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Heartland Tech Weekly: The Types of Startups That Call the Midwest Home are Diversifying

Wednesday, April 25, 2018   (0 Comments)
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Data on which startups are getting funded in Heartland communities or which venture capital firm just closed a new fund is easily available. But what kind of data is actually useful in determining whether a startup community is seeing progress in producing more fast-growing startups?

Last week, I was sent a 2017 year in review report from the Michigan Venture Capital Association. I like looking at reports from state-led organizations like the MVCA because I find they often capture small startup funding announcements national databases may miss.

The report found that the amount of venture capital money Michigan startups received from Michigan venture capital firms decreased from $222 million in 2016 to $179 million in 2017. Additionally, the number of venture-backed startups in Michigan fell from 141 in 2016 to 134 in 2017. But when I spoke with MVCA executive director Maureen Miller Brosnan, she noted a few reasons to stay positive.

For starters, Miller Brosnan attributes part of the funding decrease to the increasing diversification of Michigan-based startups. Historically, the majority of venture-backed Michigan startups have operated within the health care sector. That’s still the case, but Michigan is also seeing an increase in the number of IT and software startups, which require less capital to operate than, say, a medical device startup.

Also, two years ago the MVCA began tracking for the first time the number of startups in the mobility sector, given the investments both public and privateorganizations in Michigan have made in mobility and self-driving car startups.

Of course, it’s Miller Brosnan’s job to tout the positives of the Michigan venture community. But I think the variety of startups popping up an area is a worthwhile metric too few startup communities pay attention to. When I spoke with Drive Capital’s Chris Olsen a couple of months ago, he also cited the diversifying array of startups forming in the Midwest as a positive. In particular, he thinks this newer crop of what he called “true tech businesses” can get more attention from coastal investors than startups in the Midwest may historically have gotten.

While it’s too soon to tell if this will prove true, I think startup communities will only benefit from showcasing themselves as suitable for a diverse array of companies.

As always, please send me your thoughts via email. You can also sign up here for VentureBeat’s Heartland Tech newsletter to get this column in your inbox weekly.

Anna Hensel
Heartland Tech Reporter

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