Despite Detroit being ranked the “No. 1 Emerging Startup Ecosystem” by Startup Genome’s 2022 Global Startup Ecosystem Report, total venture funding in Michigan, like many Midwestern states, lags other regions as compared to coastal investment.
California, Massachusetts, and New York annually account for more than 73 percent of all venture funding nationally. In terms of venture capital invested in the United States in 2022, the Great Lakes and Midwest region accounts for just 7.2 percent of all capital deals. Michigan’s venture capital rank when compared to gross domestic product (GDP) is 29th, trailing Minnesota (8th), Illinois (9th) and Ohio (25th) in the Midwest. Additionally, raising funds from traditional venture sources has become more challenging recently, especially for startups outside traditional tech hubs or those with female or minority founders.
Michigan’s venture funding has been increasing faster than other states’, to be sure; however, most private investors in Michigan do not have the capacity to fund early-stage, pre-seed companies. This type of funding is increasingly coming from public agencies, private foundations, or sometimes corporate foundations.
For Michigan to increase job creation and spur economic development, the state needs to be creative at generating more opportunity for entrepreneurs. To be more competitive the state of Michigan needs to invest more public funding in its startup ecosystem. Like other growing Midwest economies, Michigan simply needs more early-stage, pre-seed capital to turn its talent and innovation into jobs.