For those curious about building a startup in Minnesota and Ohio over California and Texas, Midwest Startups presented by M25 has released its annual Best of the Midwest Startup Ecosystem Rankings. The list includes 64 cities across the region, ranked on their respective startup activity, access to resources and business climate.
This year, Lincoln ranked 13th with a total score of 26.4. Omaha ranked 16th and had a total score of 24.5.
The top five cities by rank, including their total scores, were:
- Chicago, Illinois (60.6)
- Minneapolis, Minnesota (38.9)
- Pittsburgh, Pennsylvania (36.8)
- Columbus, Ohio (34.5)
- Indianapolis, Indiana (34.3)
Last year, Lincoln surpassed Omaha, with the capital ranking 15th and the state’s largest city ranking 16th. These placements spoke to larger discussions among ecosystem stakeholders over whether or not Omaha and Lincoln should be considered one giant hub to increase the state’s reputation — rather than two individual communities.
“This might be the hardest pair of cities in the whole ranking to cleanly separate,” M25 Founder and Managing Partner Victor Gutwein said in an email to SPN.
M25 is a venture capital firm based in Chicago. It prioritizes investing in early-stage tech startups headquartered in the Midwest. It has gotten involved in the Nebraska startup ecosystem through investor-focused programming and investing in local startups, such as Immigify, Workshop and Opendorse.
The firm runs Midwest Startups to provide support and context to the larger Midwest startup ecosystem. Rankings go back to 2017 and pull from sources including PitchBook, the U.S. Census and U.S. News and World Report. The weighted calculations derive from 25 variables, such as startup density, number of exits, number of investors and cost of living.
“Combine Lincoln and Omaha and the joint metro lands in our top ten,” Gutwein said. “But a startup can only pick one city, and once you look at what’s actually driving the numbers, these are genuinely two different ecosystems.”
He emphasized that the placement of cities on the list doesn’t necessarily reflect how much an ecosystem has improved over the previous year. Rather, cities could experience strong advancements but remain at a lower rank for startup creation and growth in comparison to other hubs.
“Omaha isn’t declining — it’s still the top-ranked city in its own peer group,” Gutwein said. “This is Lincoln compounding, not Omaha slipping.”
He specifically pointed to Lincoln being the site of CompanyCam’s recent unicorn status and the continued momentum of companies such as Hudl and Spreetail. While there are joint efforts across Omaha and Lincoln to benefit entrepreneurs, such as Invest Nebraska and NMotion, Gutwein said there are still distinct resources in both.
For example, rather than factoring in one overall University of Nebraska system, Gutwein identified the University of Nebraska-Lincoln and Creighton University as the prominent schools that went into Lincoln’s and Omaha’s respective rankings.
Looking back on 10 years of creating these lists, Gutwein said some overall takeaways include the importance government-backed funding plays in the success of startup hubs and how multiple “shots on goal” raise the chances of successful ventures blooming. While Midwest Startups may pull all these factors and data together, Gutwein said some communities “just have a more entrepreneurial culture than others” — a united mindset that may not appear in the numbers but leads to more companies built.
Gutwein said he was curious to see where more “flywheels” would rise. As startups grow and exit, their founders and employees often go on to start their own startups with new hires and economic impacts in the same regions. This can be seen in former startup Flywheel going on to be a link to other startups in Omaha, such as Grapple and Alpaca.
Gutwein said startups used for the calculations needed to have identifiable signs of funding and a presence on PitchBook. He added that life sciences companies are excluded from the data due to their unique trajectories.
When defining the Midwest region, he said it was a more complicated consideration. He said they chose an area that encompasses a shared culture, shared talent pipeline and a distance founders and funders are willing to travel for initial investments.
You can learn more about rankings and the methodology behind the list here.
