Columbus is "creating a dynasty right now" as one of the top 10 Midwestern cities to launch a startup, while Chicago is widening its lead as No. 1, according to Chicago VC firm M25’s annual list of the region’s top startup cities.
Central Ohio remains in sixth place and Cincinnati at No. 10, although the gap between the two cities is narrowing, according to the firm's scoring criteria. Cleveland dropped a spot to No. 12.
"Columbus is still definitely taking the cake," M25 Managing Partner Victor Gutwein wrote. "Give Cincinnati another year or two for their fresh crop of unicorns to exit and they might start to really compete."
Columbus minted a new unicorn in Branch Financial this year, and venture capital firm Drive Capital last month raised $1 billion over two new funds – "the elephant in the room" for Midwest VCs, M25 said.
Gutwein has compiled the ranking for the past five years based on startup activity – including launches, growth and exits; access to capital and other resources such as incubators; and the overall business climate such as costs and taxes.
In the top five, Indianapolis overtook Pittsburgh this year for No. 3. Here are the top 20:
1. Chicago
2. Minneapolis
3. Indianapolis
4. Pittsburgh
5. St. Louis
6. Columbus
7. Detroit
8. Ann Arbor, Michigan
9. Madison, Wisconsin
10. Cincinnati
11. Kansas City, Missouri
12. Cleveland
13. Louisville, Kentucky
14. Milwaukee
15. Bloomington, Indiana
16. Lafayette, Indiana
17(tie). Omaha, Nebraska
17(tie). Lexington, Kentucky
19. Akron, Ohio
20. South Bend, Indiana
The pandemic brought with it a remote-centered world, and the challenges that used to exist for Midwest startups, like raising capital from the best investors across the country and accessing experienced talent, still exist to some degree but are largely mitigated.
“It was hard to get investors to come outside their core cities and commit more time, travel and money to something they aren’t connected with, and furthermore the experienced talent that’s worked in startups and seen a product go from seed stage to IPO has been lacking in the Midwest,” Gutwein said. “That’s been changing pretty fast because you can hire somebody to your team that isn’t necessarily based in Chicago and you can supplement what you can find locally with people on a national or international level.”
Finally, despite what appears to be a slowdown in venture funding, Gutwein was encouraged to see six new funds of $300 million launched over the past year in the region.
