Bright prospects for a Midwest Entrepreneurial Economy

Things are looking up. We have the beginnings of what one could arguably say is “not your father's Midwest.” Whether those of us in the region know, or care to admit, the Midwest has long been viewed as late in the game with respect to emergence of a culture of innovation and entrepreneurial energy. One need only look at the January 2010 Brookings Institution study , Turning up the Heat: How Venture Capital Can Help Fuel the Economic Transformation of the Great Lakes Region by Frank Samuel for an exposition of the major problems that face the Midwest in creating an innovation economy.

That report concisely and compellingly argued that to move toward a 21st Century culture of innovation, the Midwest needed to 1) dramatically improve access to capital and 2) create regional mechanisms to work cooperatively to encourage creation of fundable new ventures based on the strong base of world class research institutions that are located in the Midwest. To paraphrase a few of the findings from the Brooking study, Great Lakes region universities and medical centers account for about 33% of the nation's academic and hospital R&D spending and Great Lakes region public and private retirement funds contribute 40% of the capital supplied to the venture capital industry. In contrast, companies in the region receive a mere 14% of VC investment. Like a colonial economy, we are exporting our raw material and buying back the products produced by the new ventures funded by largely Coastal VCs.

So why are things looking up? In Mid-October I took part in the Fall members meeting of the Midwest Research University Network - we call it MRUN for short (full disclosure: I am a co-founder and I currently serve as president of MRUN). MRUN's mantra is regional cooperation to foster local startup development. The theme of this meeting was Catalyzing Angel Technology Investment. It was the third MRUN meeting organized on the CATTEC theme aimed at catalyzing technology transfer and investment. This MRUN event was in fact a joint meeting with the Midwest co-Investment Network (MIN) and sanctioned as a regional meeting by the Angel Capital Association. MIN is an alliance of 16 angel groups across 3 Midwest states who are working together to syndicate deals and share diligence resources.

The meeting brought the money people and the idea people together but not in the standard context of a venture conference where entrepreneurs pitch to an audience of investors. These two groups are working together to tackle Midwest problems of access to capital and regional cooperation while advancing their own objectives. The angels want better deals and connections with other angel groups that collectively can better finance attractive companies. The university startup professionals want to connect with investors and seasoned management for new ventures that seek to commercialize cutting edge university research. Whatever comes out of these meetings will assuredly not be the total solution but it will be a start and it will fuel the breakdown of barriers in a region where the key participants in the startup culture have not known each other well enough to effectively work together. With these beginnings of regional cooperation among investors and those who facilitate startup creation, the Midwest can begin to improve access to capital while leveraging the diverse innovation resources scattered about the region.