Recapping the first-ever MidBest roadtrip
A brief synopsis of our journey into the heart of the Midwest's startup ecosystem
After 900 miles, 45+ meetings, and roughly 196 cups of coffee, the MidBest road trip has come to an end.
We spent last week immersed in startup ecosystems that have transformed over the previous five to ten years, met incredible entrepreneurs shaping the future from outside of Silicon Valley, and uncovered ways the Midwest must continue to improve to foster innovation.
It was an adventure.
We made friends with former Ohio State star and NFL wide receiver Braxton Miller, got too familiar with a Chicago 7/11’s 4:00 AM customer base, and somehow weren’t late for a single meeting.
While this first trip is finished, the journey towards democratizing access to capital for startups in the Midwest is just starting. Time and again, founders shared their funding struggles as they built their companies. They were hampered by slow-moving local investors, who lack experience with high-growth tech startups, and disregarded by Bay Area-centric venture firms, which sometimes seem to prefer Stanford dropouts with shiny pitch decks over anything produced in the Heartland.
In the coming weeks, we will share weekly explorations of each city’s entrepreneurial ecosystem and its role as it relates to the region. Each edition will touch on a city’s business and startup history, profile the catalysts driving it forward, and offer our unvarnished takes on where it’s going, what makes it unique, and what it needs to do better.
For now, here’s a quick day-by-day overview of our trip:
Day 1: Dayton
We arrived in Dayton, Ohio, at midnight on Sunday, June 20th, and didn’t go to bed until 2:00 AM due to last-minute preparations. The initial sleep deprivation set the tone for our week.
Our Monday started at 9:00 AM in Downtown Dayton’s The Hub, a joint venture of the Entrepreneurs Center and the University of Dayton located in the historic Dayton Arcade. Shuttered in 1990, the Arcade recently underwent a $100 million renovation and is now home to dozens of small offices and coworking spaces, classrooms, apartments, and an events venue. Future expansion plans include retail and hospitality, anchor-tenant office space, and perhaps a hotel.
The day’s nine meetings all occurred downtown, which is the future of the city’s economic revival. We met with a quickly growing defensetech company, an ambitious insurtech startup, and an innovative, video-based e-commerce platform. Additionally, thirty-three percent of our meetings were with Black founders and leaders, reflecting the region’s racial diversity. However, obstacles to equity and access were also major themes. The majority of founders we spoke with saw the fundraising process as an impenetrable black box. They viewed the idea of the “friends and family” round of initial capital raising as an impossibility and had no connections to the relationship-driven venture capital industry.
Day 2: Detroit
We woke up at 5:00 AM Tuesday to start the three-hour drive to Detroit for our 9:00 AM meeting. Thankfully, the flatlands of western Ohio are not known for their congestion, so we made good time. The office of Detroit Venture Partners is nestled in the heart of downtown Detroit, which boasts a full quiver of gorgeous art deco-style buildings. The office’s foyer is covered ceiling to floor with a photograph of bustling 1920s Woodward Ave, an homage to the city’s industrial heyday and an ode to its entrepreneurial heritage. Since the city has not grown since the 1960s, the architecture of its downtown is largely frozen in time, and a quick stroll of the city center beckons memories to a bustling American city.
Detroit has struggled mightily over the last half-century, becoming the poster child for “rust belt” decline. This decline, however, has opened up a yawning economic gap that startups are chomping at the bit to fill. The city’s budding entrepreneurial landscape is thanks largely to grassroots efforts driven by its eighty-five-percent Black population and massive real estate and startup investment by native son billionaire Dan Gilbert.
Day 3: Chicago
We arrived in Chicago around 9:30 PM on Tuesday and checked into our hotel in the bustling North Loop neighborhood. This would be the only night in a hotel over the entire trip thanks to the Midwestern generosity of friends and family. On Wednesday, we met with local VCs and startups ranging in size from a handful of employees to unicorn status (valued at over $1 billion).
