Partnering with PitchBook, Silicon Valley Bank, & CBRE, my firm analyzed a broad spectrum of Midwest startup & VC data. This analysis revealed trends that tell a much more powerful story about the Midwest’s success than the story we tend to tell ourselves from inside the Bay Area’s shadow.
. This analysis revealed interesting trends — both nationally and regionally — that tell a much more powerful story about the Midwest’s successes than the story we tend to tell ourselves from inside the Bay’s shadow.
Just as profitability hasn’t stopped startups from going public, it hasn’t prevented them from earning VCs’ confidence, either. Startups are better capitalized than ever, with round sizes more than doubling since the start of this decade. Likewise, pre-money valuations are also increasing. Investors and founders can perceive this in a number of different ways, some positive and others less so. One undeniable fact, however, is that the trend is going up.
Moreover, the cost of doing business is less in the Midwest — from rent, to labor, to lower employee turnover. And that lower cost doesn’t come with a compromise in quality of talent. The Midwest is home to some of the country’s top universities for tech talent, while also offering salaries that go farther than they do elsewhere. For example,showed that when cost-of-living is factored in, tech employees take home $21,000 more, on average, in salary than they do on the coasts.
Part of the reason we see such large multiples in Chicago is because startups in the Midwest begin with the most reasonable valuations in the country. It’s not until startups mature and demonstrate strong revenue growth and a clear path to profitability that valuations become comparable to the valuations that the Bay Area sees. And when Midwest startups reach those later stages, top VC firms from around the globe fund them for rapid growth.
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