Finance

Howdy, neighbor!

Minnesota startups look to Midwestern investors by Kevyn Burger

By Kevyn Burger

When Chad Halvorson went looking for funding for his Twin Cities-based venture When I Work, he found five venture capital firms to put up the money for him to expand the employee scheduling and time clock software.

Halvorson raised $24 million last year, with participation by major investors on both the east and west coasts, and from VC firms in Minneapolis, Indianapolis and Columbus.

Looking to VCs in neighboring states is creating opportunity for Midwestern startups. With almost 80% of venture capital investment flowing to California, New York and Massachusetts, perhaps it’s no wonder that Midwestern funders and founders want to connect.

“There is a strong history of innovation in the Midwest,” says Halvorson.   

“Right now, there’s a level of practicality in the innovation and the problems being solved by Midwestern companies that’s less prevalent on the coasts.”

Serial entrepreneur and AOL founder Steve Case preaches the gospel of heartland strength. Over the past three years, his “Rise of the Rest” bus tour stopped in over two dozen cities to shine a spotlight on talent that exists outside Silicon Valley and New York. He’s invested in more than 50 companies along the way.

Star Tech’s Joy Lindsay believe there is a regional shorthand between Midwest companies and investors, who are both out to prove something.

“The work ethic here is great, the valuations and terms are reasonable and the entrepreneurs are coachable,” she says. 

Lindsay sees money flying in from investment firms in Kansas City, Omaha and Chicago.

“These Midwest funds bring their own syndication of firms. The expertise those venture funds bring is helpful,” she says.

It’s worked for Halvorson. When I Work has grown to 130 employees in its Minneapolis headquarters, with more than 50,000 workplaces using its platform.

Halvorson is now leveraging the capital he raised, not seeking more investors.

“We’re building what we said we were going to build,” he says. “For those who show they can create something that people want, there’s plenty of capital here in the Midwest that’s eager to get to work. We’re on track and more focused than ever.”

“Right now, there’s a level of practicality in the innovation and the problems being solved by Midwestern companies that’s less prevalent on the coasts.”