Will the Next Silicon Valley Be in the U.S. Heartland?
While traditional coastal tech hubs still dominate, rising venture activity in the heartland signals that America’s geography of innovation is the midst of change.
In the past decade, VC has broadened its reach beyond traditional hubs such as Silicon Valley and the Boston-New York-Washington Corridor, as significant startup ecosystems have popped up across the country’s midsection.
From Austin, Texas, to Columbus, Ohio, regions nationwide have invested significantly in developing robust ecosystems to support entrepreneurship. They are building the necessary infrastructure for startups and innovation by creating incubators, accelerators, co-working spaces, and other vital resources. According to the book Silicon Heartland by Rebecca Fannin, the number of institutional startup investors (such as VCs and angel groups) in smaller inland hubs tripled to 3,700 between 2011 and 2022. This extensive funding network and the associated infrastructure provide startups with essential guidance, mentorship, and resources, contributing to a substantial increase in venture investments in “middle America.” These investments nearly quadrupled to $20.2 billion, supporting the growth of nearly 18,000 startups in the heartland.
ABOUT THE AUTHORS
Ron Levin
Managing Partner, Seed FundRon has spent his career in a variety of entrepreneurial, leadership, and business development roles. He has been an angel investor and advisor to over a dozen technology startups. Ron was Co-Founder and CEO of TravelPerk, a VC-backed travel management platform that is now a “unicorn” company with thousands of employees and customers across the globe. Prior to TravelPerk, he started the B2B division of Booking.com and before that was a consultant with McKinsey & Co. Ron began his career at Lycos, one of the web’s pioneer search engine and web portals. Ron graduated from Babson College and received his MBA from Harvard Business School. He is the author of the impact-focused Higher Purpose Venture Capital Blog.
Ju'Quan Mills
Investor Relations ManagerJu’Quan is a graduate of Babson College, where he received a BS in Business Administration and a minor in marketing. Most recently, Ju’Quan had an internship as an Analyst for Providence Strategic Growth, a Boston-based growth equity firm. In his role as Investor Relations Manager, Ju’Quan supports the work of our fundraising teams for our venture funds. Ju'Quan is also a part of Alumni Ventures' Venture Fellow Program where he supports the work of the Sports Fund and Seed Fund.
Learn More About the Seed Fund
Invest in entrepreneurial companies at the earliest stage where the opportunities for value creation are typically highest and company valuations are usually at their lowest.
Max Accredited Investor Limit: 249
For early-stage startups, regions with a lower cost of living and more affordable operating environments present an enticing opportunity to stretch their limited funding further. States like North Dakota, Indiana, Arkansas, South Dakota, and North Carolina were ranked by Forbes in 2024 among the top states to start or run a business. These states offer a supportive regulatory environment, growing workforce, and low labor costs, making them attractive destinations for startups.
Universities in America’s heartland are playing a key role in the growth of their regional venture ecosystems, providing access to resources, talent, and domain-specific expertise. For example, WARF Ventures (Wisconsin Alumni Research Foundation) provides seed and growth funding to early-stage startups that are commercializing technology out of the University of Wisconsin-Madison’s Morgridge Institute for Research. WARF has invested directly in over 50 startups, holds more than 2,000 patents for campus discoveries, and licenses inventions to industry. About 600 miles northwest of Madison in Grand Forks, the University of North Dakota’s Center for Innovation has helped over 670 startups, which employ more than 6,000 people and have attracted over $140 million in investments. UNK is also home to Dakota Venture Group (DVG), the first completely student-run VC investment fund.
The COVID-19 pandemic accelerated funding flows into the heartland as the shift towards more remote and distributed workforces presented startups with an opportunity to transcend the limitations of traditional tech hubs and unlock a wealth of talent and resources that were previously inaccessible. According to Forbes, as of 2023, 12.7% of full-time employees work remotely, while 28.2% work in a hybrid model, and it’s projected that 32.6 million Americans will work remotely by 2025.