Chicago’s scale immediately resonated with us. It’s the third-biggest city in the country, with nearly 10 million people living in its greater metro area. Its startup scene matches that scale. It has a robust venture capital community and a network of startups operating on a spinning flywheel of success that has minted nine unicorns in 2021 alone. Yet, despite our 46 years of experience in the Midwest, we still underestimated Chicago. In reality, the startup ecosystem here is well-established. It has a track record of strong exits and more than a handful of candidates for future public offerings and high-value acquisitions. This dynamic resonated in the behavior of Chicago investors; while some, like Chicago Venture Partners, were focused on the region, the majority looked more broadly for deals.
Day 4: Cincinnati (with a pit stop in Indianapolis)
Thursday was the most grueling travel day. We awoke at 4:00 AM to hit the road from Chicago to an early meeting in Indianapolis. Losing an hour crossing from the Central to Eastern time zone only exacerbated our struggles. While we both enjoy conversation, to preserve our voices and our sanity, we opted for quiet time, podcasts, and an eclectic mix of rock, rap, and Taylor Swift.
After an insightful conversation with Matt Hunckler of Powderkeg, we hit the road again for Cincinnati. Cincinnati’s conversations offered candid insight into the ecosystem’s strengths and weaknesses. We were careful throughout the trip to avoid building too much of a “cheerleader” narrative—no one benefits from a PR-driven agenda. The founders we met in Cincinnati were frank about what has helped them thrive and where the region still has work to do. After a half-dozen meetings around the city, we set off for Columbus that evening. All in all, we covered more than 400 miles and four cities between 4:00 AM and 9:00 PM. We’re still recovering.
Day 5: Columbus
Returning to Columbus for the two of us Ohio State alumni was a shock to our system. The city has completely changed over the last five years and is barely recognizable. Columbus has grown faster than any other city in the state by a longshot and is nearing the boomtown status currently held by Austin, Nashville, Charlotte, and Salt Lake City. Outside of Chicago, Columbus seems to be unique in that it is one of the only cities we visited that is attracting non-Midwestern founders and investors at scale. The state capital’s startup community has been energized by strong yet imperfect contributions from the state government and large local institutions. Of the six cities we visited, Columbus has the second-strongest startup ecosystem, which is supported in part by young talent coming directly from Ohio State.
Over dozens of interviews, a few themes emerged that we’ll explore further in future updates:
The Midwest has wins but needs more success stories
ExactTarget, Root, and CoverMyMeds are midwestern examples of the critical billion-dollar outcomes that kickstart the proverbial startup “flywheel.” However, the region still needs more to engender investment and inspire innovation. Who will be the next big winners?
Midwestern culture is a differentiating factor
People in the Midwest seem to be more risk-averse--how is this impacting the startup ecosystem?
The intersection of old money, new money, and startup investing in the Midwest
When capital is in the hands of primarily old money investors in old money cities, what happens to the startup investment process?
Barriers to accessing capital and scaling companies in the Midwest
Historically, why has it been difficult to raise capital and scale a business in the region, and why is finding the right talent so difficult?
Introducing Gaelen
Last week’s edition of the newsletter featured a dive into Will’s background and purpose behind launching MidBest, but it would be remiss of us not to introduce you to Gaelen, the co-pilot of this endeavor:
Hi all! I’m Gaelen Hendrickson. I have been lucky to have the opportunity to work in several consulting roles throughout my career, which has allowed me to advise private equity firms on potential acquisitions, work on massive fortune 100 mergers, and gain deep knowledge of the technology industry. While I am thankful for all my consulting experiences, I was looking for more.
My interest in startups, entrepreneurship, and venture capital started in 2014 during an internship with the Innovation group at Nationwide. In this role, I looked for up-and-coming insurtech companies for Nationwide to partner with. We looked at companies creating insurance vending machines for retail stores and cryptocurrency implications on insurance. This sparked my interest in startups, entrepreneurship, and venture capital. My passion for innovation paired with my experience as a kid raised in Cleveland is how I came to join MidBest.
See you next week.