2025 SaaS Benchmarks: Where the Midwest Is Winning (and Where It Lags)

The 2025 SaaS Benchmarks Report from High Alpha is out, providing an essential pulse check on the global software economy. As champions of the region, we leveraged the dataset to break down the key metrics of Midwest-headquartered startups against the rest of the United States.

Before diving in, it’s worth noting the companies surveyed are near-peers in maturity: the average founding year for Midwest companies in the dataset was 2016, and the rest of the United States cohort was only slightly later, rounding up to 2017. This small difference sets the stage for a fair comparison of operating strategies and scaling velocity.

So, how do Midwest startups stack up against the rest of the US? Let’s dig in.

How Midwest startups are similar to the Rest of the US

In several foundational aspects, the Midwest and its coastal counterparts are marching in lockstep, proving that successful startup DNA isn't geographically exclusive.

Structure of Founding Teams

According to our data from 800+ startups, the structure of founding teams is remarkably similar across regions, affirming that the decision of how many founders a company starts with is largely independent of geography. The Midwest shows only a slightly higher share of solo founders, but the overall distribution is consistent:

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The high prevalence of two or more founders (65% in the Midwest vs 67 for the rest of the country) underscores a shared, universal understanding of startup risk: successful scaling requires diverse skill sets and shared leadership burden. Plus, region doesn’t seem to have a meaningful impact on how many founders a company starts with. 

Encouragement of AI Adoption

The internal push for AI adoption is a universal mandate in 2025. Both the Midwest and the Rest of the US are heavily encouraging their teams to integrate AI tools and workflows into their day-to-day operations to boost efficiency and output.

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In total, 85% of Midwest startups are either strongly encouraging AI adoption internally or made it a strategic priority, compared to 81% of startups in the rest of the US. The Midwest's particularly high "Strongly encouraged" figure is also in line with being stereotypically “Midwest nice” — companies in our region are more likely to strongly encourage vs. tell folks they must do or adopt something.

Despite the slight difference in responses in the “strongly encouraged” and “made it a strategic priority” categories in both cohorts, the overall message is clear: 8 out of 10 companies everywhere are heavily pushing internal AI adoption. This internal efficiency drive is where the Midwest is currently leveraging AI most aggressively, cementing AI as a necessity for operational excellence and cost savings.

How Midwest startups are different than the Rest of the US

While the fundamentals of founding team structure and internal AI adoption encouragement are similar, a distinct regional divergence appears when analyzing AI incorporation in product, scaling speed, and work culture.

AI Incorporation in Product

The biggest difference in AI strategy lies in how the technology is integrated into the core product offering. Midwest startups are more likely to report that AI is a supporting feature rather than a core function.

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This shows that the rest of the US is much closer to the full SaaS Benchmarks dataset (where 36% report AI is core to their products), suggesting Midwest companies are currently implementing AI more often for efficiency and enhancement rather than as the primary value driver. 

The 75% of Midwest startups in the "supporting feature" category highlights the region’s pragmatic, often risk-averse, approach. It suggests founders are integrating AI where the value is immediate and clear, avoiding the more capital-intensive, speculative bets on building products where AI is truly the star of the show — where the product wouldn’t exist without AI. 

This matters because the data shows that companies where AI is core to the product are growing faster in every single ARR cohort.

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Embedding AI deeply into your product isn’t just a technical choice, it’s a growth strategy. And while it’s a disciplined strategy to incorporate AI where the value is immediate and clear, this approach may temper future disruptive potential compared to coastal firms building entirely AI-native solutions.

Growth Rates and Rule of 40

Perhaps the most challenging data point is that the Midwest lags behind the rest of the country from both a growth and efficiency perspective, particularly when examining the Rule of 40 (Growth Rate % + EBITDA Margin %), an important data point for understanding company health.

The data presents a fascinating nuance: while the rest of the US continues to lead at the median, the Midwest's top performers are now operating at hyper-growth velocity.

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This is crucial — the upper quartile is now equal for both regions at 100% growth. The Midwest is fully capable of producing hyper-growth outliers. The challenge lies in improving the performance of the middle-tier companies (the median), where a significant 9-point gap (44% vs. 35%) remains, suggesting a tougher path to scaling for the average Midwest startup.

This trend is strongly reinforced by the Rule of 40 performance:

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The gap is still substantial at the median, where the rest of the US outperforms the Midwest by 7 percentage points (25 vs. 18) in overall efficiency. The slightly negative lower quartile Rule of 40 score (-1) suggests that the least efficient Midwest firms have a slightly higher cash burn than their coastal peers (0). This combined data indicates that while the Midwest's most successful firms can match any growth rate nationally, the region as a whole struggles with the combined efficiency and growth required to cross the Rule of 40 threshold consistently.

Revenue Stage

This difference in growth rate is starkly reflected in the revenue stage distribution. Despite having a similar average founding year (2016 vs. 2017), Midwest startups tend to operate at smaller revenue scales.

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With 65% of Midwest companies under $5 million ARR compared to 47% for the rest of the US, this suggests it’s taking Midwest companies longer to reach meaningful scale, even with similar starting times. The fact that the average founding year was the same strongly implies a slower time-to-scale narrative for the Midwest. This delay, coupled with the lower upper-quartile growth rates and lower Rule of 40 scores, indicates that the regional ecosystem must accelerate its market penetration strategies to catch up with its coastal peers in the $50 million+ ARR category.

Culture of Work

Finally, both regions strongly favor flexible work models over traditional in-office structures, but they approach "flexibility" differently:

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Midwest startups are more likely to operate in a Predominantly Remote setup (teams report 1-2 days in the office per week), while the rest of the US leans slightly more toward being Fully Remote (no central office). This difference highlights the Midwest's commitment to flexibility while potentially retaining a light, central physical presence to foster community and culture — a subtle but important distinction in the era of distributed teams.

Wrapping Up

The 2025 SaaS Benchmarks data tells a complex, yet ultimately optimistic, story about the Midwest. Our data confirms a crucial capability: Midwest founders are just as collaborative, pushing hard on internal AI adoption, and most importantly, our top-tier companies are fully competitive with the best in the nation, hitting 100% growth rates. Yet, the data suggests a slower time to scale and a significant lag at the median in both growth and Rule of 40 efficiency, possibly linked to a more cautious approach to incorporating AI as a core product feature.

These findings serve as both a challenge and a roadmap: The foundational strengths are here, including resilient founding team structures and a strong commitment to internal efficiency. However, for the Midwest to close the gap in the middle and produce more breakout companies, founders must consider placing bolder, more disruptive AI bets at the very heart of their products. This shift from pragmatic enhancement to core disruption will define the winners of the next decade, ensuring the Midwest leads, rather than lags, the national scaling curve.

To dive deeper into all the key benchmarks and trends shaping the SaaS landscape this year, you can download the full 2025 SaaS Benchmarks Report from High Alpha.

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‍Mollie Kuramoto is Director of Marketing at High Alpha, a venture firm based in Indianapolis that creates and funds B2B SaaS companies. Prior to High Alpha, she worked at marketing services agency Element Three in the same city, and has been a content marketer in written and video form. Originally from Cincinnati, she graduated from Purdue University with a degree in English and Film and likes riding her bike to the office as well as coaching youth soccer on weekends.