Midwest Entrepreneurial Ecosystems: A Look at Michigan and Ohio

How established is the venture capital industry in the Midwest, outside of Chicago? Turns out, quite a bit, especially if you look at states like Ohio and Michigan.

In 2019, Ohio businesses raised more than $961 million (No. 16 nationally) through 147 deals, while Michigan saw $771.6 million (No. 21 nationally) through 115 deals.

As a whole, the Midwest is an ideal place to invest. The Brookings Institution asserts that Midwest states have “innovation horsepower, punching at or above their weight on key metrics that drive new business formation.” At the same time, the Chicago Council on Global Affairs calls out Midwest communities for “successfully (evolving) from their industrial and farming roots and … winning in today’s globalized, tech-based and knowledge-driven economy.”

For now, let’s look at a few ways Michigan and Ohio have gotten to where they are. You should note that it’s not about the size of the states; rather, it’s about these states having internal collaboration, creating momentum and putting the pieces together.

Corporate Engagement

In July 2019, Cincinnati syndicate fund Cintrifuse raised $56 million in its second strategic fund, with participation from corporations such as Procter & Gamble, Scripps Media Inc. and the Kroger Co. The fund provides exposure to a network of more than 700 venture capital fund managers and thousands of startups.

Major companies looking for innovation have turned to Renaissance Venture Capital, a fund-of-funds in Michigan and the largest of its kind in the United States. For every $1 Renaissance has deployed, it has helped attract $17, or a total of $1.3 billion of investment, back into Michigan.

Strength of University Assets

The Ohio IP Promise was created in 2019 to make universities more attractive to innovators and entrepreneurs. It brings together the state’s higher education institutions to provide a unified process for the commercialization of research.

Michigan has the Michigan Translational Research and Commercialization (MTRAC) program, which was started to move technologies from universities into the commercial market. Through 2018, MTRAC has funded 159 projects and secured $130 million in follow-on funding.

State Assistance

Ohio has a state-run economic development initiative called Ohio Third Frontier, which has deployed more than $1 billion since 2002. It also has supported seed-stage investors such as CincyTech in Cincinnati, Rev1 Ventures in Columbus and Jumpstart in Cleveland.

The Michigan Strategic Fund has broad authority to promote economic development and create jobs. For example, it has provided grants, loans and other economic assistance to high-tech, second stage companies in the state.

Established Trade Associations

Along with an established venture capital industry comes established trade associations. VentureOhio hosts an annual dinner that recognizes stars of its industry (e.g. “Entrepreneur of the Year”) and puts together an annual report on investment activity. Its CEO even testified before Congress to make the case for reviving entrepreneurship through tax reform.

Similarly, the Michigan Venture Capital Association hosts events (including the Midwest Growth Capital Symposium) and provides research on the venture capital industry. The association also boasts a Venture Fellow program to increase the number of venture professionals in Michigan.

The established system these states have in place shows what other states need to do to grow their own venture capital industry.