaña built ERA/UNIVAC, Control Data, and St. Jude, and turned the region into a national tech hub for three decades. Then, having seemingly arrived, between 1986 and 1995 Minnesota doubled down on building its bench of Fortune 500 headquarters instead of recruiting the next generation of founder-led companies in PCs, mobile phones and the internet.

Marc Andreessen laid out his favorite rule of thumb recently for assessing the vitality and growth prospects of an industry, but I’m going to venture it works just as well to describe a region.

“If the founders of the companies are currently serving as CEO, chairman or chairwoman, or board member of their companies, it’s a good industry to enter. It is probably still young and vital, and there are probably still opportunities to exploit all over the place, either at those companies or at new companies in that industry. If not—if the founders are dead or out of touch—beware. The industry is now being dominated by companies run by second, third, or even fourth generation managers who inherited their companies pre-built, and are serving as caretakers.”

Apply Andreessen’s test to Minnesota’s seventeen Fortune 500 today. Zero are still run by their living founders or have been in the modern era.

Why does Minnesota generate so few founders on its own?

We Minnesotans are familiar with our Kauffman Foundation rate, 0.17 percent, the lowest in the nation (UCLA’s Robert Fairlie, Iowa Startup Collective), to much wringing of hands.

But it’s hardscrabble necessity that forges founders, and good living that makes corporate employees. Natural beauty, top schools and healthcare, solid wages, Fortune 500 careers. The same features that make Minnesota a great place to raise a family also blunt the Maslow pressure that forges founders.

The flip side is that those same conditions make Minnesota eminently recruitable. And recruitment, not cultivation, is the near-term strategy because we don’t have the population to get the founder-business-creation flywheel spinning organically.

A common misconception when Minnesotans speak of recruiting from Silicon Valley or other tech clusters is that we’re looking for the boomerang to return home with their tech skills. That targeting may work with employees, and while that segment is slightly more risk-polled than their contemporaries who stayed local, as noted earlier, founders have a different profile and are more recruitable than the corporate population.

Our target is the top lieutenant, just coming off a Bay Area unicorn. They are not from there either, and are ready to strike out on their own. They want what Minnesota offers: clean lakes, cohesive neighborhoods, a school system their kids can thrive in. And a nascent ecosystem they can help build, rather than be founder number 67 in their mentors’ already dense ecosystem.

What the AI wave actually changes

In 1948, Allied decartelization broke up Germany’s industrial conglomerates. What followed was the Mittelstand: the most durable small-business export economy in modern history, built by founders who could now own outcomes that had previously been locked inside a few dominant firms. The structural opening of decartelization produced a generation of builders.

The AI wave does the same thing to American cities in 2026. It collapses the cost of starting and scaling a company. It will create market openings similar to decartelization on our Fortune 500. At the same time it will put the operating leverage that used to require a Fortune 500 platform into the hands of a small senior team. And it does that across every operationally complex industry at once, which is why it is going to be particularly disruptive to Minnesota’s stock of good paying corporate jobs.

The AI wave will be much broader, more niched, and much less dependent on VC drop bys (or capital) or engineering talent wanting to live in specific SF zip codes.

Anduril, for example, built a $60 billion enterprise value out of Costa Mesa, having explicitly chosen to stay out of Silicon Valley.

We’re going to witness a cambrian explosion in new business creation and this next wave of founders can build wherever they want. AI-native founders don’t need permission from their cap table, a regional consortium, or development office. They just need a welcoming place to build.

The lieutenant we just described has the playbook, the network, and is now spinning up three to five companies on AI-native rails, in parallel, in the same way their mentors used to run one scaleup at a time.

We have to choose to compete in the battle for AI founder talent. The AI wave is a once-in-a-generation opportunity to restart Minnesota’s growth engine. Actively recruiting founders is how we rebuild it.

We all need to pitch in

The work is recruitment. Selling the ecosystem building opportunity in Minnesota is the motion. Every actor below has a lever that serves the same goal: the short term growth and long term viability of our home State. If you are on this list and you are not actively recruiting, you won’t be able to say you did everything you could to not let this wave pass Minnesota by.

Governor Walz can sign a founder-migration executive order this quarter: a state-funded performance-based forgivable loan for relocating AI-native founders, benchmarked against three-year employment and revenue milestones, modeled on Utah’s EDTIF and North Carolina’s JDIG. He can also commit Minnesota to being the leading state on gov-tech. Permitting, licensing, DMV, tax, social services, unemployment insurance, service-delivery compliance, agent-native redesign at state scale, shipped publicly. Every founder we’re recruiting hears “first State shipping AI-native gov-tech, come here and build it for us” and knows we mean it.

