Why VCs shouldn’t be so quick to dismiss Heartland startups

October 20, 2017

Excerpt from "Why VCs shouldn’t be so quick to dismiss Heartland startups," published on VentureBeat, October 19, 2017.

A doctor in Boston touches a screen to assess a patient’s infection risk. A banker in New York wires $1 million to London with a few keystrokes. A student in San Francisco cracks her first quadratic equation on a tablet.

And they all did it with software from … Wisconsin.

Most people are surprised when we mention these examples of high tech from the Heartland, because the story of American entrepreneurship has shifted overwhelmingly to the coastal tech hotbeds in California, Massachusetts, and New York.

But Wisconsin — home to banking software giant Fiserv, hospital electronic medical record innovator Epic Systems, and academic software leader Renaissance Learning — reminds us that the Heartland of our country has a thriving entrepreneurial culture stretching back generations.

Those of us who have been working with these companies for 25 years know what’s driving these founders and how they’re building their companies, oftentimes with little to no institutional capital until a very late stage.

In fact, the disparity in venture funding is enormous. The 12 states that comprise the American Midwest, as defined by the U.S. Census, have a combined population of close to 68 million people — not much different than California, Massachusetts, and New York, which collectively have about 66 million residents. Yet despite population parity, the Midwest captured just 5 percent of the $69.1 billion of venture capital deployed throughout the U.S. in 2016, according to the National Venture Capital Association 2017 Yearbook. The three leading tech states claimed 74 percent.

Nevertheless, a steady stream of successful IPOs proves that the Heartland is forming companies without a heavy reliance on venture capital. The flow of public offerings includes Workiva (Iowa), SPS Commerce (Minnesota), Paycom (Oklahoma), BATS Global Markets (Kansas), Paylocity (Illinois), ExactTarget (Indiana), Grubhub (Illinois), and Vantiv (Ohio).

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