The American Midwest has a long history of making stuff. During the 20th century, it was the manufacturing center for the nation, and indeed much of the world. It’s still where a surpassing majority of agricultural commodities are grown and processed. But is it also a major producer of technology startups? Maybe not as much as the coasts, but the Midwest’s bustling metropoli and vast expanses of rural land prove to be fertile ground for quite a bit of startup activity.
And that’s what we’re going to take a look at here. In a similar vein to our recent analysis of startup fundraising in the South, we’ll break down the region into its constituent parts, assessing deal and dollar volume trends in the Midwest’s two primary sub-regions, some of its individual states and the most active metropolitan areas in the U.S.’s midsection.
And, to be clear, this is not Crunchbase News’s first foray into the region. We’ve covered the region’s seed-stage interest in AI and hard tech, a few notable rounds and have always included the Midwest in all manner of data-spelunking expeditions. And to this, we’ll add a deep dive into the numbers.
Borders and boundaries are a deep well of disputes. To preempt debate, we use the U.S. Census Bureau’s definition of the Midwest region which, unlike its definition of the South, shouldn’t be too controversial. If you have something against Kansas or Ohio being included in this group, take it up with the Feds.
The good folks at the Census Bureau split the Midwest into two distinct — and rather unimaginatively named — sub-regions: the West North Central and East North Central states, which are separated by the Mississippi River. We’ve included the map below.
By splitting the Midwest into two distinct parts, we’ll be able to see where most of the startup and funding activity is concentrated. Spoiler alert: The farther west you go, the startup population (and the population itself) grows more scattered.
Based only on reported data in Crunchbase, the Midwest appears to be affected by the same phenomenon as the rest of the country. Crunchbase News has previously found that the number of seed and early-stage deals has gone off a cliff in the U.S., resulting in a top-heavy market featuring many large, late-stage deals. And this wouldn’t be a problem if it weren’t for a shortfall in new startups to fill the next cycle of early-stage funding. The “hollowing out” of the Midwestern venture deal pipeline becomes readily apparent when you look at funding data for the past several years, which you can find in the chart below.
To wit, deal volume is down markedly since 2014, as Crunchbase News reported in its Q4 2017 report of startup funding activity in the U.S. and Canada. But somewhat counterintuitively, the amount of money being invested into startups is on the rise in the Midwest and throughout many other parts of the country, reaching fresh multi-year highs in 2017. Almost one full quarter into 2018, the trend appears to continue unabated.
But this chart abstracts away a lot of nuance, so let’s take a closer look at the region and its states.
We’ll start first with deal volume, because that’s a fairly decent indicator of a geographic region’s level of startup activity. Below, we’ve plotted venture deal volume, divided by sub-region.
Again, based on the reported data from Crunchbase, we found that deal counts have been on a downward trend for several years. And though some of this may be attributable to reporting delays, projected deal volume data for the whole of the U.S. and Canada (fourth chart down in the Q4 quarterly report) shows a years’-long downtrend. There’s no reason to believe that startup activity in the Midwest is materially different from the rest of the U.S. and Canada.
But what about the relative “balance of power” between the two sub-regions? At least when it comes to deal volume, has one sub-region waxed while the other waned? To a limited extent, the answer is yes. Between 2012 and 2017, the percentage share of all Midwestern dealflow going to West North Central states like the Dakotas, Minnesota and Missouri has grown from 25.4 percent to 31.2 percent, up by nearly one-fifth in relative terms.
Now let’s check out dollar volume. The chart below displays aggregate reported venture capital dollar volume raised by startups in the Midwest.
As far as the amount of money Midwestern startups have raised over time, the trendline is generally up and to the right. But that’s not the only way this differs from the deal volume data we looked at earlier. For dollar volume, there appears to be no appreciable change in the “balance of power” between the two sub-regions since 2012. Depending on the year, East North Central states like Illinois, Michigan and Ohio raked in between 70 and 78 percent of total dollar volume, but that variance doesn’t appear in an orderly trend.
We started first at the regional level, then compared smaller groupings of states. Now, let’s see how deal and dollar volume is distributed on a state-by-state level. Doing so will point to the states that lead the region in venture-backed startup activity. Below, you’ll find a chart of how deal volume is split between the top five Midwestern states.
And here is how dollar volume is distributed.
As we saw with our analysis of the South, the top five Midwestern states for deal volume are the same five top-ranked states for dollar volume. But there is some notable variation in how these states rank among each other and the amount of deal and dollar volume they account for.
Considering that Illinois is home to Chicago and a number of downstate universities with deep tech startup roots, the fact that it places first for both metrics shouldn’t come as much of a surprise.
What might be more of a head-scratcher is Minnesota, which ranks third in deal volume but second in dollar volume. Why does it switch places with Ohio? The answer could lie in the industrial mix which, in the case of Minnesota, includes a disproportionately high number of medical device and other life sciences companies, which typically take a lot of capital to get off the ground.