Mayors across Minnesota hold the two other levers, after founding customers, that AI founders evaluate when they choose a place: access to compute and living standard. Rochester’s Kim Norton has been championing the $5.6 billion DMC initiative and secured BioLabs for Rochester in 2025. Bloomington’s Tim Busse launched a citywide economic development plan and the city’s first CEO Summit in 2025. Rosemount approved Meta’s $800 million hyperscale data center. Every other mayor has the same plays available: a direct founder-recruitment channel at city hall, accelerated permitting for AI infrastructure, a named point of contact. It’s a founder talent war and the mayors who publicly compete for this business will land the founders. Just look at what Mayor Suarez was able to do in Miami during the pandemic by simply saying “tech companies, Miami wants you here!”

Senator Klobuchar has the antitrust-and-consolidation standing to author a federal AI Homestead Act: portable forgivable loan, founder-visa pathway, state-level matching fund. Restarting Minnesota’s growth is the DFL’s path to the next Minnesota miracle, and the senator who authors the bill becomes the governor who ships it.

Local Fortune 500 CEOs can put founding-client procurement budgets against a founder-reference program administered jointly with Greater MSP, with a named C-suite sponsor per company.

The operator network, founders who have already built here or chosen to relocate, is the connective tissue between them: the people who answer a cold email from an AI founder with domain-specific advice and are down for sending the first 10 warm intro emails on that founder’s behalf.

AI founders reading this are whom we’re all trying to reach. If you are spinning up a company (or three) and thinking about where to anchor it, here is the direct path: DM me and I’ll route you to a mayor, a commissioner, a procurement lead at a Fortune 500 customer, a school principal, or a founder who has already made the move. Whichever is first on your diligence punch-list. One real conversation, this week.

Make the ask

The next Villafaña is most likely one of three lieutenant profiles. The research lead spinning out of Anthropic or OpenAI with a four-person team and $30 million in seed funding. The Stripe or Scale alum who has had enough of San Francisco and is ready to anchor somewhere. The product leader who just sold to Meta and is deciding where to start their next company. They are in Palo Alto, Austin, New York, Seattle. They do not know Minnesota is competing, or what we have to offer.

Nobody has asked them yet. A power broker like we or Indianapolis used to have would have. The AI founding window we’re in the middle of is the chance for us to build new ones.

This week: one call to one founder you already know. Next week: one call to one founder you don’t. Report results so we can track coverage across the ecosystem.

We know what to do, let’s get started.

The founder, VC and family office response: 159,689 impressions. 1,589 reactions. 373 comments. 117 reposts. The post made one structural claim: the next generation of large-employer-replacement companies will run on roughly ten senior operators, each owning a functional domain and managing their own stack of agents. Call it Model A. No junior headcount, no middle management, no SaaS wrappers. Capital profile: $10-12M up front, not $2M SAFE.

A few weeks back, Citrini Research published The 2028 Global Intelligence Crisis, painting a picture of the macro consequences of exactly the agent-mechanics I’d laid out: productivity without prosperity, SaaS margin compression, 10% unemployment by 2028, 38% drawdown in the S&P.

So let me pick that thread back up and tell you what I’m building.

A recap of the prediction I laid out in April 2025: the 100:1 compression

Every operationally complex company was built on management and specialist layers because coordinating work required human judgment at scale. Schedulers scheduled. Analysts analyzed. Developers wrote code. Auditors audited. Each layer of management and ERP systems was justified because the next layer up needed its output to do its job. This is essentially every Fortune 500 company that isn’t pure software, and most of the Fortune 1000 under them.

Agent-native companies collapse human layers. The senior orchestrator / architect stays, because taste and judgment matter more than ever. The thousands of executives, directors, managers, and specialists who used to translate senior judgment into daily execution are replaced by tuned agent stacks running at machine speed, machine scale, and structurally lower cost.

A year later, the claim has become the playbook. Enterprise software buyers are testing internal agent tooling in place of third-party SaaS. Incumbents across healthcare, retail, logistics, manufacturing, and financial services are running pilots where one senior operator plus an agent stack does the work of an entire team. The April 2025 post described what will replace the Fortune 500 operating model over the next decade, and what a new generation of ten-person-led operating companies will be built on from day one.

Why corporate America will adapt

The second lever implicit in my April 2025 post was competitive pressure on incumbents. If a new generation of ten-person-led agent-native companies can do what a 1000 person legacy operations org does, that incumbent is going to restructure toward the same shape as the attacker. The incumbent CHRO doesn’t need to believe the thesis; they need one peer CEO to hit a margin target the legacy structure can’t reach, and it’s restructure or fail. Greenfield companies will move faster. The incumbents are bigger ships to turn, but it’s going to be turn or sink. Citrini’s macro picture, productivity surging while employment contracts, is what happens when both run at the same time.

What I’m building next

My April 2025 post was about Model A, the ops-heavy company. There is a second model that matters just as much, and that I’ll call Model B: the pure software company with 1-2 founders running a disciplined agent harness.

I’m working on a new company in each model, both launching this summer.

