Maker, Maker. Doctor… Quantum Physicist?

It’s fine for us in the Midwest to collectively gasp that “we don’t raise enough early stage capital”, or that “we must connect our ecosystems”... but where specifically? With what? What industries are the most likely to succeed in this part of the country and therefore, what skills, policies and processes do we need to put in place to ensure any such efforts help to grow our innovation economies?

These are important questions.

“Midwest problems require Midwest solutions” I said in a recent podcast, while the host suggested that Midwest states are ‘maker states’; the implication being that in this region, we should focus more attention on hard tech, and less on software.

Is this true? 

Who knows? If we did, we wouldn’t be writing this. We’d already be somewhere warm, on a beach, with someone bringing us drinks with little umbrellas in them, just like Lionel Tribbey wanted. IYKYK. But we digress.

As we continue finding the stories that power this site, we can see the formation of the most important macro industries in each of the states that we cover. These are those that have either a) risen to prominence over time, b) become embedded in the public narrative and policy or, more recently, c) have gained attention thanks to visionary and successful entrepreneurs: think deeptech and especially Quantum computing in Illinois, Health in Minnesota, Martech in Indiana, Fusion in Wisconsin, Mobility in Michigan and Manufacturing in Ohio.

If these were well understood and agreed upon through general consensus as each state’s focus, then surely that would help ensure the necessary attention and funds and skills for each, no?

Let’s start with manufacturing, which is a core piece of the economy in each of these ‘maker states’. 

Since 1990, the share of manufacturing as a % of GDP fell from 16 to 11% across the United States. It isn’t just an American problem though, the chart below tracks a similar tale across much of the ‘western’ world.

Let’s consider how we got here and what any of it really means. 

While we don’t need to recount history for locals, for the sake of anyone else… 

The Midwest effectively ‘created’ what we now call the middle class. Working families were able to live off only one wage, with a gradual rise in income and social status due to booming manufacturing industries and vast agricultural plains. “People with modest skills… being able to earn their way to a standard of living… where they could own their own home, own their own car, was really without precedent in history,” Michigan State University economist, Charles Ballard, told radio station WDET in 2017.

This region is also the birthplace and/or HQ of a multitude of global icons: McDonalds, Kelloggs, Kraft and Ford as well as the largest global firms in insurance (United Health), healthcare management (Epic Systems) alongside a host of others. At various points in the 20th century, it was home to the richest person and some of the most expensive real estate in the world.

Since that time, perceptions have changed, with the words ‘rust belt’ applied to a number of cities and states across this vast area.

And yet, that perception belies the fact that even now, the six Midwest states which we cover on this site have a combined economy of $4.12 trillion dollars: larger than California and for that matter any other single area on earth bar China (and the US as a whole, obviously). Across the Great Lakes and surrounding region there are 60 million people, the most populous megalopolis in all of North America. In the Midwest states this results in a GDP per capita of approximately $77,000; more than the USA as a whole and above any nation in the G8 group of countries.

All of which brings us back to whether we should focus on hard tech and deep tech rather than software for the future of the innovation economy across the Midwest. 

Should we? Have we, historically speaking? And if not, what types of businesses are - at the very least - most likely to receive funding across the region if we look at the actual data? 

Taking into account the fact that funding and business trends can wildly fluctuate, in order to look at this properly we considered data from across the entire decade between 2015 and 2024. So we’ve slaved over a keyboard and squinted at spreadsheets (combined raw data can be seen here) to bring you the numbers and - most importantly - attempted to pinpoint insights into what, if anything, can or should change.

NOTE: Analyzing the data by category comes with complications: in the Dealroom data (which we use as our data source for these types of analyses) companies can appear in more than one category, leading to funds being replicated. By sense checking this, we estimates the repetition to be around 5%, which we deem an acceptable figure. It would be preferable if this wasn’t the case, however for these reasons the dollar figures here should be taken as signals rather than absolutes.

