Three words define the Midwest venture capital market compared with others in the U.S.: capital-efficient growth.
That's according to Chicago firm M25's annual list of the region's top startup cities, which crowned Chicago No. 1 once again.
Victor Gutwein, M25 managing partner, said that Midwest companies tend to use less capital, scale more efficiently and provide better outcomes to investors, and other parts of the country are starting to take notice.
He added that the recent venture economy reset seen over the past two years showed that the Midwest's conservative approach to using capital is the best path forward.
While the top six in the Midwest rankings — Chicago, Minneapolis, Indianapolis, Pittsburgh, Columbus and Detroit — all stayed the same from last year, college town Ann Arbor, Michigan (7), and Madison, Wisconsin (8), jumped St. Louis (9), with Cincinnati (10) rounding out the top 10.
Downstate Illinois also saw a big boost in this year's rankings, with Champaign (23, up two spots), Peoria (33, up 13), Springfield (50, up 11) and Rockford (54, up five), all showing strong growth, attributed in part to new government incentives. Peoria's Natural Fiber Welding got a shoutout as the only recent downstate financing round of over $50 million.
The startup rankings were calculated by startup activity, access to resources and the overall business climate.
Among Chicago's startup ecosystem wins include Tempus' IPO, Tegus' acquisition, Kin Insurance's new unicorn status, and Mediafly's and Ocient's recent raises. There were also six firms that announced new funds of more than $80 million, including Lightbank, 7wireventures, 53 Stations, Distributed, HPVP and Motivate.
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