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“I moved here for the job, but I stayed for the local music and the local beer.”

I’ve met a couple of people who claim to have moved to the Twin Cities because of The Replacements, and I bet we could find a small army of twenty- and thirty-somethings who moved here or stayed here because of Atmosphere and Rhymesayers (Say Shhh…!). And well, you can’t get Surly beer in Chicago or South Dakota.

I tend to think the reasons people (and companies) choose to be in Minnesota get oversimplified and over-politicized. Taxes and regulation matter, to a degree. But my hunch is that those levers are severely limited if a place doesn’t have a vibrant “scene.”

I had an energizing conversation Thursday with the guys at Element Six Media, a green advertising and branding firm in Minneapolis that builds campaigns around sustainable earth materials and social media buzz. I’ll be unpacking my interview notes in the next couple of weeks for a story on The Line, but I wanted to share one snippet now that particularly lingered with me: This is the New Economy. If we’re waiting for things to turn around or resume to normal, we’re wasting time because this is the new normal. Here’s how co-founder Maikel van de Mortel put it:

“We don’t talk in terms of things turning around. This is the new reality, and we’re at ground zero. The question is: how are we going to build up. The problem is that not everybody has come to peace yet with that new reality, and as long as that doesn’t happen, if you’re not at that point, then you’re going to struggle. The truth of the matter is it’s not going to go back to what it was. We’re not going to see profit margins as high anymore as they used to be. We’re not going to be able to charge those dollar amounts anymore as we were used to. Every single industry is going to have to face some realities, because people are going to object. It’s just part of the new economy. Every day that we talk about how things were, we’re waiting for things to turn around, is time that we spend wasting. That’s what’s really unfortunate. We can’t waste our time. We can’t afford it.”

It may be the last remnant of “a bygone era when the Twin Cities was one of the nation’s top technology centers.” The region has just a few large tech operations left (Lawson, Digital River, Seagate), and venture capitalists say most local software startups are tiny and will never grow into market leaders or large companies.

Gary Smaby, managing partner at Quatris Venture Capital Fund of Minneapolis, tells the newspaper that venture capitalists now expect a tenfold return on their investment and the ability to reach $100 million in annual sales. “I don’t want to leave the impression that there are not good startups,” he says. “It’s just that there are not many good start-ups with that kind of potential.”

So we’re not likely to find the next IBM or Oracle or Microsoft bubbling up from the Twin Cities startup scene, but maybe that’s not the point. Instead of asking who’s going to be the next big tech blockbuster to come out of Minnesota, should we instead be asking who’s going to be the next hundred successful small companies?

Large companies are may be good for the region’s economic stability, and it will take a lot of successful small businesses to replace the up-to-1,000 jobs thought to be at risk because of the ADC sale. But a conversation I had the other day with local entrepreneur/technologist Dan Grigsby has me wondering whether small companies might play a much more significant role in the future tech scene of the Twin Cities.

(Update 9:38am: Just got a phone call from Garrick Van Buren, who wanted to question whether large companies actually are good for a region’s economic stability. I made the comment offhandedly as a way to say I’m not completely writing off the value of large enterprises, and I’m quite certain I’ve heard that point made, but I can’t prove it. So there’s another can of worms: What is the value of large companies? One theory Garrick had is that they have traditionally been a magnet for attracting talent to the Twin Cities.)

Grigsby says the Twin Cities tech economy is already seeing a shift. It’s nothing unique to our region, and it has to do with the cost of computing power. Moore’s law is a prediction made by a Caltech professor in 1970, and it says that computer power basically gets twice as efficient, and thereby half as expensive, about every other year. He’s been almost spot on so far, and for the past 40 years the cost of computing has continued to plunge.

The cost of computing resources has fallen so much that very tiny companies or even individuals can now attack problems and develop ideas that just five or ten years ago would have been too costly for anyone but a large company to pursue.

I’ve written before about the opportunities cloud computing has presented for startups, which no longer need to pay to set up server rooms and hardware before launching a business. Instead, they can contract with a service like Amazon Cloud Services and only pay for the resources they use. Even without leveraging the cloud, things have gotten cheap. Grisby notes that he has a $1,000 server with enough capacity and redundancy to support any business he wants.

“So my cost of running a business has gone to basically zero,” says Grigsby. “That’s not universally true. There are still big, hard problems, but there’s enough problems that have the scope of business that I can make a living, and a very nice living, and at the same time don’t require a huge infrastructure to do it.”

He was talking specifically about software businesses, but other types of freelancers and entrepreneurs that depend on computing are starting to realize the same efficiencies. And the economics are becoming empowering.

“If I can find 2,000 people to pay me $40 a month for a product, I make $1 million a year. The economics of that are liberating. When I can build a company that costs nothing to operate, that changes the way I can live,” Grigsby told me. “Now, instead of having to spend 9-5 in a dull cube, I literally work from my patio. I look across my yard at a lake, and I love it.”

So what I’m throwing out there is that maybe — maybe — there’s less reason to worry about a bygone era if the next era in Minnesota high-tech looks like Dan Grigsby’s patio.

(Update 12:08: Twin Cities Business Senior Editor Gene Rebeck wades into the same territory on his BTW blog. See my comment over there, too.)

