Fundraising in the Midwest: Longer timelines and a trickle of liquidity

At A2Tech360’s Invest360 event held at the University of Michigan Golf Club last week, founders were provided an unvarnished look at how Midwest investors see the current state of fundraising in our region. The panel brought together three VCs: Antonio Lück of MatterScale Ventures, Allie Singer of Allos Ventures, and Prem Bodagala of Invest Detroit Ventures and was moderated by Mike Flanagan, VP at Ann Arbor SPARK and Managing Director of the Michigan Angel Fund. He began with a reality check: exits are only just starting to trickle back into view, and most investors are still waiting for liquidity before the faster pace of a few years ago has any prospect of returning. That set the tone for a conversation that was candid, data-driven, and at times… bluntly honest.

The Market Has Slowed, But Not Everywhere

Lück pointed to hard numbers: “From Carta, for rounds that are under 5 million since 2021, the number of rounds are down 48%”. His own activity illustrates the change: “In 2020, 2021, and 2022, we were probably doing an investment a month… 2023, 2024, it decreased significantly… this year, we’re probably on pace for doing two or three”.

Singer confirmed the slowdown: “We did four deals last year, and I think we’ll end the year this year at two or three”.

But Bodagala said his fund’s pipeline looked different. “Last year, we did about 30 investments total, about 20 new companies, 10 follow ons, and we’ll be on course for the same this year”. 

Why? As downstream capital tightened, earlier-stage funds like his stepped into the gap.

What Changed? The Path to Profitability

One of the clearest shifts has been in expectations around profitability. Lück described it as “probably… one of the biggest major changes in criteria that I saw”. In 2021, “profitability wasn’t even part of the conversation,” but by 2023 founders were under pressure to “really become break even or profitable, or at minimum show (a) path to profitability”.

Singer added that while her firm’s “goalposts haven’t changed,” they’ve become uncompromising about meeting them. “Customer retention, margins, 18 months cash runway, minimum… that’s all gotten a lot tighter”.

For Bodagala, it’s about making sure companies can demonstrate what downstream investors will need: “If they have a clear path of attaining those milestones, then we can underwrite that risk… but if it is unclear… that makes it a lot more challenging”.

The room groaned when Lück cited a data point from Carta that the current average time to raise funds was nearly two years.

Singer noted that even her firm - which she said prides itself on moving relatively quickly - takes “two to three months to get to a term sheet, and then post-term sheet, usually 60 days target. Things always take a little bit longer… that’s why (an) 18 months minimum runway is so important”.

Best Practices to Get Attention

The panelists offered founders concrete, almost tactical advice:

- Get your house in order. Bodagala stressed the basics: “Have a well organized kind of data room… a good naming structure for the folders, standardize your files”.

- Think beyond priced rounds. Singer encouraged founders to explore options: “Some of our companies have raised venture debt and things like that. I would just always think about, like, different types of capital”.

- Tell a cohesive story. Lück argued that conviction matters as much as data: “Put the emotion behind it so people understand that you’re on this for a really, really long time, that you have the drive to go through one wall, two walls, 152 walls before you get somewhere”.

Flanagan, wearing his own investor hat, summed it up: “It is kind of an extended interview… you’re looking for every little signal too of what this team or what this person might be”.

Raising in the Midwest vs. the Coasts

Singer believes Midwest founders have an edge: “We are by nature more capital efficient… Midwestern companies are gaining interest from the coast just because we’re lean”.

Bodagala shared that efficiency is actually starting to draw companies in: “We are working with a company that’s moving from New York to Detroit to grow their company”.

Lück framed the decision more strategically: choose based on access to talent, suppliers, customers, and funders. And in today’s world, “there’s no reason for you to uproot and now go to the valley… that’s not the case anymore”. He added that the Midwest’s unique mix of software and hardware expertise is a global differentiator.

What Founders Can Take Away

If you’re raising in 2025, this panel’s advice adds up to a few sharp takeaways:

- Fundraising is slower. Plan for 18–24 months, it isn’t a sprint.
- Investors want discipline. A clear path to profitability is now a non-negotiable.
- Get organized. A polished data room signals professionalism.
- Be realistic. Reset your valuation expectations.
- Leverage where you are. Efficiency, talent, and deep sector expertise are real advantages.

And above all, don’t forget the vision. As Lück told founders: “Make sure that that’s the largest vision you can place on somebody’s mind. If you can do that, you probably will raise money”.