Access to venture and growth capital is one of the biggest impediments to Midwest entrepreneurs and start-up companies. While there’s a plethora of venture capital on the East and West coasts, accessing capital for growing companies, including tech companies, in the Heartland has been a perennial challenge.
Indiana in 2021 ranked 30 out of the 50 U.S. states in terms of venture capital raised, according to research firm Statista. While Indiana tech companies brought in a record level of venture capital in 2021, the total is still less than 10% of the amount raised in big tech regions on either coast.
The dilemma has given rise to organizations and initiatives such as Steve Case’s Rise of the Rest, an initiative to accelerate the growth of tech start-ups in the Midwest and other underfunded areas.
Several Indiana companies over the years have benefitted – and even gained funding – through that initiative. While software and other companies in central Indiana are gaining some traction with investors, start-ups in outlying areas still face serious funding challenges.
Fort Wayne and Allen County officials are addressing the challenge head-on.
Greater Fort Wayne Inc. and Allen County Together have set a community goal to launch a $10 million venture fund and accelerator by 2026 to help address a lack of venture capital investment in Northeast Indiana. The fund will be housed at Electric Works and enhance Allen County’s ecosystem for entrepreneurs. The intent is to grow the fund to $25 million by 2031.
John McDonald, a long-time Indiana tech sector leader and managing entrepreneur of Indianapolis-based Next Studios, said the move is a big step forward for an area with a tech and entrepreneurial scene that is poised for take-off.
“One thing we’ve learned in working with start-up founders all over our state is the need to first address the capital availability problem,” McDonald begins. “Great partners like the Kosciusko County Economic Development Corporation, the Northeast Indiana Innovation Center, the Don Wood Foundation and STAR Financial Bank have shown us all the incredible innovation that is coming from Northeast Indiana.
“As every Indiana Chamber member knows, key to our success in the digital economy is innovation, and this new initiative from our friends at Greater Fort Wayne and Allen County Together in building a local capital base is a key in the lock for the region’s future development as an entrepreneurship hub for the Midwest and beyond,” he adds.
The state of Indiana has efforts to bolster available venture capital. Notably, it launched Elevate Ventures, a non-profit organization that serves as a venture capital firm for the Indiana Economic Development Corp., the state’s public-private job-creation agency. Since its inception in 2011, Elevate Ventures, the venture development partner of the state of Indiana, has invested nearly $136 million in 468 companies, leveraging an additional $1.7 billion from private sources. But cities and regions around the state are increasingly recognizing more needs to be done.
Fort Wayne officials said this initiative is a long time coming.
“We’ve had a lot of conversations about how to increase entrepreneurial activity within the community,” offers Greater Fort Wayne Inc. CEO John Urbahns. “A key barrier for that has always been funding for start-ups to try and scale up and grow. Venture capital funding was an area that we really identified going through our process. We need to make sure that we create funding mechanisms in our community to help companies grow and scale up.”
Urbahns notes that entrepreneurs that don’t find the resources they need in the area pack up and move to where there are more resources. Other Midwest cities have started to fortify their access to capital, he adds, and if cities like Fort Wayne don’t act, they risk falling further behind. Already in neighboring Michigan, Grand Rapids has a $25-million venture capital fund and Kalamazoo has started a $50-million venture capital fund – all with the purpose of helping entrepreneurs scale.
“My contention is that if (entrepreneurs and start-ups) are not going to find the funding here, they’re going to go somewhere else to do it, whether it be Kalamazoo, Grand Rapids, Fishers, Indianapolis, etc.,” Urbahns concludes. “And if they take off and start to grow, are they coming back? Or do they stay where the funding is?”