WHAT’S UP DOC?

The standout result upon initially reviewing the data is that 25% of all funding over the ten years between 2015 and 2025 has gone to businesses which Dealroom categorizes as ‘Health’. That’s also the case nationwide, as (contrary to popular opinion) health businesses received the most amount of funding in dollar terms with 18% of the total, beating out enterprise software with 15%.

Health was also number one across the decade on a state-by-state basis for all but one of the six states in this analysis: Michigan. Whereas Health was number one for funding across the decade in Illinois, Ohio, Minnesota, Wisconsin and Indiana, in Michigan, it was ‘Transportation’. 

MICHIGAN MOVES THE NATION (BY CAR)

While Michigan being dominated by the Transportation category isn’t a surprise, is it due to a slew of electric vehicle makers like Rivian or new, funky mobility companies like May Mobility?

Nope. 

Almost three quarters of the entirety of the funds over the decade can be attributed to Lineage, the logistics and supply chain business based in the metro Detroit suburb of Novi which held the largest IPO in the world in 2024.

Outliers, eat your heart out.

However, removing Lineage fundraising from the data doesn’t actually change much in the way of rankings. While the Transportation category as a total across all states would fall beneath Fintech to fourth position (after health and enterprise software), it would remain number one in Michigan. 

Lineage raised $6.6B in private capital between 2018 and 2022, but removing this amount would leave $2.7B in Transportation fundraising in Michigan over the decade. Fintech as the next best category in that state... was $2.1B. 

What is odd about this data is that Health remains behind other categories in Michigan, despite its position in other states. In fact, Michigan only beats out Wisconsin in dollar terms for the total amount of funds raised by its health businesses across the timeframe of this analysis.

MAKE (IN) AMERICA, HEALTHILY. 

Health wasn’t always the leading light here.

For example, in the funding boom of ‘free money’ during 2021 and 2022, Enterprise Software was where everyone wanted to be in the Midwest. But that wasn’t the case everywhere. 

In Minnesota and Wisconsin, Health was the number one category for every single year. Through the mid 2010s, Health, Energy and Enterprise Software criss-crossed each other in Illinois while Ohio was similar: in a few years across this last decade in each, Health was overtaken: by Enterprise Software in 2019 and Energy in 2015.

Indiana, with the second smallest total of funding across this time period and just 17% that of Illinois during that time, saw the most variability. And perhaps that state can act as a guide for the others. Real Estate, Fintech and Enterprise Software have all been the leading category in Indiana, although in recent times (much like everywhere else), funding has been trending upwards for Health businesses.

DOES SIZE MATTER?

It is a standard practice to talk in dollar terms when it comes to startup ecosystems.

It’s the ‘sexiest’, most headline-grabbing way to demonstrate performance. But funding isn’t - in and of itself - the sole or most important indicator of success for a particular location. 

What if we look at the number of rounds? While the same discrepancy in doubling up we noted at the beginning of this article is also true, as an indicator of the swings and roundabouts of cycles, volume is probably a purer indication of what is most important in each state. 

Isn’t that the reason we’re here, rather than talking only of $? 

Taking the data for the number of deals, we see the same indications of category dominance as in the dollar figures.

Health leads with 22% of all deals, followed by enterprise software (9.62%) and fintech (9.07%). Most interestingly, applying the dollar figures to the number of deals indicates the outsized nature of fundraising in some categories, as well as the impact of outliers. Transportation leads with $20.5m per deal, almost double the next category of security. If we remove Lineage, however, the two categories are almost identical. 

Adding other states -in order to compare our situation in the Midwest with regions that are ahead of us as ecosystems - brings a reality check. Taking number of deals and applying it to volume, we generate a 'per deal' figure.

In the 'positive' news column, that outlier figure in Michigan delivers a $59 million average fundraising round in the transport category: more than California, New York, Massachusetts or Texas.

