By Jason Tatge, Farmobile co-founder and CEO
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Savvy investors are turning their attention to the Midwest. Leading VC firms and investors are fleeing from the high prices, the groupthink, and the cutthroat competition of the Coasts and turning to the heart of the United States for their next moonshots.
And yet, the Midwest attracts just 7% of VC capital, a tiny piece of the total available pie, especially given how expansive the Midwest is. While there are challenges, I believe the greatest untapped investment opportunity is right here in the breadbasket.
A Sales Pitch on the Midwest
We have extraordinary institutions here in the Midwest that catalyze high-quality startups and technology breakthroughs. The resources that have sprung up just in the last 10 years have been astounding. The industries here are all ripe for disruption.
Some of those include: Steve Cases’ Rise of the Rest Fund, Pipeline, a fantastic fellowship of Midwest entrepreneurs, and, Drive Capital, a VC firm that takes bets on companies in the Midwest. And lets not forget the Kauffman Foundation, which has been empowering entrepreneurs in the Midwest and beyond since 1966.
We also have great examples of successful technology companies with extraordinary staying power – from BATS Global Markets, the stock exchange that in 2012 accounted for 10-12% of all U.S. equity trading to Cerner, the largest independent health IT company in the world. We have our own startup unicorns, too: Root Insurance (Ohio), Uptake (Illinois), and Duo Security (Michigan, acquired by Cisco) have all reached $1B+ in valuation.
These companies are creating billions of dollars of value and attracting some of the world’s best talent to places like St. Louis, Kansas City, Champaign, Omaha and Columbus.
Speaking of attracting talent, the Midwest has one of the densest clusters of top-tier universities in the country.
Harvesting The Opportunity
As the proud founder of a Kansas City-based startup, I can’t help but think this is only the beginning. The Midwest is the proving to be an investors dream; the prime opportunity for investment.
Outside of the basic economics, there are business model benefits unique to our region that may not be immediately obvious, but play a huge role in why Midwest startups are able to do more with less.
First and foremost is our proximity to customers. 60% of American consumers live in the “New Heartland.”
In the case of my company, Farmobile, we’re able to be on our customers’ farms every single day. We’re within a day’s drive of 80% of our potential customers. This gives us a constant, rapid feedback loop that would be very hard to achieve elsewhere. Instead of getting stuck in our own echo chambers, we’re out in the fields every single day. We’re in the early days of digitizing agriculture, so being close to the customer is even more important than it is in other more established industries.
Secondly, we are digitizing traditional industries like healthcare and agriculture and city infrastructure. It feels like we’re in the early days of the internet, where entire new industries sprouted up in the course of a few short years. It’s the early days of a gold rush.
For example, at Farmobile we’re creating a new data economy. We’ve developed a marketplace that recognizes the value in the data that farmers collect on their fields every day and rewards them for it by making it an asset they can license to buyers over and over again.
It’s a compelling model for investors because the downstream opportunities for a data set this huge are limitless. Data like ours is going to help us figure out how to feed a growing planet, and we’re finding ways to do it while helping farmers improve their operations and generate a predictable revenue stream.
This has never been done before in our industry, but we have models to inspire us. In our case, it’s akin to what happened when music went digital and artists began receiving royalties for their music each time it was streamed.
We are able to de-risk huge leaps like that because we have the learnings from other industries who have come before us to build upon.
Stop In and Stay Awhile
There is plenty of room for investors who want in. Frankly, we’re fairly saturated at funding levels between seed and Series A. Where there is the biggest gap – and the greatest opportunity – is in the Series B and C stage, when companies are growing quickly, generating revenue, and scaling in a big way.
I think we’ll impress you with how much we can get done with relatively little funding. Companies in the Midwest have the lowest equity funding with the highest median exit. The bang for your buck is unmatched.
If you’re an investor scouting out your next deal, stop by and stay a while. We’re pretty friendly, and I think you’ll be surprised at that hidden talent and enormous value you’ll find here.