A carpe diem call to action for Midwest tech entrepreneurs and investors
There are great entrepreneurs and great companies everywhere. Including in Middle America. In cities such as Indianapolis, Louisville, Lexington and Cincinnati, there are emergent entrepreneur-led ecosystems. A growing contingent of investable opportunities continues to build, but venture capital formation in Middle America has not matched supply and demand. This market imbalance has created an opportunity gap with meaningful financial upside.
Encouraging outside capital (namely from “the coasts”) is an important but one-way strategy. More than 75 percent of venture capital is deployed in just three states – California, Massachusetts and New York. But 75 percent of the nation’s gross domestic product is outside those states. It is time to invest in ourselves.
As the demand side and supply side converge, this delta represents an opportunity to invest in Middle American companies, participate in their growth and be a value-add venture partner on the ground to entrepreneurs and peer investors alike.
We saw disruptions in 2020 and 2021 that serve as an accelerant for investment, talent and entrepreneurial activity in Middle America. The coasts are taking note of these changes in behavior and the collapse of geographic barriers to capital. In a blog post, famed venture capitalist Fred Wilson calls it the “Rise of Everywhere” and says these changing dynamics will create “…a massive increase in the geographic range of where investors can and will invest.”
Drive Capital in Columbus, Ohio, was founded by ex-Sequoia partners who said in TechCrunch: “The most ‘compelling emerging market” may be America, outside Silicon Valley.” A New York Times article headlined: “They Can’t Leave the Bay Area Fast Enough” says “the Bay Area’s latest tech era is ending for a growing crowd… They have suddenly movable jobs and money in the bank – money that will go plenty further somewhere else.”
AOL Founder turned venture capitalist Steve Case launched the Rise of the Rest venture fund and platform around this very theme, and Lightship Capital’s $50 million fund to invest in minority and female entrepreneurs in the Midwest further punctuates the case.
We believe there will never be less opportunity; there will only be more. There will also never be less technology in Middle America than there is today; there will only be more.
This wave of technology is clearing barriers to entry and empowering a generation of entrepreneurs who (along with those who follow) will build the great businesses of our future. Many will do so in Middle America. It makes imminent sense to invest in these unknown and fast-growing opportunities ahead of the curve.
We have lived and watched these dynamics unfold in Middle America and around the world as entrepreneurs ourselves and through our work with Endeavor, which operates in 40 countries and 8 U.S. markets. In 2021 alone, Endeavor Entrepreneur-led companies provided more than 3.4 million high-quality jobs and generated more than $42 billion in revenue.
Endeavor’s global venture fund, Catalyst, currently has approximately $500 million under management and a portfolio of more than 50 “unicorns” – companies valued at more than a billion dollars. Regionally, Catalyst has invested in SkuVault, LISNR, AppHarvest (APPH on NASDAQ), and SoLo Funds. Beyond Catalyst investees, Endeavor supports founders of growth-stage companies across the Midwest – including El Toro, Casted, RxLightning, PERQ, Cloverleaf, Interapt, Demandjump, BehaVR, Handle Global, and many more.
As the entrepreneurs and networks in growth markets mature, the natural result is the emergence of regional venture capital. In Latin America, the co-founders of Mercado Libre (MELI on NASDAQ) formed Kaszek Ventures ($2 billion assets under management), while in the Middle East/North Africa, the founder of Aramex formed Wamda Capital ($125 million assets under management). The founders of ExactTarget exited to Salesforce for $2.5 billion and launched High Alpha in Indianapolis, which has nearly $250 million assets under management and has launched 27 startups from its venture studio.
It is no coincidence that these funds have become some of the most active and successful investors in their respective markets. We understand these trendlines: what is emerging in Middle America is no different. The multiplier effect of more venture capital in the Midwest drives job creation, wealth creation, and inspiration for entrepreneurs to build here.
Middle America presents an exceptional pipeline for venture growth investments in the U.S. and certainly in Indianapolis, Louisville, Lexington and Cincinnati. These companies often have strong growth, revenues and are looking to expand. The technologies have massive market potential. For far too long our community has passively let venture capital firms from the coasts reap the benefits of investing in our very best companies. Our opportunity is to invest in ourselves and participate in these outsized market opportunities.
Being on the ground and early movers in Middle America is a superpower. It provides deal flow, networks, and opportunities others often don’t see or understand so precisely. Fast growth venture-backable companies and entrepreneurs are becoming ever more prevalent.
There will never be less; there will only be more.
You can accept the present or you can breakthrough, invest, and define the future. It is time for our community to invest in our entrepreneurs, rightfully participate in the returns and build the future.
Endeavor is the world’s leading community of high-growth entrepreneurs with a mission to unlock the transformational power of entrepreneurship by selecting, supporting, and investing in the world’s top founders.
Endeavor Catalyst is the rules-based, co-investment fund of Endeavor, set up to exclusively invest in Endeavor Entrepreneur-led companies.