There are other bright spots, although they may reflect the impact of outsized winners in 'smaller' ecosystems than any great signal of where we can win in the Midwest: Security and Fintech funding per deal in Minnesota and Hosting in Indiana all lead the larger states according to our data. But what of the 'hard' vs 'soft' tech debate? Enterprise Software funding is surprisingly close to larger states in Illinois and Minnesota on a per deal basis, but the figures for Robotics, Transportation (save for Michigan), Semiconductors and Energy... are not.

So if this data can lead to any initiative of where we should be looking to push further, it is surely the California per deal figure in robotics of $37 million+. While California's GDP for manufacturing is surprisingly higher in dollar terms than most would realize, as a combined region... surely most of the tech they create is deployed here more than most anywhere else on earth?

THE ALMIGHTY DOLLAR.

The largest single year for fundraising in the region was $24 billion in 2021, while the largest for any single state in one year was $10 billion for Illinois in the same year. Interestingly, that was led by the largest category for any single state in any given year. But it wasn’t Health; Illinois caught Bay Area vibes in 2021 and posted $3.6 billion in funds raised for Enterprise Software companies.

This proves that when fundraising markets are buoyant, great things can be built and great funds can be raised almost anywhere. 

Illinois comprised 44% of the total raised for all states in 2021, a trend that occurred multiple times at the beginning of the decade, but is thankfully dissipating as other states appear to catch up.

Let’s not get ahead of ourselves though: this $3.6 billion dollars for that single year for that one category in that one state… is almost the same as the ENTIRE AMOUNT ($4.1B) raised in Wisconsin over the decade examined here.

Like Michigan with Transport though, that mammoth year of fundraising in Illinois was led by a single business: Alight, an employee benefits software business which raised a $1.6b SPAC to take it public in 2021.

After Illinois, the second placed state in any given year usually approaches 25% of the total. That also means that, during every year in this analysis, just two out of all six states combine for anywhere between 50 and 60% of the total amount raised across the entire Midwest. 

An exception came in 2019, when Minnesota and Ohio both had stellar years such that they reached similar funding levels to Illinois. That year, Ohio was amongst the most diverse over the course of this entire analysis: $2.3 billion raised, almost 29% of the total across all states that year and with Health, Enterprise Software, Fintech, Transportation and Security all above nine figures with three of those approaching $500 million. 

All were the result of one major raise in each category: $500m for Veam and Root car insurance raising $350m.

It was different in Minnesota that year, with the Health category contributing $1.2b, almost half of that from a single Series D round by tech-enabled insurance company NeueHealth.

Indiana’s best ever year was in 2021, with almost $2 billion raised across the state. Although this only comprised 8% of the total raised across the region that year, it was extremely diversified: Health, Enterprise Software, Marketing and Fintech were all above 9 figures.

The year was led by nine figure growth equity rounds for martech business Formstack, healthcare software Greenlight Guru and board management platform OnBoard.

Unfortunately, the data in this analysis indicates that Wisconsin has never had a year where fundraising has totalled more than $1 billion. Even in 2021 - the closest it came during this decade - it didn’t crack that magic figure. Although Health led the fundraising that year, the largest single round was $210m for mobile shopping rewards platform Fetch.

State-by-State: Which Category Leads in Each Midwest State?

Here’s a breakdown of the top three fundraising categories in each of the six states for the past decade, along with the total venture funding those categories have attracted over that period. We’ve then added figures for the dominant overall industries in terms of contribution to state GDP, according to USA Facts, as comparison.

What we’re looking for is any correlation, indicating why those sectors may or may not thrive in fundraising terms.

ILLINOIS

Top Three industries of total economy in Real GDP ($895.3B) terms for 2024:

Professional and business services ($141 B - 15.75%)

Real estate, rental, and leasing ($117.0B - 13.07%)

Manufacturing ($110.7B - 12.36%)

‍Top category in fundraising vs top category in overall economy?