Longtime readers of Crunchbase News may remember a ranking of Midwestern startup cities we wrote back in August 2017. However, here we’re just focusing on deal and dollar volume over the past 15 months, since the start of 2017.
Let’s start first with the top 10 Midwestern cities as measured by number of startup funding rounds.
And in the chart below, you can see the top cities, as ranked by venture dollar volume, from the same period of time.
In both rankings, four of the top five cities are the same, but the odd one out appears to be Columbus, Ohio. Although there were a fairly large number of rounds raised by startups in that metro area, most of the rounds were fairly small by national standards. And one of the main reasons why Kansas City, Missouri jumped so much in the dollar volume rankings was a $100 million Series F round raised by C2FO.
But, again, as far as the Midwest goes, everything pales in comparison to Chicago alone.
For many, the Midwest is in a kind of Goldilocks zone. The East and West coasts seem to hold more or less equal sway over the culture and economy and most of its cities are neither too big nor too small. The only extreme it seems to occupy is its winter weather.
Source: TechCrunch
The 24-foot dinosaur is really extinct after an accident sizzles him down to a frightening charred skeleton.
Source: CNET
A look through the lens of a young Atlanta-area photographer who took part in yesterday’s demonstration.
Source: Wired
After weeks of speculation, Uber has concluded a deal that will see it sell its business in Southeast Asia to local rival Grab . The company plans to announce the agreement this coming week and potentially as soon as Monday, two sources have confirmed to TechCrunch.
Full details of the arrangement aren’t fully clear at this point, but TechCrunch understands that Singapore-based Grab will take over Uber’s ride-sharing in the eight markets in Southeast Asia where it is operational. It will also take ownership of Uber Eats, which is available in Thailand, Malaysia and Singapore. Bloomberg reported today that Uber will take 25-30 percent equity in Grab in exchange.
Both Uber and Grab declined to comment when contacted separately for comment.
The successful conclusion of negotiations comes less than two months after SoftBank, an early investor in Grab, secured a long-drawn-out deal to become an Uber shareholder.
SoftBank is thought to have favored consolidating Uber’s businesses in emerging markets, with Southeast Asia — a loss-making geography for all — one of its apparent targets. That’s despite significant growth potential as more of the regions 600 million consumers come online for the first time.
Revenue from taxi apps is said to have more than doubled over the past two years to cross $5 billion in 2017, according to a recent report co-authored by Google. The industry is expected to reach $20 billion by 2025, the same report found.
Uber previously exited China in 2016 after striking an equity exchange deal with Chinese market leader Didi. The U.S. firm also quit Russia last year after it sold its business in the country to local rival Yandex.
Unlike those two deals, however, Uber had held a decent position in Southeast Asia in recent times although it appeared to lose considerable market share last year. Issues inside Uber, including the resignation of founding CEO Travis Kalanick and investor squabbles, seemed to divert its attention away from Southeast Asia. All the while, Grab marched on and it notably refueled its tanks with over $2.5 billion in additional funding from investors.
Grab isn’t the only rival in Southeast Asia, however. Go-Jek leads the Indonesian market and it recently gained the backing of Google, JD.com and Tencent at a valuation of some $5 billion. Despite winning in Indonesia, Southeast Asia’s largest economy and the world’s fourth most populous country, Go-Jek is yet to venture overseas. This Uber-Grab consolidate certains gives it a good reason to expedite those plans.
Source: TechCrunch
Facebook chief calls scandal a “breach of trust” and outlined preventative steps the company is taking.
Source: CNET
Adrian Lovett, the Web Foundation’s new CEO and president, says we shouldn’t take the good things about the web for granted — we should fight for them.
Source: CNET
Money, speed, and prestige are the hallmarks of auto racing. Take all that away, and you get Norwegian bilcross.
Source: Wired
Facebook chief Mark Zuckerberg has taken out a full page ad in the Washington Post, the New York Times, the Wall Street Journal and six UK papers today to apologize Cambridge Analytica scandal, according to CNN’s Brian Stelter.
The ad starts in bold letters, saying:
“We have a responsibility to protect your information. If we can’t, we don’t deserve it.”
The ad was published on Sunday, following Zuck’s first public acknowledgement of the issue on Facebook and a subsequent media tour earlier this week.
Congress has also put Mark Zuckerberg on notice to potentially come speak with them, with Senator Kennedy of Louisiana encouraging Zuck to “do the common sense thing and roll up his sleeves and take a meaningful amount of time talking to [them].”
For those of you still unsure what’s going on with Facebook and Cambridge Analytica, you can see a full play-by-play here.
Here’s the full transcript from the print ad:
We have a responsibility to protect your information. If we can’t, we don’t deserve it.
