A new report from a Chicago-based venture capital firm ranked the top Midwest cities for startup activity, and Madison cracked the top 10.
Published by M25 on Wednesday, the VC firm’s second annual Best of the Midwest report listed the top 54 tech hubs in the region.
Chicago, unsurprisingly, came in at No. 1, followed by Minneapolis and Pittsburgh. Madison, which also ranked 10th last year, tied with Cincinnati. Milwaukee dropped three spots to No. 12, but Green Bay moved up one spot to No. 34.
“There are absolutely signs that the whole region is experiencing growth,” said Victor Gutwein, the managing director at M25. “We want to measure who’s doing better relative to another, and there are efforts in every community to try to push that community ahead and to make it a leader in our region.”
M25, which has investments in two Wisconsin companies, including Madison-based EnsoData and Milwaukee-based Scanalytics, added some new methodologies this year to rank the cities.
It added a startup momentum category, which measures the growth of the number of startups over time, and it also factored in tech exits and fundraises to measure how impactful the outcome of the average startup is on its ecosystem.
Another metric M25 considered was “connectivity,” otherwise known as a city’s distance to large airports, its population reach within a two-hour drive and access to major highways.
“It’s easier to attract VCs to a city with nonstop flights,” Gutwein said. “It’s easier to also sell if you have a lot of people nearby.”
The report also measured the quality of tech talent, investor activity, accelerators, universities and government support.
Though Madison’s ranking remained at No. 10 this year, Gutwein said it’s not exactly an indication that the startup ecosystem there is stagnant.
“It’s not necessarily a bad thing to stay flat,” Gutwein said. “It’s not out-performing and it’s not underperforming. Obviously, you would want to see it rise, but there are some clear limitations that Madison has just because of the size of the city.”
Based on Madison’s population, it naturally won't have as many startups as other, larger Midwest cities, like Chicago or Minneapolis, he said. However, being the capital of the state and home to a major university gives Madison an advantage in that its workforce tends to be highly educated, which fuels the creation of startups and the number of active investors.
As for Milwaukee, Gutwein said its drop on the list can be linked to its lack of large tech exits and fundraises, one of the new methodologies M25 included this year.
“Milwaukee doesn’t have much, especially if you compare it to a similarly sized city, like Ann Arbor [or] Columbus,” Gutwein said. (Ann Arbor’s Duo Security was just acquired by Cisco for $2.3 billion.)
Gutwein also said Milwaukee scored low on startup density. But as Milwaukee’s ranking dropped, Green Bay actually jumped up a spot.
“Their growth rate was really high,” Gutwein said. “There is startup growth there and it’s actually one of the highest in our rankings.”
To see the full report, go here.
