In 2018, it’s amazing that the Midwest being the most profitable region for startups isn’t the most surprising thing of the year. Crunchbase News released a research article recently describing this point with nice graphics included. Crunchbase focused their findings to include analysis on “a very special subset of Crunchbase data, only analyzing startups with reasonably complete funding histories and known valuations at time of exit. To be counted as “complete,” startups with recorded pre-Series A (seed, angel, convertible note rounds) or Series A rounds of known size, for which the size of any subsequently-raised venture round is also known, are included.”
According to Crunchbase, the Midwest has the fewest recorded exits but produce consistently better results from a multiples on invested capital (MOICs) standpoint. This includes the South, West, and Northeast US regions. Below is a good snapshot of just how well the Midwest does versus other regions.
As you can see, despite the Midwest having the least amount of total equity (by far), the region is still able to make out head of its counterparts in terms of Median Exit Valuation. With such a low number (the Midwest is actually less than 13% of the total number of West coast startup exits), there is still a bit of question if, with more funding this large median exit would continue. Regardless these numbers are impressive and at minimum should have more people looking to invest in Midwestern companies.
Lastly, according to Crunchbase the top city for startup exits (matching the Midwest narrative) was Chicago, IL with a 4.81X median MOIC. With 20 startups coming from the area it is a much smaller example than SF Bay area (with 386), but right on par with Austin (26). Unbelievably despite its almost two times MOIC when compared to Austin, it does not get the same respect.
With this new dataset hopefully more diversity will be given to startups outside the west and east coast areas with more research done in the Midwest. For now it appears the region is a largely untapped market that could result in billions.