Since launching M25 two years ago, we’ve become experts on the Midwest startup ecosystem. We are one of the most active investors in the…
Since launching M25 two years ago, we’ve become experts on the Midwest startup ecosystem. We are one of the most active investors in the region, with nearly 50 portfolio companies spanning 9 states. We have deep roots in this region and regularly cover a ton of ground — hopping from city to city and digging into each local community to understand their unique challenges and opportunities. While there, startup leaders and community champions who understand the importance of a tech economy regularly ask us how they are doing — the good, the bad and the ugly. They know they are far away from Silicon Valley but see the opportunity all around them. They want to know what their community can do to improve the odds of startup success — and attract talented entrepreneurs to build their companies there. And, perhaps most interestingly, they want to know where they stack up against other cities we’ve visited.
To answer these questions we are excited to be introducing —Midwest Startups Cities: Best of the Midwest, a regularly-updated ranking of the best regional cities to start, grow, and invest in high-potential technology companies.
Why Rank the Best Cities of the Midwest?
It should no longer be a secret that the Midwest is a rapidly growing, increasingly compelling tech ecosystem. Everyone knows about Sequoia’s Chris Olsen and Mark Kvamme, who ditched the coasts and raised $300M to found Drive Capital in Columbus. Steve Case regularly runs the Rise of the Rest tour, and his VC firm Revolution has enlisted Hillbilly Elegy author JD Vance to source seed deals across the region. Several unicorn exits — from ExactTarget in Indy to CoverMyMeds in Columbus to Cleversafe in Chicago — are proving investor returns, providing liquidity for a new crop of tech-savvy angels and spurring a diaspora of startup spinouts. So much noise has been made that we’re now seeing coinvestments from coastal stalwarts NEA, Greycroft, Bessemer, and USV, among others.
A lot of the rhetoric is about how the Midwest can be (or beat) Silicon Valley. Or on a local level, how one city can outperform another. In general this is great — competition should drive each community to push for a better entrepreneurial environment and achieve success where they are strongest. But much of the information and comparisons are drawn from biased, inherently subjective sources like government development entities or state universities. Hence, we decided to use our position — as a seed-investor heavily involved and invested in the entire region — and our strengths — a relentless pursuit of objective, data-based decision-making — to bring a definitive stack ranking to these communities.
Methodology
Just like determining which startups are the best to invest in, deciding which Midwest cities have the best tech ecosystem is a difficult proposition dominated by inherently subjective variables. It’s difficult — but not impossible, and we have the perfect, proven skillset to do it. Let me break it down for you.
1. First we selected the cities that should be included in our rankings. We started with the 50 largest cities in the region (and remember — our definition of the Midwest includes Kentucky and the western half of Pennsylvania), combining suburbs and adding other cities (primarily smaller towns with large, state-backed universities) to end up with 54. Hopefully it isn’t misleading, but we actually judged metropolitan regions (cities just has more of a ring to it), and therefore we would combine cities such as Minneapolis with St. Paul (and large suburbs like Bloomington) and Lafayette, IN with West Lafayette. There were some difficulties with metros straddling state lines (looking at you Covington, Kentucky and Overland Park/Kansas City, Kansas), but for the most part this seemed like the right move, as tech ecosystems don’t heed city or state lines.
2. Based off of best practices, industry data, expert insights and our own experiences, we broke down 8 categories with 20 variables that were critical to a successful startup ecosystem — and then weighted them according to importance. These range from VC activity to the cost of running a business to access to talent, all items that I’m sure most would agree are important. That being said, there will unfortunately never be consensus on which categories are more or less important, so for now we will have to agree to disagree (or agree to agree?)
3. We next had to find reliable sources to provide objective data for each of these categories. Some had clear datapoints — for angel groups we looked at the number of angel groups listed in Crunchbase Pro — where others needed multiple variables. For example, our category “Talent” required us to consolidate data ranging from the US News & World Report university rankings to percentage of workforce with a college education to the number of patents issued. And special shoutout to The Seed Accelerator Rankings Project, a great endeavor which allowed us to take into account the quality of the local accelerators (one of our variables under the “Access to Resources” meta-category).
4. Finally, we aggregated the weighted ranking of each variable in each category to achieve a final ranking, both for overall and for each general meta-category.
What’s Next
We’re distributing our rankings on MidwestStartups.com, a new platform that M25 is launching this fall to drive talent to venture-backed, Midwest-based startups. Over the course of the coming weeks and months, we plan on diving into the results and discussing them with others. Please do give us your feedback — if you feel we missed something, if you want to know more or if we happened to get something exactly right, we want to know. In the coming years, we will continue to evolve and expand our rankings as needed, hopefully improving their quality and usability. If nothing else, we hope it brings additional excitement and energy to our region’s tech ecosystem, awakening sidelined capital, informing civic and governmental leaders, and arming entrepreneurs as they better understand their region’s strengths and weaknesses.
About M25
M25 Group is one of the most active venture capital firms focused solely on early-stage investments in the Midwest. Their objective, analytical approach has helped support their thesis and craft what is known as an ‘index fund of Midwest startups.’ M25 has already invested in over forty companies since their inception in 2015, and continues to invest in over twenty companies each year. Their collaborative, forward-thinking approach and diverse array of investments across industries and business models throughout the region has quickly established them as a key node in the Midwest startup ecosystem.
Twitter: @M25Group
About Midwest Startups
Midwest Startups is the best resource for all things startups and tech in the Midwest. Create one profile to access job opportunities at several dozen venture-backed tech startups in the Midwest. Developed by M25 — one of the most active early-stage investors across the region — to create a hub for aspiring and experienced talent to easily access the fastest-growing companies where they want to work.
Twitter: @MidwestStartups