Illinois has the largest economy in the region, and based on the portion of both fundraising and the economy as a whole, the most diversified. Nowhere else in the Midwest is there a lower percentage of the total for the number one category, or a more even spread of its top three categories in the overall economy. 

Largest % of National Category - 4.12% of Legal (814m)

Largest per deal value - Enterprise Software : $12.7m

INDIANA

Top Three industries of total economy in Real GDP ($419.5B) terms for 2024: 

Manufacturing ($119.4 B - 28.46%)

Professional and business services ($43.14 B - 10.28%)

Real estate, rental, and leasing ($42.58B - 10.15%)

Top category in fundraising vs top category in overall economy?

Like many other states, Health businesses receive the most funding in Indiana. However, the variation between its overall industries and what gets funded gives Indiana the impression of being a diversified economy. No other state has a category that dominates quite like manufacturing dominates in Indiana with almost 30% of the economy, the largest in the nation. And although Health is number one in startup funding, its % as part of the overall economy is lower than anywhere else at 9.72%. 

Largest % of National Category - 0.76% of Hosting (206m)

Largest per deal value - Hosting : $25.3m

MICHIGAN

Top Three industries of total economy in Real GDP ($566B) terms for 2024: 

Manufacturing ($99.24 B - 17.53%)

Professional and business services ($84 B - 14.84%)

Real estate, rental, and leasing ($75.85B - 13.4%)

Top category in fundraising vs top category in overall economy?

One category is more than half of all fundraising across a decade, and no other category in any state comes close to the same dominance. Looking at the overall economy, transportation could be considered a subset of manufacturing, which implies a strong correlation between the overall economy and what actually gets funded.

Largest % of National Category - 5.10% of Transportation (9.3B)

Largest per deal value - Transportation : $58.6m

MINNESOTA

Top Three industries of total economy in Real GDP ($395.3B) terms for 2024:

Professional and business services ($60.35B - 15.26%)

Real estate, rental, and leasing ($51.76B - 13.09%)

Manufacturing ($46.26B - 11.7%)

Top category in fundraising vs top category in overall economy?

Despite being the overall leading category across all the states considered here, Health does not dominate fundraising in any other state in the Midwest quite like it does in Minnesota. That said, the category is just over 11% in the overall economy and nowhere else has a lower reliance on Manufacturing as a portion of its overall economy in this region than Minnesota.

Largest % of National Category - 1.55% of Health (7.1B)

Largest per deal value - Security : $30.3m

OHIO

Top Three industries of total economy in Real GDP ($727.3B) terms for 2024:

Manufacturing ($109.75B - 15.09%)

Professional and business services ($99.56B - 13.69%)

Real estate, rental, and leasing ($85.11B - 11.7%)

Top category in fundraising vs top category in overall economy?

Ohio is just pipped by Illinois in the value of its Manufacturing sector, though with a larger percentage overall. Similar to Indiana, as arguably the two most diversified economies across this region both overall and in startup fundraising, Health as a category in the total economy is less than 10%

Largest % of National Category - 1.15% of Event Tech (139m)

Largest per deal value - Transportation : $13.7m

WISCONSIN

Top Three industries of total economy in Real GDP ($354.1B) terms for 2024:

Manufacturing ($56.16B - 15.86%)

Professional and business services ($42.69B - 12.05%)

Real estate, rental, and leasing ($42.05B - 11.89%)

Top category in fundraising vs top category in overall economy?

Wisconsin is the smallest economy in this analysis. That said, Health being its largest fundraising category isn’t reflected in the overall economy with this making up only 10.3%, according to data from USA Facts.

Largest % of National Category - 0.52% of Marketing (515m)

Largest per deal value - Marketing : $9.1m

Midwest vs. National: How Do the Industry Trends Compare?

