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In 5 years, the Midwest will have more startups than Silicon Valley, by Chris Olsen, Drive Capital

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They saw 3500 companies in their first year.

Silicon Valley is the only place you can find and retain key talent. It’s the only place you can scale a large organization. It’s the only place you can get the smart money you’ll need to grow. It’s the only place people will understand what you are building.

Sean turned to me and said, “You’re wrong.”

What? No I’m not. The Silicon Valley pitch isn’t wrong. Google, Facebook, Oracle, Cisco, and many others all prove I’m right. I’m right. Right?

Sean didn’t stop: “How many hospitals are there in Silicon Valley?” he asked. “How many healthcare payers are in Silicon Valley? How many engineers can I hire with the $500k I have in seed money? How much office space can I rent for $1 a square foot?”

When I walked out of the CrossChx office, my mind was racing. Is he the only one with a startup that makes more sense to build in the Midwest than in Silicon Valley? Surely, Sean is an outlier. Let’s not get ahead of ourselves.

Mark had the same reaction. We concluded that if Sean was unique, there was no question. I should go back to California and continue my career in Silicon Valley. But if Sean was just one example of the types of founders and the types of companies emerging in the Midwest, we couldn’t afford not to take a closer look.

We set off on a major research endeavor to see what conclusion the data supported. Mark and I were both trained by the very best in our business to build strong, well-evidenced theses.

Surprisingly, every piece of macroeconomic data suggested Sean personified just one of thousands of opportunities across the Midwest, and that the raw ingredients for bold, ambitious new companies were more plentiful here than in Silicon Valley.

California is the eighth largest economy in the world. The Midwest is the fifth. The Midwest is also bigger than Brazil, Russia, and India, each of which had recently caught many a venture capitalist’s eye.

The Midwest receives 25 percent of all research dollars in America and graduates more computer science degrees than any other region or country on planet earth. There are gobs of tech exits at valuations just as large as other places, and yet, the Midwest receives just four percent of the annual venture dollars in America.

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