Colorado startups have long adopted the mantra that you don't have to be on the coast to build a great technology company. A new report from Crunchbase on startups in America's heartland backs that feeling.
America’s Mighty Middle Report, published by Crunchbase and Omaha-based Dundee Venture Capital, shows that over the last decade, Denver trails behind only Chicago and Austin in the region’s VC funding with $10.5 billion. Chicago topped the list at $15.2 billion, followed by Austin at $11.8 billion.
The report defines the Mighty Middle as the 25 states in America’s heartland, bounded by the Rocky Mountains and Appalachian Mountains.
Denver and Boulder were coupled together in the report, defined as the Greater Denver region.
Looking at statewide data, Colorado startups raised $11.4 billion this decade, trailing only Texas and Illinois among states measured in this report. In just the past five years, local startups raised two-thirds of that $11.4 billion, or $7.6 billion.
Total venture capital investment deployed into the Mighty Middle over the past decade was $92.6 billion, the report stated.
In addition to growing investment activity, large exits are also occurring more frequently. Of the 47 exits, 60% at $500 million or more in the Mighty Middle occurred from 2015 to 2019. Only six such exits occurred in the first three years of the decade, compared to 16 in the last three. The report highlighted SendGrid's $3 billion purchase by Twilio in 2019 as a success story for the region.
Despite growth in the middle part of the country, the data shows significant gender disparities when it comes to funding. Female founders in the Mighty Middle region have not raised larger, late-stage rounds at the same rate as their male counterparts. Of venture capital raised from 2010 to 2019, just 3% was invested into female-only teams, 7% in female and male teams and 90% went to male-only teams, according to the data.
“Gender parity in the entrepreneurial ecosystem is a long way off,” the report states.
Despite this overall trend, Denver has fared well when it comes to female-founded startup fundraising. The largest rounds raised by female-founded businesses in the last decade were both based in Denver; Paladina Health's $165 million raise and Guild Education's $157 million round.
Recently, the VC activity in the Middle Mighty region has slowed due to impacts from the Covid-19 crisis. The pandemic has slowed down the economy and investing across the U.S. as well.
The report shows that in the first quarter of 2020, $2.5 billion was invested in the Mighty Middle, down from the fourth quarter of 2019, when companies raised $4.7 billion and the first quarter of 2019, which saw $3.8 billion invested. 2020’s Q1 investing was down 47 percent quarter over quarter and 34% year over year.
“Crunchbase does anticipate a slowdown in the second and third quarters as venture investors assess the impact to their portfolio companies and reevaluate startups in a changed business environment,” the report states.
