Midwest investors don’t always seek the same innovations as those on the coasts.
Over the past few months I’ve talked with entrepreneurs about their early-stage startup successes and challenges, and securing funding was a frequently mentioned topic. I’ve already brought you their insight on funders’ risk aversity and equality issues in funding, and today I’m sharing their thoughts on learning your region’s tech niches.
A recent report from Crunchbase and Dundee Venture Capital found that startup activity outside of Silicon Valley has surged over the past decade. Capital investment in the “Mighty Middle” — 25 states in the center of the country outside of traditional coastal tech hubs — increased 247% in the past 10 years.
But each region or city has its own tech startup ecosystem. For example, a representative for Chicago nonprofit re:work told me they specialize in training candidates for tech sales positions, a sector with a strong local presence, as opposed to the West Coast’s reputation as an engineering hub. Another example is Minnesota’s reputation for its strong medtech community.
Entrepreneurs say it helps to know and, if possible, capitalize on the niches that the investors in your area are most likely to fund. That doesn’t mean funding is entirely unavailable to startups outside a region’s established tech specialty, but entrepreneurs with different specialties could have a longer funding process with more barriers to overcome.
- “I won’t say that there is no angel funding or there is no venture funding, but most people are really focused toward medtech, which has a long history in Minnesota,” said Deepinder Singh, CEO of 75F, a smart building control systems company I will highlight later this week. “In the early days [of building 75F], it was much harder to convince people to take a bet on a small company, especially in what is a relatively stodgy sector: IoT.”
- “I’m doing my best to educate the Midwest marketplace and Midwest investment communities because there’s no reason we cannot be a hub around cleantech/carbontech,” 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.
- “There are really only 20 to 50 VCs in the Midwest interested in what we’re doing, but if you go to the coasts there are hundreds of them,” said Tony Bergida, director of communications at Frosty Tech, an Overland Park, Kansas-based business that provides eco-friendly cooling solutions such as freezer gel packs, which I will highlight later this week. “The lack of funding makes it a slower process… but Kansas City really is a growing tech sector — a diamond in the rough… We’ve had success pitching to private investors in the area.”
Do have other insight about financing for Midwest tech business? Let me know so I can highlight it in a future newsletter. Email email@example.com or connect on Twitter @centereddottech to share ideas.
📊 SURVEY RESULTS: 71% of leading angel investors are still committed to investing in startups and creating jobs despite the difficulties the pandemic presents, according to results from a new survey from the Angel Capital Association, based in Overland Park, Kansas. More than 60% are still interested in funding a new startup, compared with 32% whose interest has lessened. (Angel Capital Association)
💰 FUNDING AWARDS: The Wells Fargo Innovation Incubator, which helps early-stage clean technology entrepreneurs, moved up its September funding awards to provide immediate support for cleantech startups affected by COVID-19. Three Midwest businesses and organizations are among the 18 awarded a collective $900 million: BRITE Energy Innovators, based in Warren, Ohio; Clean Energy Trust, based in Chicago; and Daugherty Water for Food Global Institute at the University of Nebraska. (news release)
🔀 CHANGING ROLES: Des Plaines, Illinois-based research, development, and training organization GTI has named Kristine Wiley director of its newly launched Hydrogen Technology Center. The center’s focus will be developing solutions for clean hydrogen, including the possibility of storing and transporting it via existing natural gas infrastructure. Wiley has nearly two decades of experience with GTI, including director of a research and development group focused on solutions for detecting and mitigating methane emissions in the natural gas industry. She previously held roles that worked closely with the energy industry on environmental issues. (GTI)
📂 PATENT FILING: Ford Motor Company filed a patent application for a device mounted on an electric vehicle that would encircle the entire vehicle with solar panels at the flip of a switch. Energy absorbed through the flexible panels would power the EV. The patent filing does not necessarily mean the innovation will come to fruition for commercial use. (Eletrek)