On bootstrapping and angels: Insight on getting funding as a Midwest-based tech startup

I’ve spoken with a lot of entrepreneurs over the past few months to bring you stories about their innovations and the problems they’re trying to solve. A topic that comes up frequently is that of funding challenges for Midwest tech business compared to those located on the coasts.

Many entrepreneurs echo similar difficulties. Despite the challenges, they also cite benefits to running a tech business in the Midwest. They are largely positive about their experiences so far, their ability to overcome location-based challenges, and what the future holds for financing startups in the region.

Entrepreneurs say investors in Midwest startups tend to be more risk averse than those in coastal tech hubs.

  • “The reputation Chicago has is being very tight when it comes to giving money versus the East and West Coast [investors], who will just give money to a new idea startup. Here, it’s widely known that they want you to make money or have something working,” said Andre Johnson, founder of Chicago-based LiveEquipd, a platform to help people with disabilities find quality supportive equipment. “It took a lot more time to do this than a lot of novel startups where they got venture capitalist money… It’s not like the big spaces where people are just willing to throw money at it… We need someone to be able to take that chance or see the big picture and understand that this has great potential even though it’s not generating so many dollars.”
  • “Financially, I had 30 years behind me so I bootstrapped it and I have a good support network in that capacity,” said Joanne Rodriguez, founder of Illinois-based Mycocycle, a company that uses fungi to detoxify asphalt construction and demolition waste and turn it into a valuable resource. Still, “I joined the Cleantech Open National last year because I knew I would need exposure from a less risk averse crowd that sees more cleantech and carbontech startups coming through. That has been helpful.”
  • “When you have a cool invention but you don’t have a product it’s not the easiest thing to get funds or develop the idea. … We’ve had all of our capital from private equity, not VC funds. If you look at the number of VCs, there are really only [a few dozen] interested in what we’re doing in the Midwest, but if you go to the coasts there are hundreds of them,” said Tony Bergida, director of communications for Overland Park, Kansas-based Frosty Tech, an eco-friendly, non-toxic cooling product company that I will highlight in a future newsletter. “We’ve been able to make the $6.5 million we raised over the years go farther in the Midwest as opposed to living on the West Coast. … There are a lot of assets to being in the Midwest. It’s a double edged sword.
  • “I think there are also significant benefits to being based in the Midwest. The risk appetite is more in line with how we look at business. We’re not looking to get someone to write a $5 million check, we’re about creating and sustaining value for customers and the environment,” said Katie Kolhoff, CEO of Illinois-based NUMiX Materials, a company removes heavy metals from industrial wastewater and recovers the metals.

Tomorrow, I’ll share insight on how entrepreneurs say income status, race, and gender equity influence funding channels.

Do you have other insight about financing for Midwest tech business? Let me know so I can highlight it in a future newsletter. Email katie@centered.tech or connect on Twitter @centereddottech to share ideas

Today’s cleantech headlines:

  • Indiana nonprofit Energy Systems Network is partnering with the Indianapolis Motor Speedway to launch a $1.5 million prize competition for autonomous vehicle development. 37 teams from nearly a dozen countries are signed up to participate in the Indy Autonomous Challenge. (Business Wire)
  • A team of engineers at Purdue University has created hardware for AI processes that will consume less energy than traditional energy-intensive components. (Tech Xplore)
  • The U.S. Department of Energy’s Advanced Research Projects Agency-Energy (ARPA-E) is providing $4 million in funding for technology to tranform recovered plastics into fuel. ARPA-E expects to award between four and eight grants. (Resource Recycling)

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