With 18.5 million people, Florida has 16 Fortune 500 firms. Minnesota has 71 percent fewer people and 30 percent more F500 firms. Per capita, Minnesota has the highest number of F500 companies in the country. But in the last 25 years, Minnesota has not produced a single Fortune 500 company. Are there lessons for Florida from Minnesota’s past success, and recent loss of its “secret sauce?“
The first is the venture capital (VC) method. VC is capital-intensive and return-hungry. To earn high returns, VCs seek high-potential opportunities. Then they recruit star managers and add money. The VC formula has worked when home-run opportunities are plentiful in the initial stages of hot, emerging industries, such as semiconductors in the 1970s, PCs and biotechnology in the ’80s, and the Internet in the ’90s.
VC has not done as well at other times due to a shortage of home-runs. Industry “wisdom“ is that only about 1 percent to 20 percent of VC investments are home-runs. VCs who finance them succeed — 4 percent of VCs earn about 65 percent of IPO profits. Most are in Silicon Valley. VC returns in areas without home-runs have usually been lower.
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Read: “How can Florida produce more Fortune 500 firms?,“ an article by Dileep Rao, Clinical Professor for the FIU Department of Management and International Business for the MiamiHerald.com.