In his recent book, Jason Calcanis answers the question: "do you have to be in Silicon Valley to be a good angel investor and invest in good companies," with one word, "yes." In fact, he makes it an entire chapter. But the angels, venture capitalists, and thriving startups of the Midwest would beg to disagree, and there are recent growth stories to prove it.

Lessonly, which announced its Series B this week and is a leader in the learning software industry, is just one example of the rising trend of startups based in the Midwest, particularly Chicago but also including Indianapolis and Detroit, raising large venture-backed financings.

"We really take pride in a core Hoosier value: neighbors who help others. Our clients tell us how much our software has improved their learning, their productivity, and their people. And their direct feedback helps us improve our product and contribute to a better learning experience for Learners everywhere. That's the way we do things in the Hoosier State," said Max Yoder, Lessonly CEO. "I'm super excited to see Yellowship [Lessonly's new conference] come to Indianapolis. The Lessonly team continues to impress and inspire me--and I'm sure that this conference will do the same," added former ExactTarget CEO Scott Dorsey, now a partner at High Alpha, the venture capital firm that served as an early investor in Lessonly.

There are certainly key advantages that can help a company thrive in the Midwest, as opposed to relocated to Silicon Valley. First among them is a far lower cost of living, plus lower salaries due to employees. Indeed, by some estimates, a Chicago startup could have a burn rate of 50%+ less than a Valley startup, with the same employee headcount and office size. This in turn enables companies to push toward breakeven and profitability faster, which in turn reduces the failure rate of venture investments.

Second, the Midwest has one of the largest concentrations of good universities and engineering talent in the country. University of Chicago, Notre Dame, Northwestern, Wisconsin, Michigan, Illinois, and Carnegie Mellon among others are all within an hour's flight of each other and close driving distance, and many graduates flock to Midwestern cities.

Indeed, as a Chicago native, I've had my own experience with Midwestern companies, investing in almost half a dozen, and several of them, including ThinkCerca, which helps schools rethink and reform their critical thinking education efforts, are scaling after raising institutional rounds. I think the Midwest will become a strong hub for growing companies in the years to come.

"Chicago is a startup mecca for ed tech with companies like ours and Edovo, we're tackling some of the most intractable problems with proven, effective products and a petri dish of an innovative school district, and city leaders who embrace technology, which is why research shows us leading the country in growth!," said Eileen Murphy, the founder of Chicago-based ThinkCerca. 

Published on: Nov 16, 2017