Webinar
Venture Investing in the Heartland: How the Midwest is Going from Rust Belt to Tech Belt
Presenters
Managing Partner, Seed Fund
CNBC Contributor and Author of Silicon Heartland
CEO and Co-General Partner of O’Leary Ventures
CEO and Founder of VeroSkills
Examples of the numerous successful companies that have emerged from non-traditional hubs across include:
- Duolingo (Pittsburgh): A language learning app that went public in 2021 and is now valued at over $7 billion
- Duo Security (Ann Arbor): A cloud-based, zero-trust security platform for all users, devices and applications, acquired by Cisco for $2.3 billion
- Arcadia (Denver): A climate-solutions data company that achieved a $1.45 billion valuation in 2022 following a $200 million funding round
- Equipment Share (Columbia, Mo.): A tech-enabled construction solutions provider offering an ecosystem of products and services for contractors, valued at $3.75 billion with plans to go public in 2025.
“Greatness Is in Our Backyard”
As venture capital firms seek to diversify their portfolios and tap into new markets, they are increasingly investing in startups in America’s heartland.
As the country’s most active VC firm, New England-based Alumni Ventures has invested nearly $150 million in these regions. AV portfolio companies include VeroSkills (Birmingham, Ala.), a workforce platform that retrains refugees around the globe into highly paid careers in AI, automation, and software engineering. Another portfolio company is Lessonly (Indianapolis), a cloud-based training and enablement platform acquired by Seismic in 2021. AV has also backed AIQ Solutions (Madison, Wis.), creating a faster and more comprehensive way to analyze multiple radiological images at one time; and Axiom Space (Houston), the leader in providing human spaceflight services now building the world’s first commercial space station.
Many prominent VC firms have made the Heartland their home, “looking for the billion-dollar opportunities east of the Rockies and west of the Hudson River,” as stated in the mission of Drive Capital of Columbus, Ohio, with its motto “Greatness Is in Our Backyard.”
O’Leary Ventures has taken a regional focus with its management of Wonder Fund North Dakota. Founded by Shark Tank’s Kevin O’Leary and renowned investor Paul Palandjian, the fund has partnered with North Dakota to manage a $45 million direct investment program aimed at bolstering economic growth throughout the state. According to Palandjian, North Dakota is a hotbed for entrepreneurship and innovation in multiple industries — from agriculture to defense technology to data centers and AI.
Another tailwind for Heartland investments is the Startup America Partnership. Led by Revolution (and AOL) founder Steve Case, the foundation has helped shaped government policies to cast a wider net in expanding access to capital and talent for entrepreneurs nationwide. Case has been a leading voice in advocating for policies that support the growth of startup ecosystems across the country.
“Great startups can be found everywhere, not just in Silicon Valley and entrepreneurs are building great companies in ‘Rise of the Rest’ regions across the U.S.”
— Steve Case, AOL Co-Founder, Revolution CEO, and author of The Rise of the Rest: How Entrepreneurs in Surprising Places are Building the New American Dream
Webinar
Venture Investing in the Heartland: How the Midwest is Going from Rust Belt to Tech Belt
Presenters
Managing Partner, Seed Fund
CNBC Contributor and Author of Silicon Heartland
CEO and Co-General Partner of O’Leary Ventures
CEO and Founder of VeroSkills
One of the most high-profile, high-tech Heartland investments this year came in May when Microsoft announced a broad investment package designed to strengthen the role of southeast Wisconsin as a hub for AI-powered economic activity, innovation, and job creation. These investments include $3.3B in cloud computing and AI infrastructure, the creation of the country’s first manufacturing-focused AI co-innovation lab, and an AI skilling initiative to equip more than 100,000 of the state’s residents with essential AI skills.
As venture capital continues to flow into these emerging regions, the future of innovation and entrepreneurship is being redefined, fostering economic growth and job creation across the country. The decentralization of startup ecosystems represents a seismic shift in the landscape of venture capital, democratizing access to opportunity and fostering innovation on a national scale.
Learn More About the Seed Fund
Invest in entrepreneurial companies at the earliest stage where the opportunities for value creation are typically highest and company valuations are usually at their lowest.
Max Accredited Investor Limit: 249
Sources:
WilmerHale Venture Capital Report 2023
Silicon Heartland: Transforming the Midwest from Rust Belt to Tech Belt by Rebecca A. Fannin
Bloomberg – A Closer Look at the Geography of Venture Capital In the U.S.
Forbes – Ranked: The Best States To Start a Business In 2024
Forbes – Remote Work Statistics And Trends In 2024
Elevate Capital – The Unequal Geographic Distribution of Venture Capital
Finta – Venture Capital Fundraising: Insights from the Q4 2023 Pitchbook-NVCA Venture Monitor Report
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