Is Deep Tech Quietly Exploding in the Midwest?

“Should we do a list like this, but just for the Midwest?” the Dealroom team asked, pinging me a map of deep-tech value and investment across the entire United States.

Um, does a Midwesterner say ‘ope’?

Upon reviewing the data they provided, what it tells us is interesting… and also kinda messy. 

So here’s our attempt to provide the clean, Midwest-only cut you actually need to know about, as well as linking to their data so you can peruse at your own leisure.

The signal in the noise

First, some context. 

The rankings they’ve created (visible only to you and I on this special, secret page right here) are based on a combination of factors; startup and breakout capital, alumni founders and enterprise value. The cities are ranked on these metrics across the years of 2021 to 2024, while also comparing the most recent figures of 2023-2024 with those of 2019-2020.

Starting with the overall rank, Chicago is the first Midwest city on Dealroom’s list, at 22nd globally and 8th in the U.S. That squares with what can be seen on the ground, including the push into quantum and the first quantum startup accelerator.

Despite all that, deeptech investment in Chicago - as a category and according to Dealroom’s figures - has actually fallen 51.6% since 2019-2020.

The next city on the rankings in the Midwest is the Minneapolis-Saint Paul metro area which ranks 38th globally and 17th in the US. In growth terms, funding in this category is up 9% since 2019-2020.

Here is the entire list of growth in funding for Midwest cities, according to the data. 

While the Chicago rank overall - when compared with the reported drop in funding - may be confusing, it can possibly be explained by the explosion the city and state saw during the ‘free money’ period of fundraising in 2020 and 2021. 

During that era, companies in the state of Illinois raised funds that were double and even triple its neighbors as a total for each of those years, and these funds predominantly went to enterprise software companies. However, what this data for deeptech shows isn’t ‘more apps.’ It’s plants, labs, fabs, and pilot programs turning into revenue.

What even is ‘deep tech’ here?

In a recent edition of his excellent newsletter, Landon’s Loop, Landon Campbell of Drive Capital defined deep tech as “an ‘experiment’ turned innovation”.

We really like that definition.

In this case though, when diving deeper, Dealroom’s taxonomy spans Core Deep Tech (heavy R&D), Frontier Tech (applying deep tech), and Hard Tech (where it meets hardware/manufacturing). 

Furthermore, they consider several areas within the category:

- Future of computing (quantum, photonics, AI chips)

- Novel energy (fusion, hydrogen, solid-state batteries, carbon removal)

- Novel AI (gen-AI, explainable AI, autonomous systems)

- Space tech

- Synthetic biology (FoodTech, Agritech, Health)

- Advanced materials & manufacturing

- Aerospace, automotive & remote sensing

In other words, these definitions should be capturing what the Midwest is structurally good at: agtech, health, R&D, hardware, manufacturing... all now incorporating the AI layer that can stitch it all together.

A quick sanity check on “messy”

- Growth ≠ Size. Detroit’s +920% is real velocity, but comes off a small 2019–20 base. Chicago’s decrease hides a larger absolute stack of enterprise value and doesn’t take into account the current push into this area from policy makers and those currently building.

- Enterprise value vs. dollars raised. Dealroom’s core metric when measuring such things is combined enterprise value. Enterprise value growth is the change in that total. That means it moves with actual rounds and real revenue, not just stories. Even though we’re trying (!)

- Taxonomy matters. A location may be next to nowhere in ‘software’ but spike in deep tech because its wins sit in batteries, materials, medical devices, or ag robotics. That’s good for our region and any attention in this space can hopefully bring more funds and jobs in this direction.

It is also worth noting what is meant here by enterprise value (EV) and most especially ‘enterprise value growth’.

According to them, “The (combined) Enterprise Value of an ecosystem is the sum of all the valuations of startups in that specific ecosystem. This is a combination of private company valuations based on most recent VC rounds (which is either announced or estimated by Dealroom based on benchmarks), realized exit value, or publicly disclosed valuations, and public company enterprise value. Enterprise Value Growth is the change in this combined enterprise value of the ecosystem over a given period.”

Their view is that EV is the best metric to judge the growth of a location, because it combines a variety of metrics into a single one which can best demonstrate the overall economic impact upon a region. 

The issue, as we see it, is what you apply EV to. The smaller the location, the larger the impact of large, outlier results. We only need to see the recent data on overall EV growth to see that. One large result - in that case Acrisure in Grand Rapids, Michigan - and there is an enormous impact on the figures for one cycle. Therefore while EV can make sense, in the Midwest it would be best applied at the state rather than city level.

The takeaway

If you still think the Midwest is a place only to find value and “cheap burn,” then you’re running an old playbook. The new pattern might just be lab-grade technology getting de-risked by real customers; often inside the plants, hospitals, fields, and logistics hubs that already live here.

The use of such data also brings up the issue of what is - and is not - a startup. That’s a debate worth having, but not here.

What is worth stating is that whatever definition we use will have little to no impact on our stories. We aim to report on anything innovative which can have an economic impact: on jobs, incomes, revenues, the tax base etc. In fact, the original and best category of what we want to talk about in these pages, is entrepreneurship. Most especially, the entrepreneur: “one who organizes, manages, and assumes the risks of a business or enterprise” according to Merriam-Webster. That definition can also apply to those working in a lab, or tinkering away in a warehouse or shop floor, who then branch out to turn their discoveries and inventions into anything that leads to such economic impact.

For those reasons, we intend to look further into deeptech topics in thr future. As the public narrative from policy makers - as well as large corporates in our region - shifts, reshoring and manufacturing  trends also emerge. Our ability to talk about it will be dependent on whether we’re able to separate hype cycles from durable progress, which we can do with the right data of course.

So if you’re a founder or funder in any of the deep-tech categories listed here, please get in contact. 

We want to tell more of these stories.