Gary Smaby frets about a trend that’s picking up steam: the decline in the number of publicly held companies based in Minnesota. Looks like he’s onto something.
The state’s large number of public companies has long been a distinguishing feature of its business community. Minnesota is ranked ninth among states (tied with Virginia) with 19 Fortune 500 companies. It’s also ranked ninth with 81 Nasdaq-listed companies. This despite the state’s 21st-place ranking by population.
But Minnesota’s concentration of Fortune 500 companies stands to come down by one if Eagan-based Northwest Airlines is absorbed by Atlanta’s Delta Air Lines, as proposed in the Delta-Northwest deal announced in April. Meanwhile, the state’s relative strength in Nasdaq listings has been inching down. Virginia, with 79, is nipping at Minnesota’s heels. Since 2003, Minnesota’s Nasdaq listings have dropped 21.4 percent, from 103 to 81, while over the same period, total Nasdaq listings fell 14.1 percent, from 3,725 to about 3,200. (Nasdaq’s listings peaked in 1996 at 5,556.)
The state’s count of publicly held companies overall has been sliding fairly steadily for the past 10 years. Today, it stands at about 150, down from 260 in 1998. In the early 1970s, it topped 350.
Smaby pins a large share of the blame on the Sarbanes-Oxley Act of 2002, saying the cost of complying with its financial reporting and transparency requirements has discouraged companies from going public. He warns that this factor might be combining with others to lead some Minnesota entrepreneurs—save perhaps for those with med-tech businesses—to start their companies elsewhere. In metro regions such as San Jose or Boston, he notes, there are larger support sectors—of venture capitalists, attorneys, consultants, accountants, managerial talent— to nurture start-ups.
Smaby’s view counts. A Minnesota loyalist, he is managing partner of the Minneapolis-based Quatris early-stage seed capital fund. He is also venture capitalist in residence and managing director of the Ventures Enterprise MBA program at the University of Minnesota’s Carlson School of Management, which evaluates and works to bring to market new technologies developed by the university and by Minnesota companies.
Says Smaby: “I’m not as excited as I was 10 years ago about the climate for entrepreneurism in Minnesota.”
