It's no surprise that Chicago is tops in the Midwest when it comes to the best cities for startups, according to VC firm M25's annual list of the region's top startup cities. But some movement in the top 10 shows which Midwest cities are on the rise, and which are falling.
The top five cities in M25's list this year are unchanged from 2020's rankings: Chicago, Minneapolis, Pittsburgh, Indianapolis and St. Louis stand as the top Midwest cities again this year. Columbus and Detroit were the risers this year. Columbus climbed one spot from last year to No. 6, while the Motor City moved up two spots to earn the No. 7 ranking.
Meanwhile, Ann Arbor dropped two spots to No. 8 and Madison fell one spot to No. 9.
Here are the top 20 Midwest cities for startups, according to M25.
- Chicago, IL
- Minneapolis, MN
- Pittsburgh, PA
- Indianpolis, IN
- St. Louis, MO
- Columbus, OH
- Detroit, MI
- Ann Arbor, MI
- Madison, WI
- Cincinnati, OH
- Cleveland, OH
- Kansas City, MO
- Milwaukee, WI
- Louisville, KY
- Lafayette, IN
- Bloomington, IN
- Omaha, NE
- Champaign, IL
- Lincoln, NE
- Des Moines, IA
M25 compiled its rankings based on three factors: startup activity (active startups, startup formation growth, number of exits, and large outcomes), access to resources (how much local startups have raised from VCs, the number of local investors, incubators/accelerators, universities, government support, and access to quality talent), and business climate (cost of living, labor costs, business tax friendliness).
Chicago would be hard for any city to catch on an average year, but with the city in the middle of a venture funding frenzy that's minted several new "unicorn" companies with a $1 billion valuation or higher, the Windy City easily claimed the top overall spot in the Midwest.
"Chicago is on an absolute tear," M25 Managing Partner Victor Gutwein told me. "Ten new unicorns in 2021 alone for a total of 19 Chicago tech unicorns is crazy rapid growth and, while the entire U.S. is seeing more unicorn creation than ever, this is an outsized share."
Venture funding is up across the country, and the Midwest is no exception. The amount of venture capital invested in the region has nearly doubled over the last 12 months compared to the same period last year, climbing from $10.1 billion in ‘19-’20, to $19.8 billion in ‘20-’21, according to M25.
That's boosted cities like Columbus, which is home to recently IPO'd Root Insurance and health-tech firm Olive, which is now valued at $4 billion, and Detroit, which is home to sneaker resale startup StockX, which is valued at just under $4 billion. Big tech wins in those cities helped them outpace Ann Arbor and Madison, two cities that still saw some significant startup momentum of their own: Ann Arbor-based Llamasoft was acquired for $1.4 billion and Madison's Fetch Rewards reached unicorn status with a $210 million raise.
"Ann Arbor decreasing was a surprise, as they had the Llamasoft exit and have such a strong density of startup creation, but it was passed by two surging ecosystems - Columbus...and Detroit," Gutwein said. "What used to be a huge cause for celebration and a reason a startup ecosystem would be on top of our rankings is now no longer enough."
You can see the entire M25 ranking here.