The Model B company: Project Darkhouse

Model B is the pure software version of the same order-of-magnitude compression of human coordination layers. One founder, sometimes two, running a disciplined agent harness against a structured vault. The founder holds the judgment layer, and agents execute in scoped lanes with formal handoff gates. The architecture is the discipline. A founder running this pattern in 2026 ships what a whole well-funded team shipped in 2020. Implications for pandemic-era SaaS vintages are they don’t get to keep their cost structure when a bootstrapped AI-native competitor arrives in the same category, ships the same workflow tool in a fraction of the time.

There’s a whole long tail of categories that were never economical at venture scale, that are now within reach. What I like to call the new Mittelstand moment. Businesses with a few thousand to a few hundred thousand serious users, 7 to 9 digit TAMs, real demand, real willingness to pay, real churn protection through hillclimbing domain expertise. A generation of real businesses sat in plain sight, previously uneconomical. That’s an enormous surface area the last decade of venture couldn’t till, and it sits almost entirely in consumer and small business for the obvious reason that enterprise belongs to Model A startups, or to incumbents building their own internal agent stacks.

Project Darkhouse is a vehicle for launching several of these niches into prosumer opportunities. Millions of adults in America compete in sports outside of work. The same knowledge gap exists in every one: context is trapped in manufacturer spec sheets, in coaches and pro-shop techs, in word of mouth, and in forum threads. What comes next is founders putting together world-class domain context, and then setting agents loose on top of it. Putting world-class tooling in the hands of prosumer practitioners and coaches. Building in Minneapolis and shipping this summer. First niche is one with 3.2 million US competitive enthusiasts, category-wide knowledge gap, zero good structured reference product. More categories to follow.

My bet on Model A: a large-corporate attacker

I’m also building an attacker in a 50+ year old industry. High operational complexity, hierarchy-heavy legacy, exactly the kind of incumbent structure agent-native companies are positioned to replace. That’s a separate post when we’re closer to launch.

What this means if you’re a founder

For Model A, the opportunities are the large operating incumbents whose structure is vulnerable to an agent-native attacker: the ERP-era operating models, the thousands of executives, directors, managers, and specialists, the cost structures built on an assumption of human coordination that no longer holds. The founder retired years ago, and the AI response will be slow.

For Model B, the opportunities are the categories software couldn’t effectively reach previously: professionals and prosumers with real willingness to pay in markets too small for a 15-person team to close the math, and domain knowledge trapped in manufacturer sheets, coaches, techs, forums, and veteran memory. You find those by hunting for practitioner communities with real depth and no structured infrastructure to support them. Wherever the state of the art lives in people’s heads, there’s a Model B company to build.

Evaluating whether what you’ve found can become a monopoly matters as much as finding it. World-class software and cap table are becoming less central as moats. Model performance and agent stacks will commoditize. What will compound is proprietary organizational context, workflow embedding, and switching costs that accumulate through use. Ask yourself three questions about any opportunity (after Thiel and Helmer): Does the business accumulate context through use that no competitor can replicate from a cold start? Does it sit inside a workflow the user would rebuild painfully if they left? Does every new user or transaction make the next one more valuable? One or two, you have a good business but not a category-defining one. Zero, you have a feature. Three yes answers, you have a monopoly-shaped opportunity.

What this changes for capital

Both models break traditional early-stage VC.

Model B because venture’s underwriting stack wasn’t built for multi-bet solo founders. The round the economics would support is below venture’s minimum viable check. The founder typically won’t raise until revenue already works, which means no traction gap for venture to close. Underwriting has to shift from team size and burn rate to agent-stack quality, accumulated organizational context, and revenue durability. Most firms aren’t set up to evaluate those dimensions.

Model A breaks it because the team is too senior, the check is too big, the plan is too real for early-stage venture to underwrite. The $10-12M up front goes almost entirely to compute and senior operator salaries, and the capital is as likely to come from operator-investors who ran the pre-LLM version of the business as it is from private equity or growth-stage venture.

Net-net, venture as currently structured can’t really serve either model well. Model A wants capital but not at venture’s check sizes or governance terms. Growth equity and operator-LP funds are closest to the shape these companies need; traditional early-stage VC is not. Model B wants capital below venture’s minimum viable scale, or doesn’t want it at all. Venture will need to restructure to serve these companies, or it will capitalize the shrinking universe of companies that still fit the old pattern.

The window

The April 2025 post was Model A. Model B is the other half of the picture, and the two archetypes together are how operating companies and software companies will be built for the rest of the decade. For founders, the window is open right now. The mechanics are live, categories are visible, and the consensus is still forming. Grab a problem that speaks to you. Or grab two or three, because Model B economics mean you don’t have to pick just one. If Darkhouse takes 40% of my time, I can run a second bet with the other 40% and still have 20% for compounding infrastructure. The founder who would have built one company now builds three. Someone else is already or is about to plant their flag on them if you don’t.