From Zero to a Billion In 10 Years
From Zero to a Billion In 10 Years
Nebraska taps into its culture of innovation, venture capital floods in.
Key Takeaways
Nebraskan startups have attracted well over a billion dollars in venture capital in the decade since 2011, a year where no venture capital was raised.
State buy-in for research, innovation, entrepreneurship and infrastructure accelerated with the Business Innovation Act, with investments stewarded by leadership from all corners of the innovation ecosystem.
Innovation ecosystem leaders and members have created the conditions for future success, including significant investments in the support infrastructure researchers, innovators and entrepreneurs require to succeed.
Investments in existing areas of intellectual and economic strengths are complemented by strategic investments in growth industries, from advanced manufacturing to health and life sciences.
Read this article to learn about the process they followed, what makes their innovation ecosystem unique, and strategies that can be applied anywhere.
Note TGB innovation ecosystem pillars: Local Uniqueness and Strategic Differentiation; Collaboration and Synergy; and Resilience and Adaptability.
Recommended reading: Part 1 and Part 2 of this three-part series.
Traction Required
Nebraskans are fiercely loyal to their state. There’s a palpable sense of state and civic pride which neatly intersects with personal independence, a builder’s mentality, and willingness to do more with less. Lincoln, the capital, embodies Nebraska's deep commitment to community and civic engagement. University of Nebraska-Lincoln’s women’s volleyball team is so beloved that fans set an attendance world record. Cornhuskers football has sold out the The Sea of Red 60 years running. This feeling of pride and connection is the reason why many who’ve left return: Nebraska feels most like home. If there is a place where innovation and entrepreneurialism are as natural as breathing, Nebraska fits the description.
And yet.
Worldwide in 2011, 3051 companies attracted over $30 billion in venture capital. Not one of those dollars went to in-state deals in Nebraska. In a year when X, then Twitter, closed two separate nine-figure deals, Nebraska’s startups gained no VC traction.
Every intellectual and cultural ingredient was present, but the capital wasn’t. With jurisdictions across the globe supporting research commercialization, creating innovation infrastructure, and offering seed funding to high-potential, early-stage companies, Nebraska stood out for the wrong reasons. Absent sufficient support, all too often innovation and entrepreneurship fell by the wayside. With too few startups surviving proof of concept, venture capital went elsewhere.
Problem, Meet Solution
It was a watershed moment, confirming among state officials, the business community, and academia the need to fundamentally rewire Nebraska’s approach to innovation. Global competition is too intense, today’s technologies too complex, that without a high-performing innovation ecosystem it is extremely difficult for an individual region to compete effectively. Innovation ecosystems are now perhaps the single most important modern determinant of long-term municipal and regional economic success.
Nebraska’s subsequent passage of the Business Innovation Act (BIA), including “access to capital in early stages of product development,” recognized that innovation is a large scale, collaborative enterprise requiring infrastructure and close integration between government, business, academia and innovators.
Key Milestone: A Fully Functioning Innovation Ecosystem
In a single year, 2021, Nebraskan startups successfully captured $334 million worth of venture capital attention. The product of a sustained, decade-long run, this achievement can’t be overstated. With technology-based innovation integral to the state’s strong GDP growth, ranked 19th nationally by the BEA, infusions of in-state technology represent a double win.
But the real story is this: Nebraska’s innovation leadership successfully directed the state’s existing strengths and unique culture into an innovation ecosystem capable of producing—year after year—new technologies, jobs, and companies.
Real Success Requires Real Work
The success is real and sustained: over the past decade in-state startups have attracted over a billion dollars of venture capital. Explaining zero to a billion requires more than a single post, so at the risk of oversimplification the rapid emergence of Nebraska’s innovation ecosystem appears based upon four factors:
Research advantages in food and agriculture, health and life sciences, robotics and advanced manufacturing
Industry strengths in food and agriculture, insurance, and manufacturing
Cost of living advantages attractive to talent, and cost of production advantages attractive to investors
Culture. Nebraska is known for its do more with less, self-reliant culture and for banding together to help one another, traits noticeable among its innovation leaders.
We're used to doing things ourselves, building things ourselves, and used to doing more with less. Our acumen in building things is strong.
Dan Hoffman, CEO, Invest Nebraska
Signal Received
As they develop, innovation ecosystems signal what makes them unique: their own characteristic blend of local culture and mix of infrastructure, methods, and technologies.
Stewardship might be the most apt term to describe Nebraska’s approach to its innovation ecosystem, reflecting an ethos of hard work, dedication, community focus, long term commitment, and emphasis on real world applicability.
One of the hallmarks of our ecosystem is its collaborative nature. The overall willingness to help others is so amazing to me. From C-levels in startups and existing businesses to new founders who are just getting their feet wet. It's such a collaborative and collegial environment. It's fantastic.
Brad Roth, President and Executive Director of NUtech Ventures
Building the Structures That Change the Game
Dan Hoffman is the CEO of Invest Nebraska, which supports in-state startups in partnership with the Nebraska Department of Economic Development, among others. He sees both the complexity and opportunity of aligning entrepreneurs, infrastructure, and capital with the state’s areas of strength and future growth. “It's not only about money, it's the infrastructure that needs to be built up around those entrepreneurs.”
Invest Nebraska launched The Combine in 2019: leadership in food and agtech is not only lucrative, but strategically vital for an economy leading in those fields. The Combine’s space at Nebraska Innovation Campus, itself part of University of Nebraska-Lincoln, showcases capital, government, and academia collaborating effectively to develop useful infrastructure and practical startup support.
