The Secret VC: Midwest Corporate Venture Is Just Private Equity in a Trench Coat

Next time you're at a startup event, ask the people in the room to name a successful corporate innovation fund headquartered in the Midwest. Cue silence.

I couldn't do it either at first. So together with my editorial friends at StartMidwest and thanks to data from their partners at Dealroom, we pulled the data.

I've written before that Midwest investors need to stop celebrating mediocrity, and that around here, everyone wants to invest but no one wants to lead. This month, we're talking about one of the biggest differentiators we have in this region that partially explains why these issues exist in the first place: the corporates, the pension funds, and the endowments sitting on the deepest pools of capital in the Midwest. Because when you take a look at them, a pattern emerges and it ain't pretty.

That might be because in the Midwest, people don't necessarily fit their roles.

In an ideal innovation ecosystem, universities fund discovery. Venture investors turn discoveries into startups. Corporations help those startups test and scale. Pension funds and endowments supply the patient capital underneath the entire system. In the Midwest, that chain is breaking.

The universities, to their credit, mostly know what they're doing; they're essentially set up to advance research with the help of public dollars — to take the risks nobody else will. So we can say with some certainty that they're doing their job. It's everyone downstream of the university system — private capital, corporate capital, institutional capital — that has forgotten what they're in it for.

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Talking a big innovation game

Let's start with the corporates, because this one makes me genuinely angry.

The Midwest's giants love to talk about innovation. Mobility. The future of manufacturing. Digital transformation. Leading in Life Sciences. Support for Deep Tech initiatives. And then you look at what they actually do with their money, and it's not venture at all, and it's not really innovation either. It's private equity in a trench coat.

They invest at the point where something is a sure thing. They buy technology after it's already been developed, de-risked, and proven by somebody else's capital. Is that scouting for the future, or just going shopping? Some of our most iconic industrial names talk endlessly about wanting to back the startups reshaping their industries, and as far as anyone can tell, they've backed almost none of them. They show up. They take the meetings. They even judge the pitch competitions; I know one Midwest entrepreneurship program which is judged by the same rotating cast of corporate venture arms every single year. They show up and they judge, but they don't sponsor, and they don't invest. They ask mostly ceremonial questions, offer no path to a pilot or check, and then they go home.

Meanwhile, there are a handful of companies elsewhere in the region — think of the Medtronics and John Deeres of the world — who actually run early-stage operations and take them seriously. It's no accident that Minnesota and Illinois, with reasonably diverse economies, fare better here than the auto-and-appliance belt. But 'better' is doing some seriously heavy lifting in that statement, because nobody is going to confuse our region with Massachusetts.

To be fair, there's a risk-aversion logic in some industries. If you're integrating a new part or a piece of software into hundreds of thousands of vehicles, caution isn't irrational at all. But caution explains conservatism at the integration stage, not its total absence at the scouting stage — which is exactly where startups are most valuable to a big company: as agile external R&D, and an early look at the technology and IP you might want before a competitor sees it. That requires getting in earlier, but almost nobody around here does it.

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The receipts

We ran the numbers via Dealroom with the StartMidwest team on corporate and corporate venture activity, and I want to walk you through a few of them, because they're even bleaker than I expected.

One legacy Midwest chemical giant — a company founded in the late 19th century with a market cap north of $20 billion — shows 38 venture investments ever. EV-ER. They've participated in $9.7 billion of deals for a current portfolio value of roughly $750 million. The pace across three decades is best described as drip… drip… drop.

One major Midwest automaker's venture arm shows a portfolio in the mid-40s and roughly 76 rounds all-time — respectable on paper, until you check the news feed and find, as far as we could tell, they've made a single new investment in the last two years.

Minnesota, the region's supposed bright spot, has exactly seven entities we could classify as corporate venture funds via Dealroom. S-E-V-E-N. The largest, 3M Ventures, shows 29 rounds all-time — but this one gets interesting: roughly $820 million participated across those deals against a current portfolio value around $4.4 billion. That's what competence should look like. But, but, buuuuuut… it's relatively small, and judging by the launch dates within this portfolio, it hasn't been meaningfully active in years.

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Read More: If you're a founder trying to navigate these companies anyway, our contributors at TechNexus have written a practical guide to working with the Midwest's corporate titans.

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Then we looked at a control group and we chose New York. It shows over 4,000 corporate and corporate-venture entities. Comcast Ventures alone: 376 rounds, a portfolio around 283 companies, $8.8 billion participated, roughly $74 billion in current value. In other words active, early, and investing in its own industry at a profit. Even Hearst — a magazine company for the love of God, remember those! — has run 63 rounds and holds a portfolio of 155+ companies that may well have done more to keep it alive than print magazines ever would have.

Yes, New York's economy is bigger. That's why the honest way to cut this data is corporate venture activity as a share of total regional funding — and that's an analysis we may consider looking at in the future. But even eyeballing it against the Q2 2026 Midwest funding numbers ($1.27 billion across 114 deals), the gap isn't a scale problem. It's orders of magnitude; which makes it a culture and behavior problem.

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The money that leaves

It's not just the corporations. Follow the institutional money and the story gets even worse.

Multiple state's public employees' retirement systems manage billions, but the venture activity in their respective states -  as far as we could find - is effectively nothing.

There is a moment from the 20VC podcast that was shared on these pages here: a UK investor marveling that his organization raised more money in a single Midwest city than they did in London; one of the financial capitals of the world where venture funding last year was $22.6B while our collective states were $8.6B. A single American pension fund wrote them that check. The retirement money of Midwest workers, funding venture… somewhere else on the planet entirely. The irony in this instance is that if the industries around that pension fund don't reinvent themselves and fast, those workers may not have the jobs to even retire from. You can have all the pension math you want; it doesn't help if the entire economic system that employs your members completely hollows out.

Meanwhile, there is one local University endowment that famously turned an early seven-figure check into an AI leader into a fortune. 

the point is that local sophistication does exist here, as does the returns appetite, and the capital clearly knows how to do early-stage risk. It just… doesn't seem to do it in its own neighborhood.

The question is why? 

I've asked a lot of people, and nobody has given me an answer better than "it's not a priority." That’s not an answer, but it is a symptom.

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Should we just make them do it?

There are many countries around the world that require a minimum percentage of local content on radio and TV. It is done to maintain the local arts, film and music scenes instead of having wall-to-wall English-language imports. These systems keep local creators in business long enough to compete.

Should Midwest institutional capital have the equivalent of a local-content rule? A carve-out — even a small one — for the ecosystem that produced you, employs your people, and pays your pensions?

My honest answer? I'm a free-market person. I think they should want to do this, and a mandate is the admission that they don't. It isn't useful if Midwest institutions accept bad returns just to feel good about themselves. But they should stop assuming worthwhile opportunities only exist somewhere else and start building the capacity to recognize the ones growing in their own backyard.

Because you should want to leave the place you call home better than you found it. So the grass is greener where you water it, and if you're going to hire from these communities, educate in these communities, and put your name on the buildings and hope to continue to keep doing so, why would you choose to operate in an economic desert and just pluck technology and innovation from everywhere else?

The Midwest's institutions haven't failed at venture. They just haven't seriously tried it.

About the Author:

The Secret VC is an active investor in the Midwest who writes anonymously so they can say what everyone else only says after the second drink. Read previous columns here.

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