You may have heard about a quiz app built by a university researcher that leaked Facebook data of millions of people in 2014. This was a breach of trust, and I’m sorry we didn’t do more at the time. We’re now taking steps to make sure this doesn’t happen again.
We’ve already stopped apps like this from getting so much information. Now we’re limiting the data apps get when you sign in using Facebook.
We’re also investigating every single app that had access to large amounts of data before we fixed this. We expect there are others. And when we find them, we will ban them and tell everyone affected.
Finally, we’ll remind you of which apps you’ve given access to your information — so you can shut off the ones you don’t want anymore.
Thank you for believing in this community. I promise to do better for you.
Mark Zuckerberg
Source: TechCrunch
Increase your total baggage awareness with some technologically enhanced luggage.
Source: Wired
Earlier this year, the business community received a wake-up call issued with all of the might that $6 trillion can muster.
The call came from Laurence Fink, the founder and chief executive of the global investment firm, BlackRock, and was delivered as a letter to the CEOs of the world’s largest companies.
Aptly titled, “A Sense of Purpose,” the letter informed business leaders that driving record profits is no longer enough to garner BlackRock’s support. Companies must also positively contribute to society, or in Mr. Fink’s words, “Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.”
I was elated when I read the letter. I’ve spent my entire career as a social entrepreneur advocating for businesses—specifically technology businesses in Silicon Valley—to use their technology, wealth, and influence for social good. After reading the letter in the New York Times and seeing the extensive coverage in major business publications, I turned to the leading Silicon Valley tech blogs to get their take on this blockbuster announcement. After all, the Bay Area is home to many of BlackRock’s largest clients.
Crickets. Fink’s letter wasn’t covered by the technology press. Well, to be accurate, I checked the first ten pages of Google results as well as all of the tech pubs in Techmeme’s top ten list. Nothing.
Guys (I hate to say it, but it’s mostly guys here in the Valley), Fink’s point is that ignoring society’s voice will lead to the loss of our “license to operate.” Putting the Valley’s collective hands over our ears and saying “we can’t hear you” only works for so long.
Instead, what if Silicon Valley embraced the letter to commit good for the better of society as a whole, not just the interests of the software and data industrial complex? What if Fink’s letter served as a constant reminder to build products that make the world a 10x more equitable place to live and prosper and not just to build products that deliver 10x profit?
With those questions in mind, here are two interrelated and crucial ways to commit good on purpose while making sure Silicon Valley technology companies embrace “A Sense of Purpose.”
Put People Before Algorithms. The goal of algorithms must not be to replace, manipulate, or deceive in the name of profit. This is all too often the case as black-box algorithms use massive amounts of data to attract eyeballs, encourage clicks, and, in more dire circumstances, even determine if someone goes to prison.
We must always ask up front how unaccountable algorithms impact individuals and society as a whole. Instead of eyeballs, clicks, and even prison time served, algorithms should be optimized to make people better—more efficient in their jobs, more informed in their daily lives, and more connected to their communities. We must make a cognizant effort to analyze and identify the risks of algorithms-gone-rogue before they result in disasters. Let’s not only ask, “How can we make more money?” but also, “What could go wrong?”
Risk-benefit analysis already takes place around boardroom tables by those with monetary interests, but those conversations fail to include the diverse voices of the communities that will feel the decision’s impact. There will never be perfect clarity around what will unfold after a decision is made. That’s exactly why decisions that impact thousands, millions, and even billions of people must include all company stakeholders—shareholders, employees, customers, and the communities in which they operate—if we are ever to prevent a world where algorithms reign supreme in the name of profit.
Treat Diversity as Our Greatest Asset. It’s very easy to discount points of view, values, and even someone’s humanity when the voice of diversity is not present. Establishing diversity as a core company principle is a good start, but it’s not enough. Diversity must be omnipresent and it must be truly embraced across an organization as an asset, not a statistic.
Many in Silicon Valley will tell you that diversity has been a top priority for years, only to follow with reports that cite a 2% increase in women employees, 0% increase in black employees, and no data at all on the number of employees with disabilities. Let’s not conflate transparency with priority. We must increase diversity now while investing in STEM education and training to create a more diverse pipeline of workers for tomorrow’s technology jobs. By making the workforce of today and tomorrow more diverse, we make our communities more diverse. We are then one step closer to never discounting a point of view, value, or someone’s entire humanity due to a lack of voice.
It’s not too late to use Mr. Fink’s letter as a wake-up call for Silicon Valley to commit good on purpose. While the two proposals detailed in this article are aspirational, they have at their core something much more valuable than $6 trillion. These ideas are about regaining Silicon Valley’s conscience. They are about investing in a collective future that prizes diversity and equality, not a future that allows technology, data, and algorithms to further entrench the inequality that we face today in Silicon Valley and everywhere that feels our impact.
Source: TechCrunch