Strengthening Existing Industries; Establishing New Ones
Spurred by the invigorated investment climate and support infrastructure, Nebraska’s homegrown IP and technologies are finding their way into the economy in mutually reinforcing ways. Infusing the industries anchoring the state’s economy— agriculture, manufacturing and insurance—with in-state technologies like Sentinel Fertigation’s real-time, imagery-based nutrient recommendation software, turns digital transformation into a job-creating strength.
Economic diversification is the flip side of the economic development coin. When Nebraskan startups in advanced manufacturing, healthcare, bioscience, and robotics receive investment—now aided significantly by in-state access to specialized research and innovation infrastructure—the importance of close integration between government, business, academia and innovators becomes impossible to miss.
The product of that integration includes some impressively innovative firms. Monolith’s methane pyrolysis process produces low-emission carbon blacks found in products like tires, plastics and inks. Virtual Incision “is on a mission to miniaturize robotic surgery” and is actively collaborating with NASA.
Enter the Misfits
Brian Ardinger, now Director of Innovation at Nelnet, founded NMotion, Nebraska’s first startup accelerator, during his stint as an Entrepreneur In Residence at NUtech. His pioneering efforts are evident today in Lincoln’s startup and entrepreneurial ecosystem. He saw a clear need for networking and mentorship—community, essentially—and access to seed capital.
The entrepreneurial ecosystem has come to fill many needs: a training ground to prepare entrepreneurs for the rigours of startup life, a vital node representing entrepreneurs’ interests within the innovation ecosystem, an organized way for startups and capital providers to engage, and a community and platform for unconventional thinkers to come together. As Brian warmly puts it, “misfits” in traditional work environments often thrive as founders or “employee number five” types at high risk startups.
The city itself has embraced the startup community. Lincoln Partnership for Economic Development (LPED), offers seed funding and programming.
The density of collisions is one of the reasons why Lincoln has shown out. It's literally a 5 minute walk to the University and the downtown Haymarket area, where Hudl and other startups have convened. You run into your accountant, or lawyer, or marketing person in the street when you're grabbing coffee—it's just easier to make those interactions and collisions happen
Brian Ardinger, Director of Innovation, Nelnet
Nebraska’s Success Formula: Stewardship, Practicality…
There’s a famous line in True Grit, “If you want anything done right you will have to see to it yourself every time.” Conversations with Brad Roth, President and Executive Director of NUtech Ventures, typically followed this path. Each person or organization he mentioned was doing something proactive and above the call of duty, clearly aware of their pivotal role in the development of UNL-Lincoln-Nebraska innovation ecosystem.
This philosophy is evident within NUtech itself. The nonprofit technology commercialization affiliate of the University of Nebraska, their mission emphasizes improving quality of life alongside economic development. In addition to managing UNL’s tech commercialization process they support innovators and entrepreneurs with programming and support, including community members outside the UNL ecosystem. Within the past year, over 50 startups benefited from NUtech support, ranging from entrepreneurial training to IP management.
…And Giving Back
But if there’s an example that truly encapsulates the care, cohesiveness and community orientation of Nebraska’s innovation ecosystem it’s the RISE program founded by Jeremy Bouman. RISE prepares and trains incarcerated people for community re-entry through habilitative programming including “intensive character development, employment readiness, job creation through entrepreneurship, family programming and case management.”
The role of startup ecosystem members is a clear point of pride for Brad, “The entrepreneurial community has stepped up the past several years. I can't tell you the number of founders and others in the the ecosystem who have participated. It's just moving. People want to help. Finding a job for the formerly incarcerated is still a really big deal; it's really a tough go.” Over the course of visits and interactions, volunteers help change lives by evaluating cover letters, mission statements, resumes, and discussing entrepreneurship with inmate cohorts.
Conclusion
Marc Andreessen said “capital is abundant, but opportunity is scarce,” referencing over $6 trillion in bonds (at the time) returning negative yields. His point was that vast amounts of capital could be poured into forming more Facebooks and Googles—if those nascent opportunities existed. For Nebraska, the first steps have been taken: creating the conditions for success. They’ve solved the biggest challenge: starting from zero in 2011, where do the initial successes come from, those that stand a chance of drawing interest when competing with the global next big thing?
There’s abundant infrastructure focused on existing strengths like agtech and life sciences. The interconnections between academia, economic development, government, business and capital are robust. “Extra mile” type leaders are present throughout the innovation ecosystem network.
Investment in growth areas is both focused and significant: of the past billion venture capital dollars invested in Nebraska, over 20% has gone to health and life sciences, and a further 33% into hardware, robotics and advanced manufacturing.
There is also a thoughtful response to the scale challenge smaller innovation ecosystems face. Invest Nebraska notes 126 VC firms outside the state have invested in Nebraskan ventures. Partnerships and alliances are forming to facilitate greater access to information and resources, and efforts are being made to incorporate rural areas and small communities into innovation efforts. Through NUtech, UNL is part of the Great Lakes Region I-Corps Hub. Exploratory discussions have been held with university colleagues in Missouri, Iowa, and Kansas, looking for strategic growth, knowledge sharing, and partnership opportunities beneficial to the Heartland states.
Success is mercurial. But zero to a billion, dedicated innovation leadership, and state-of-the-art infrastructure suggests it’s here to stay.
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