Northwestern Capital Partners, LLC has been an active investor and investment banker in the Midwest since 2008. Though we have worked all over the United States, our focus has been on the under-appreciated opportunities for high technology investing in the Midwest.
The area has a plethora of great universities, a skilled workforce, large companies that spin out technology, and a desire to change the economy from a smokestack to a chip and test tube economy.
Two of our Michigan-based investments, SPLT (http://splt.io/) and HealthCure (http://healthcure.biz/), are winning awards and gaining national recognition in the high-tech healthcare economy. We are looking at new advisory assignments for medical device companies in Chicago that are extending the bar for health care, helping make surgery safer and less prone to error.
In addition, NCP is raising a venture fund, to be based in Michigan, with one of the largest healthcare systems in the US. The fund will focus on Series A investments that will reduce healthcare costs, improve caregiver and patient safety, and be adoptable by the “system.”
San Francisco and San Jose continue to dominate the venture capital industry, and measured by aggregate investment, are increasing their dominance over other areas. This is in part due to the size of the funding that goes to venture-backed enterprises in the Bay Area. A 2016 Brookings Institute study noted that in 2005, 34% of venture funding went to firms based in Northern California; the percentage of venture funding increased to 44% by 2014.
Figure 1 National Venture Capital Association
However, according to the National Venture Capital Association, geographic dispersion is increasing. On January 27, 2016, they released a report that noted that in 2015, venture firms invested in 3,662 companies in 133 metro areas. There are definitive clusters in the Midwest, with several located in Michigan, Chicago, and Madison, WI.
For example, the State of Michigan is among the top 10 in per capita patent issuance, and the University of Michigan was ranked 1st in research expenditures as a public research university and 2nd overall by the National Science Foundation. The University of Michigan generally ranks among the leaders for venture-backed startups by alumni. The University of Michigan announced in that in 2015, they sponsored 422 invention reports, 160 patents issues, 19 new business startups, and generated $78.8 million of revenue.
Michigan’s University Research Corridor (URC) is an alliance of Michigan State University, University of Michigan, and Wayne State University. In 2015, the three URC universities produce $2.15 billion in research expenditures. The URC has cultivated 210 startup companies since 2002. Among the top eight academic research clusters, URC ranked 2nd in the Innovation Power Rating and in the last two years has outperformed other research clusters including North Carolina’s Research Cluster, California’s Silicon Valley, and Massachusetts’ Route 128 Corridor.
The Midwest’s status as an economic engine for startups has heightened, so has its share of the venture capital industry in the United States. In 2001, Michigan companies received venture capital totaling less than 1% of the total venture funding in the US. By 2015, that share had risen to 1.3%, or an increase of 550%. Most significantly, while total US venture funding was less than the aggregate value, in constant dollars, in 2001, it greatly increased in Michigan. In 2016, Inc. Magazine named Chicago as the best city in the US for startups.
We believe the future of venture investing is going to be less geographically specific, with many areas leveraging their historic core competencies and commercial heritage into new centers of excellence and innovation. The Midwest region of the US is primed to play an increasingly pivotal role in this future. We are pleased to have been on the front end of this process.
Contact us today to learn what Northwestern Capital Partners LLC can do for your firm.
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