Start-up accelerator scene heating up in Twin Cities

Within the past year, the accelerator scene in the Twin Cities has taken off.

There are now at least three boot-camp programs for early-stage firms up and running around town aimed at helping them overcome the odds and succeed in a market in which most start-ups fail. Meanwhile, others such as San Francisco-based Hax have started bringing their classes of start-ups here on field trips to make pitches.

The draw?

In many cases, it's because start-ups are looking to partner with major retailers such as Minneapolis-based Target Corp. and Richfield-based Best Buy to have them either carry their products or integrate their tech services. It also comes at a time when the number of start-ups has been exploding amid the growth in Internet of Things-related gadgets and shows like "Shark Tank" that inspired a new generation of entrepreneurs.

"It's a natural evolution of the market," said Ryan Broshar, managing director of Techstar's retail-focused accelerator housed at Target's headquarters, which is currently soliciting applications for its second class of start-ups for this summer.

Two of the start-ups from the inaugural class have moved their headquarters to Minneapolis. "It's a good sign that there's that much activity here that can support these accelerators," Broshar said.

In some cities, he added, it's not uncommon for there to be five to 10 accelerators so it's about time that the Twin Cities scene begins to grow, too.

There are many different kinds of accelerators. The traditional model is one in which investors offer deep mentorship and guidance through 10- to 13-week-long boot camps in which they help companies fine-tune their strategies and focus. The goal for start-ups is often to strengthen their business models and to secure more funding.

Last year, Eden Prairie-based Sprosty Network, a consulting and strategy firm made up mostly of former Best Buy executives, launched a new concept called RetailXelerator. Now in its third class, it focuses on later-stage companies ready to "scale up" and get products picked up by big retailers.

Its 10-week program is run through webinars held once a week on everything from distribution and branding to product development and manufacturing. It culminates with all of the companies, some of them international, coming to the Twin Cities for a few days to make pitches before a private audience of retailers that have included Amazon, Sears, Verizon and Wal-Mart. The accelerator also works to set up one-on-one meetings with companies such as Target and Best Buy.

Rick Rommel, who leads the program and previously led new business ventures at Best Buy, has seen firsthand how hard it is for retailers to work with small, nimble start-ups that may still be pretty raw. At the same time, retailers want to stay relevant and carry the newest products.

"How do you breach that gap?" he said. "It's getting harder to connect to retailers because there are more and more start-ups." So retailers are asking for help with that curation, or to "find the needle in the haystack," he said.

While Sprosty partners weren't sure what to expect when they first started, they've been pleasantly surprised to be inundated with several hundred applications for each class. They started small with the first class, which was focused on smart home products, and accepted just seven companies in the program. The second class was run exclusively for an undisclosed retailer that was looking for private-label options. All nine food-related start-ups in that class are in active negotiations or have purchase orders in place, according to Sprosty.

The current class has 16 start-ups in it.

While many accelerators require teams to move for the duration of the program (with the hope some will choose to move to that city), the Sprosty folks knew that can be a hardship. So that's another reason why they decided to make their program web-based.

That was one of the appealing parts of the program to Trago, a smart water bottle company out of Austin, Texas, that took part in RetailXelerator's first class. The young company had already taken part in another accelerator the year before where they got more general mentorship and funding. And while its owners didn't want to just hop from one accelerator to another, they saw a need in what Sprosty had to offer.

"We are a small business," said Jac Saltzgiver, Trago's chief executive. "We didn't have a sales team per se. We were just two people. So how do you go scale and get out into the market? It's a tough problem to solve."

After pitch day, they connected through Sprosty to Best Buy, which will carry their products on its website, he said.

Hax started coming to the Twin Cities last year upon the suggestion of its program director, Kate Whitcomb, formerly a buyer for Target in Minneapolis and then at Target's smart home store, Open House, in San Francisco.

Some companies like Apple, Amazon, Home Depot and Lowe's often come out to meet Hax's start-ups in San Francisco. But that's not easy for every company, especially when companies have downsized corporate staffs.

"They only have so much time," Whitcomb said. "There is much less time for discovery."

So she thought it would be good for her start-ups to come to Minneapolis to make pitches directly to Target and Best Buy on their home turf.

"We're not always trying to help the team make a sale," she said. "Sometimes, it's just about getting feedback."

While most of the accelerators in the Twin Cities have a retail or product focus, Gener8tor, a Milwaukee-based program that expanded to the Twin Cities last year, is more open to all kinds of start-ups. "There wasn't an all-purpose, generally available accelerator in town," said Mark McGuire, a venture partner with Gener8tor. "We've had a lot of people asking us to come to town."

Gener8tor started in Minneapolis with a shorter, free and part-time version of its accelerator called gBeta, sponsored by the University of Minnesota. It is just for Minnesota-based start-ups and gives preference to U firms. It will run one or two more of those programs this year as well as a full-blown accelerator that will have no geographic restrictions.

"Now the question is, can we get follow through funding for our companies that want to grow and stay here?" McGuire said.

Kavita Kumar • 612-673-4113