It’s been said that “so goes the Midwest, so goes the nation”. If that’s the case, its economy should be a direct reflection of what’s going on in the country, right? And that being the case, its startup sector should also mirror national trends, but with a distinctive tilt.

Is that true? 

To policy-makers and ecosystem builders, these comparisons may highlight opportunities. The Midwest excels in areas that align with its historical industries and research strengths. That's a natural competitive advantage, sure, but is it one that the fundraising data included here leads us to believe it is worth leveraging in each case?

At the same time, the underrepresentation in categories like consumer software or cutting-edge tech in comparison to the nation’s epicenters signal where gaps exist. The fundamental question we’re asking is whether investment in those areas, in aligning with historically strong industries or finding completely new areas upon which to concentrate makes better sense.

Either way, the fact that Midwest startups raised only about $146 per person in 2024, vs. $1,112 per person in New York, $2000 in Massachusetts or $271 in Canada underscores how much room for growth there is across all sectors. Let’s look more closely at the numbers for California, Massachusetts, New York and Texas to make a comparison and better understand how the Midwest stacks up.

CALIFORNIA

Top Three industries of total economy in Real GDP ($3.4T) terms for 2024:

Professional and business services ($548.89B - 16.14%)

Information ($475.5B - 13.98%)

Real estate, rental, and leasing ($446.33B - 13.12%)

Largest % of National Category - 72.10% of Robotics (48.5B)

Largest per deal value - Transport : $37.36m

NEW YORK

Top Three industries of total economy in Real GDP ($1.8T) terms for 2024:

Finance and Insurance ($326.41B - 18.13%)
Professional and business services ($268.66 - 14.90%)

Real estate, rental, and leasing ($255.85B - 14.21%)

Largest % of National Category - 45.93% of Real Estate (37.9B)

Largest per deal value - Real Estate: $21.6m

MASSACHUSETTS

‍Top Three industries of total economy in Real GDP ($633.6B) terms for 2024:

Professional and business services ($140.95B - 22.20%)

Real estate, rental, and leasing ($86.49B - 13.65%)

Educational Services, Health Care, and Social Assistance ($76.94B - 12.14%)

Largest % of National Category - 17.68% of Health (97.3B)

Largest per deal value - Health : $22.1m

TEXAS

Top Three industries of total economy in Real GDP ($2.2T) terms for 2024:

Professional and business services ($309.2B - 14.05%)

Real estate, rental, and leasing ($281.38B - 12.78%)

Manufacturing ($239.28B - 10.87%)

Largest % of National Category - 6.6% of Telecom (2.1B)

Largest per deal value - Telecom : $18.1m

‍

Riding the Midwest’s Strengths into the Future

Healthcare is the Midwest’s heavyweight fundraising champ, and it’s likely to remain so given the entrenched advantages and continued innovation of that space in the region and across the nation. 

But on its own, that doesn’t provide a story for future growth. 

In Midwest state after Midwest state, we see examples of attempts to reinvent legacy industries, or create new ones from thin air (Quantum, Fusion, AI automation and Robotics) through startup investment. 

For founders and investors though, we see opportunity. 

The current moment is bringing renewed investment in advanced manufacturing, automation and robotics. These are industries in which our region should be able to deliver and deliver at scale. Additionally, the skills required to make these industries function are already here; they may require reskilling or adaptation, but they’re not alien. They also require resources into which much of global attention and funding are being pushed: energy and data centers. AI investment might be a bubble. The era of software eating the world may be at an end, as code becomes commodity. Quantum may be the great bet that pays off. Fusion could be a savior. And a twenty year legacy of green energy investment could be the serendipitous luck all financial windfalls need from time to time.

The Midwest states in this analysis may well be starting to finally learn what we are as it relates to entrepreneurship: practical, problem-solving, and quietly ambitious, while not attempting to mimic Silicon Valley.

The Midwest startup ecosystem of 2025 is richer and more nuanced than it was a decade ago.

What we cannot afford to do… is to miss out on this moment.