Nebraska’s two largest cities advanced in this year’s ranking of startup ecosystems by M25 and Midwest Startups. Omaha, ranked #18, and Lincoln, ranked #20, both climbed two positions. Omaha’s score increased from 21.2 to 22.0 and Lincoln’s from 20.6 to 21.4. As a whole, Nebraska saw improvements across the board due to rising startup investment and performance.
This progress was driven by significant gains in “Startup Momentum” with Omaha moving up 13 spots and Lincoln 14. Despite being a state with fewer than 2 million residents, Nebraska has recently produced startups like Hudl, Spreetail and Buildertrend which elevated Lincoln’s “Big Outcomes” score above most other college towns and comparable to larger cities, i.e. Cincinnati and Cleveland.
Omaha and Lincoln both benefit from a highly educated workforce, impressive startup density, and Omaha boasts an unmatched “Big Companies” score for cities of its size. The state has a lot of compelling ingredients for success, including the emergence of a literal “Flywheel effect”, with the founders and early leaders of Flywheel, acquired by WP Engine, launching new ventures including Workshop and Alpaca.
How the rankings are calculated
This is the eighth year of the Best of the Midwest: Startup City Rankings. “These rankings measure a core base statistical area’s (CBSA) relative rank as an ecosystem for a startup to launch, grow and scale,” according to a post on the Midwest Startups blog.
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The rankings are based on 25 variables from 16 data sources, including the U.S. Census Bureau, U.S. News & World Report, PitchBook and state governments. The 25 variables are divided into three major categories:
- Startup activity. This measures the number, density and momentum of startups in a city. It includes the size and number of exits and fundraises, and gauges the quality of the network available to new startups.
- Access to resources. This measures how supportive a city is to startups based on availability of talent, innovation, investors, startup accelerators or incubators, universities and government programs.
- Business climate. This measures how conducive a city’s economic environment is to start, attract or grow a business. Cost of living and labor costs, business tax rates, population and infrastructure—both technical and actual, i.e. reliable internet and access to an airport—are all factors that influence this portion of the scoring.
2024 highlights
Venture capital firms are on track to raise the lowest amount of capital since 2013, according to Midwest Startups’ analysis. More than one-third of venture funds that actively deployed capital in 2022 made no new investments in 2023.
Midwest startups, however, remain an attractive investment opportunity due to the regions’ reputation for capital efficiency, even during periods of growth. Midwest startups require less capital infusion due to a lower cost of living, among other factors, and tend to produce better outcomes for investors compared to other geographic areas.
According to the Midwest Startups blog, “these companies sell to the industries that form the backbone of the U.S. economy—horizontal software for mid-market and Fortune 500 companies, healthcare IT for major pharmaceutical companies, payers and providers, manufacturing and industrial SaaS in support of one of the Midwest’s foundational sectors and everything else in between.”
In spite of a wider slowdown in raising and deploying capital, Lightbank’s $290M Fund III was raised in Chicago, and is the largest fund ever raised in the Midwest. Omaha’s own McCarthy Capital raised an $870M Fund VIII.
The top five cities by rank are:
- Chicago
- Minneapolis
- Indianapolis
- Pittsburgh
- Columbus
