The Rise of Tech Ecosystems in the Midwest and Southeast

Over the years, most of the technology revolution led companies to the Western United States, as many people flocked to Silicon Valley to start their ventures. However, all that is slowly changing, as new venture capitalists in smaller American states are directing their focus towards other regions in the US, particularly the Midwest and Southeast. Although the hub of innovation is still Silicon Valley, many investors are discovering opportunities beyond it.

Several large-scale corporations and well-known businesses are also backing this revolution and looking to spearhead the movement to fund some of the country’s most undervalued yet promising tech businesses.

Renewed Interest by Local VCs

One of the biggest reasons for the rise of tech ecosystems in the Midwest and Southeast is because venture capitalists in the smaller cities are choosing to fund local and homegrown businesses that are innovating or showing promise. Several new venture funds, such as High Alpha and Drive Capital have funneled money into businesses that most investors have overlooked, i.e., startups and firms that fall out of the supposed ‘tech’ radius.

There are many rising ecosystems in cities like Atlanta, Chicago, Columbus, Cincinnati, Louisville, Indianapolis, Miami, and several others. One of the biggest advantages of building in these regions is that these companies don’t need to raise as much money as companies in the larger cities do.? Combined with a remote work environment, this is leading to ecosystems forming? with other companies also sprouting up in the same locality.

Win-Win Situation for VCs and Startups

Another trend that has boosted the tech ecosystem in the Midwest and Southeast is that of larger companies and corporations deciding to move inwards and moving their operations to smaller cities. The main reason behind this is the lower cost of doing business in these regions, as well as a lower capital requirement for scaling up the business.

In the larger cities, particularly those that are saturated with tech companies, there is very high competition, and the rising real estate prices make things even more challenging. Add to that the possibility of working remotely, and you don’t have to set up your office on the West Coast just because everyone does it.

Several investors are now focusing their efforts on markets outside of the coasts and looking into these markets for an opportunity.??

Midwest Startup Acquisitions and IPOs

Another reason why the tech ecosystem in the Midwest and Southeast is booming is thanks to a large number of acquisitions and successful IPOs that Midwest-based startups have experienced, such as Duolingo. With their headquarters in Pittsburgh, the best language-learning app in the world, they managed to go public in July 2021 with a valuation of $3.7 billion. Another tech company in the Ohio region, Root Insurance, went public in late 2020 with a $6.7 billion valuation in their IPO, and Detroit-based Benzinga was acquired by Beringer Capital for $300 million.

Momentum is growing and scaling in these markets very quickly as they are attracting talent, startups, and investors.?