I’m going to get straight into the links now:

SUSTAINABILITY
The Seward Co-op celebrated its new 32-kilowatt rooftop solar photovoltaic system with a “commissioning party” on Thursday. The array was installed by Solarflow Energy, a Seward neighborhood company that is trying to prove a solar leasing model. I wrote about ‘em this week for The Line.

MEDICAL DEVICES
ProUroCare , an Eden Prairie medical device startup, announced an extra infusion of cash from its existing investors. The company makes an imaging product that it believes can help doctors diagnose and document prostrate cancers. Thomas Lee wrote late last year that the company may have a hard time convincing reimbursers that the product is necessary. I was humming the Yeah Yeah Yeahs after reading this story in the Star Tribune this morning: an airline worker in Arkansas came across a container of human heads and head parts on their way to Medtronic that were apparently not packed or labeled properly. The state confiscated the body parts until it can confirm they were obtained legally.

ECONOMY
The Minnesota Department of Employment and Economic Development announced May job numbers on Thursday. Minnesota employers created a net 5,600 jobs during the month while unemployment fell to an even 7 percent from 7.1 percent in April. It was the second consecutive month of job gains — a first since Jan.-Feb. 2008. U.S. Census hiring is responsible for a large chunk of the increase, but private employers in the state still created 2,600 jobs. Construction and financial services were the only sectors that didn’t see growth. I spoke with an official from an IT staffing agency in the Twin Cities, who told me that it’s placing a lot more web and app developers than it was a year ago, although much of the activity is temporary contract work.

Today, I’ll be reading, digesting and starting to write something about the Minneapolis Chamber’s new 2010 MSP Business Vitality Index (PDF here). Thoughts/impressions?

I’m also following tips and tracking down companies to cover in next week’s issue of The Line. If you know of local startups that are growing or doing something cool, lemme know.

Here’s some links:

TECHNOLOGY

TEKSystems, an IT staffing firm in Minnesota, has filed a lawsuit against a former employee alleging her LinkedIn connections violate a non-compete agreement (Wired/Computerworld)

SUSTAINABILITY

Cap and Trade will burden the rich, but ease energy costs for the poor (Fast Company)

More push back against wind power. A group called Goodhue Wind Truth has put up a billboard accusing T. Boone Pickens of giving residents “the shaft.” (Finance & Commerce)

Advanced Bioenergy, a Wayzata ethanol company, disclosed Wednesday that it’s seeking to raise $10.35 million in equity. (SEC Edgar)

ENTREPRENEURSHIP

Pine Technical College in Pine City is using a federal grant to set up a $2.4 million entrepreneurship center and technology business incubator. (Finance & Commerce)

ABRA’ Auto Body & Glass is touting CEO Rollie Benjamin’s Entrepreneur of the Year award. I had the chance to interview Benjamin a couple of weeks ago about how he grew the company from a single repair shop in Fridley to a 100-location chain. You’ll be able to read my story in the August issue of Twin Cities Business magazine. (BusinessWire)

JOBS/ECONOMY

The Federal Reserve Bank of Minneapolis predicts Minnesota might not return to pre-recession employment levels until 2013. (Finance & Commerce)

mono, a branding agency I wrote about for The Line a couple of weeks ago, continues to grow. It just added two more creative hires. (PR Newswire)

Dan McElroy, commissioner of the Minnesota Department of Employment and Economic Development, told an audience Monday that his department hopes to have documents related to the tax credit posted on its website as soon as July 1.

McElroy spoke at an angel tax credit panel discussion at ADC Auditorium presented by several local science and technology organizations.

The Angel Tax Credit was signed into law April 1. It set aside $11 million in 2010 and $12 million for each of the following four years for a 25-percent tax credit for investment in Minnesota technology startups.

“We’re most interested in jobs, and good paying jobs,” McElroy said. “We’d love to see a couple relatively early successes.”

Among the criteria for companies to qualify: They must be less than 10 years old and have fewer than 25 employees. Their headquarters and more than half their payroll and employees must be in Minnesota, and all employees must make at least $18.55. Qualifying companies also need to be using or researching proprietary technology in a high-technology field.

More information is available at http://www.positivelyminnesota.com/angelcredit

Originally published May 26, 2010, by The Line Media.

A study showed up in my inbox this morning that suggests the MOJO team will have their work cut out for themselves. The Kauffman Index of Entrepreneurial Activity (PDF) is an annual survey of new business starts. This year’s report shows U.S. entrepreneurial activity in 2009 was at its highest level since 1996. More new companies were formed in this country last year than during the 1999 or 2000 tech boom years. Minnesota, however, is singled-out for having one of the lowest rates of entrepreneurial activity.

In 2009, Minnesota recorded 220 new businesses per 100,000 adult residents, just beating out Alabama (210 per 100,000), Pennsylvania (200 per 100,000) and Nebraska (200 per 100,000). Mississippi was last with 170 new starts per 100,000 adult residents. I’m admittedly still learning this beat, but the numbers surprised me. I’d have guessed we’d be in the middle of the pack somewhere — not the bottom five.

Maybe it’s just that I’m better tuned in to the conversation, but it seems like there’s an awful lot of talk lately about how to make Minnesota more entrepreneurial. Can we do it? There’s excitement about the angel investor tax credit passed by the Legislature this session. I’ve also heard concerns that it’s not enough, that we need to do something bigger to overcome our cultural resistance to risk-taking.

Guessing I’ll hear some ideas later today.