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Recession Inspires Invention But Drains Venture Capital

March 19, 2009 By Lee Egerstrom, Economic Development Fellow

Set aside for now the question about the chicken or the egg. The people in Redwood Falls, home of the annual Minnesota Inventors Congress, are clearing up other cliche', questions far more pertinent to today's recession.

Yes, it does appear that necessity can be the mother of invention. Unfortunately for such motivated inventors and entrepreneurs, however, the glass that is half full is also half empty.

The hard times may be inspiring more people to invent new products, said Deb Hess, executive director of the Redwood Falls nonprofit organization that runs the Minnesota Inventors Congress. At the same time, inventors and entrepreneurs are having more difficulty finding venture capital to launch businesses and bring their inventions to market, adds Julie Rath, Redwood Area Development Corporation executive director.

In order of development, Hess said anecdotal evidence suggests creative minds have been busy during the past year developing new products and improving systems in which commerce and industry operate. That conclusion was reached from the number of telephone calls and inquiries at the Inventors Congress headquarters.

Just how inventive these people have been will be measured in the weeks ahead as inventors and exhibitors start lining up for the 51st Inventors Congress to be held June 12-13 in Redwood Falls. The Congress' staff sent an initial mailing this past week to 8,000 people and organizations in its database. But for now, Hess said, inquiries suggest a lot of creative people have been using down times from jobs to work on developing new products.

That still leaves a large gap between invention and market, however. Hess' nonprofit group offers help to inventors looking for ways to develop their products.

Additional help can be found through other nonprofit organizations, Hess said. She specifically mentioned the Minnesota Inventors Network organization in the Twin Cities, and the state-supported Small Business Development Centers. They are based at various college sites that include the University of St. Thomas but are mostly housed and staffed at Minnesota State Colleges and Universities campuses.

Still other groups, such as the state-supported Agricultural Utilization Research Institute (AURI), are especially helpful for inventors and entrepreneurs in product development, market analysis, and manufacturing and logistics planning, Hess added.

More often than not, finding ways to license the manufacturing or marketing of a new product makes far greater sense than trying to do everything yourself, she said.
Where laboratories or manufacturing sites are necessary, entrepreneurs will eventually bring development plans to community economic development specialists such as Redwood Falls' Rath. Information about the Redwood Area Development Corp. can be found at

Finding venture capital to help prospective entrepreneurs get started is becoming more difficult every day, Rath said.

The collapsing stock market and declining equity values in other investments have undoubtedly shrunk the amount of venture capital available to support entrepreneurs, Rath said. The current economic climate is probably putting some money on the sidelines, reluctant to be used as risk capital for new ventures, she added.

"It gets harder trying to find the 'well' we're all looking for," she said.

Enabling and nurturing invention and entrepreneurship is mostly a private investment activity in Minnesota, but public policy does have an important role that should not be forgotten in weak economic times.

Public research support major Minnesota industries and resources, Small Business Development Centers do help entrepreneurs turn ideas into industry, and public economic development specialists help entrepreneurs and inventors find the well of seed capital needed to get started and grow.

Without state and local funding for these institutional and human resources, good ideas and inventions will be left on kitchen tables and in garages. That is not the way for Minnesota to grow out of the current recession.

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