More Private, Less Public

Today, Holloran says, banks and investment firms in the Twin Cities are less active in funding local start-ups. He used to work closely with the old Craig-Hallum investment banking firm in Minneapolis to help fund emerging companies, and Craig-Hallum took a number of Minnesota companies public. In their day, such firms provided financing based on personal relationships. Holloran says that had Northwestern National used financial statements as its sole criterion for lending money to Medtronic, the medical device company would never have gotten off the ground.

A second blockage in the pipeline of public companies is that the market for locally traded over-the-counter stocks, which once flourished here (see sidebar on page 64), doesn’t count for much anymore. Medtronic and Best Buy went public into this market decades ago, when they were just getting started. But the local OTC market faded in the 1970s, a decade marked nationally by inflation and a generally sluggish economy. The stock market went nowhere, as investors shunned both established stocks and new offerings. George Bonniwell, retired president of the old Craig-Hallum investment firm, says the local OTC market, where small share-price offerings were the rule, was a critical source of capital for many Minnesota start-ups.

“Every big company starts as a smaller company,” says Bonniwell, whose firm has a new incarnation—a new company with the same name—in the Twin Cities today. But the present-day Craig-Hallum hasn’t built the reputation that its namesake had for nurturing promising start-ups.

“I don’t know if there are any firms like that left anymore,” says investor Bruce Hendry, who worked at Craig-Hallum for years before it was bought out in 1992. Hendry also notes that brokers get much lower commissions today, so they have less incentive to push small stocks.

IPOs Follow the Market

To a large extent, the state’s public company count has varied with the number of Minnesota companies doing initial public offerings, which in turn tends to vary with market conditions.

The number of public companies in the state began declining in the 1970s. It fell by roughly a third during that decade to about 235, then ranged in the mid-200s though the 1980s and into the late 1990s.