Things are tough all over for startups, but relative to the rest, Columbus has finally cracked the top five in Chicago venture capital firm M25's power ranking of the best Midwest cities to build a startup.
Columbus had never topped No. 6, where it finished the past two years, in the review the firm started in 2017. Based on 2022-23 data, Central Ohio ranked No. 5.
"Boy was that well-deserved," Victor Gutwein, M25's managing parter, said in a blog post announcing the results. "Let alone hosting the largest fund by (assets under management), Drive Capital, it has created, seemingly from scratch, a near-decade long legacy of putting up massive funding rounds and generating monster exits. More importantly, the flywheel is alive and well."
Cincinnati stayed No. 10 for the fourth year, while Cleveland dropped a peg to No. 13, a steady decline from No. 5 the inaugural year. Last year's No. 5, St. Louis, dropped two spots to 7th and Detroit rose one spot to 6th.
M25 compiles its rankings based on three factors: startup environment (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 and business-tax friendliness). Overall, there are 25 variables weighed into each city's score.
Chicago and Minneapolis are the steady top two each year.
In his annual breakdown of Ohio's "3 Cs," M25 Managing Partner Victor Gutwein said the comparison is "less fun to analyze every year" given Columbus' emergence as the clear leader and widening the gap.
"I don’t necessarily see this 'turning around' anytime soon, as even though some of the causes of Columbus’ rise may not be permanent, the flywheel of talent and capital clearly will be," Gutwein wrote. "What we can all hope for is that Cincinnati and Cleveland continue to deeply invest in new startup creation and a variety of funding opportunities. ... These efforts have shown they can pay off and are even more critical in a slower startup economy."
Among notable deals since summer 2022 that M25 said influenced the score, VC firm Heartland Ventures raised a $52 million second fund. That's also a win for Columbus in that the firm moved headquarters from Indiana. Now with $142 million under management, the firm has a different kind of model: Instead of investing in local startups, it invests in coastal startups to introduce them to Midwest customers as "outsourced R&D."
Also in the year, subscription software company Mentorcliq raised $80 million after years of bootstrapping.
Not entering M25's calculations because it was in stealth mode until this July, clean energy startup Koloma Inc. raised $91 million last August. Although headquartered in Denver, the company licenses tech from Ohio State University and has a Dublin office and Columbus lab.
Gutwein also cited new fast-growing startups founded by veterans of Columbus' first unicorn, CoverMyMeds, but acknowledged some unicorns minted in the past two years are struggling.
