St. Louis-based Lewis & Clark Ventures recently released their 2018 “Between the Coasts” Report. For the second year in a row, the report shares findings about the region, its challenges and its promise.
“There’s a sense that something is happening in the middle of the country and maybe it’s not entirely clear to outsiders,” said Austin Woods, an Analyst at Lewis & Clark Ventures who compiled the report. “We hope that the Between the Coast report presents a concise, understandable, objective summary of what’s going on here for the people outside the region.”
Woods said the report also serves a purpose for people inside the region, as well.
“For the people inside the region, we hope it gives context to what the Between the Coast region is succeeding at, and maybe what we’re not quite succeeding at,” said Woods. “[We’re] trying to keep people realistic and understand what our areas of opportunity are that are really helping the ecosystem thrive.”
Lewis & Clark Ventures is a venture capital firm focusing on high potential investment opportunities throughout the Midwest region. The firm was founded on the hypothesis that investment opportunity is plentiful between the East and West Coasts, and that successful companies can launch and grow between them.
Data from Pitchbook’s private equity and venture capital database was used to create the report.
“We pulled state-by-state data either from the 2012-17 period, or for some of the pieces, from just the 2017 information,” said Woods. “Then we had a consistent set of what we defined as the stages and rounds for each geography.”
The report shows a few surprising details about the region. Among them, the fact that the Between the Coasts region is favored by healthcare entrepreneurs.
In 2017 the Between the Coasts region made about 10 percent more of its deals in healthcare technology, and about 10 percent fewer of its deals in general information technology than the West Coast.
“We think that’s due to the proximity of patients and concentration of population between the coasts, as well as the large healthcare players, insurers and pharmaceutical companies,” said Woods.
The report also showed that round sizes and valuations in the Between the Coasts region are still considerably smaller than their coastal counterparts, especially at later rounds. That leads to higher cash-on-cash returns.
“For five of the six past years, including the past four years in a row, the Between the Coasts region has had significantly higher cash-on-cash returns than the west or east regions,” said Woods. ‘In 2017 there was even an uptick in the near-highest ever ratio there.”
From 2012-2017, the Between the Coasts region also tended to have the highest exit ratios.
“The other interesting trend in [the exits section] is that exits over time have steadily been declining in the west region and they’re staying roughly flat, increasing a little bit from 2016 to 2017 in the east coast regions,” said Woods.
Lewis & Clark Ventures hopes that the report will help in maintaining a baseline understanding of deal, fund, and exit activity across the regions as the Midwest continues to gain relevance as a region for venture capital activity.
Visit Lewis & Clark Ventures’ website to view the complete report.
Christine McGuigan is the Managing Editor of Silicon Prairie News.