Loyal Midwest investors take a chance on B2C startups

By April 9, 2018

The Midwest is no stranger to B2C startups, and the investment opportunity has clearly already been identified by investors, who have put their faith into everything ranging from food and drink, fashion, music and even robotic toy mice. Thanks to this local customer loyalty, Midwest startups have been given the opportunity to thrive and achieve the same sort of success as established B2B industries such as digital health, logistics and enterprise SaaS.

Midwest customer-facing startups have traditionally stood at a significant disadvantage compared to Silicon Valley B2C companies such as Facebook, Google, Apple and Uber, whose success can be attributed, in part, to famously large investments. Perhaps unfairly, therefore, the general outlook seems to suggest that B2C startups not formed in San Francisco, Los Angeles or New York will struggle to become as successful.

Part of the reason why B2C startups have managed to thrive in the Midwest, however, is due to their understanding of the varied and moderate demographic that is the Midwest target market. In other words, the general balance of urban, suburban and rural cultures, lack of dominant single industry and large minority populations. Traditionally, inhabitants of middle America would be reluctant to invest large amounts of money into relatively niche markets, which could explain why the entertainment, consumer electronics and advertising industries are not the most reputable.

Thanks to their strong comprehension of the everyday consumer, B2C startups such as Raise.com, hudl, EBTH, Fooda and Varsity Tutors are now following in the footsteps of already hugely successful Midwest ventures such as Groupon, Orbitz and GrubHub which have all been sold for over $1B. Off the back of these companies, other startups have been launched, such as a VC firm started by the founders of Groupon, who have also backed B2C startups SpotHero and Fooda, and a new startup called Fixer, launched by Grubhub founder Mike Evans. 

However, the problem for these new Midwest startups is not the lack of interest from venture capitalists, but the limited amount of money they are able to invest in these companies. There is also a lack of accelerators looking to provide financial support, with The Brandery in Cincinnati and Techstars Retail in Minneapolis being the only two that focus on consumer and retail companies. Notable Midwest VC firms also include Chicago’s Listen Ventures and Corazon Capital.

It seems, therefore, that what these Midwest B2C startups need, in order to be able to achieve the same levels of success as B2B companies have achieved in this area, is capital. Even though ultimately it is unlikely that they will ever receive the huge investments that Silicon Valley companies will see, Midwest entrepreneurs can safely count on local customer support to ensure that their B2C companies continue to flourish.