By Tom Walker, Rev1 Ventures
While capital may be harder to come by in the Midwest versus our coastal counterparts, there is more capital available now in the Great Lakes region and surrounding states. Entrepreneurs are growing increasingly savvy about gaining access to it.
Landing customers goes hand-in-hand with landing capital. There’s no better way for a B2B (business-to-business) startup to get investors’ attention than to sign up paying customers. We are seeing exciting developments as B2B entrepreneurs tackle the interrelated challenges of raising capital and customers.
Growth-oriented founders are becoming increasingly focused on starting and growing new companies in the regions where their customers are located.
It’s better for startups to scale up with customers in their own backyard than to complicate early efforts by targeting corporations that are hundreds of air miles away.
- This works especially well in our part of the Midwest, which is home to more than a third of the Fortune 1000 companies. With 64 and 55 Fortune 1000 firms, respectively, Illinois and Ohio round out the top five states with the most Fortune 1000 companies, exceeded only by New York, California, and Texas.
- Big companies have big budgets to spend in new ways to solve old problems with artificial intelligence, machine learning, and the Internet of Things (IoT). These are exactly the types technologies that startups are building businesses around. Giant companies are also looking for innovative solutions to optimize the talents and skills of their employees, making their companies more desirable places to work.
Accelerators and investors are proactive about helping B2B entrepreneurs scale their startups by zeroing in on regional companies and industries that have the most to gain from the startup’s solution.
- Accelerators, angels, and VCs are seriously working their networks to get entrepreneurs access to strategic decision-makers. It’s much more than making a few phone calls. It’s a concerted effort to open doors to meetings and discussions that will yield results.
- Simultaneously, many corporations around here are proactively seeking early access to disruptive technology and are not afraid to act as first customers. They recognize that it takes unfettered creativity to tap into new products and markets that help an established corporation gain a competitive edge.
- When startups build products that allow major corporations to pursue strategic business initiatives that they couldn’t achieve before, corporations step up to give young companies a chance. One great example is Cardinal Health, a $103 billion healthcare and services company that is 21st on the Fortune 1000 list. Cardinal Health uses mentoring as a key element of its global talent management strategy. The corporation selected MentorcliQ, a startup that provides a full-featured mentoring system, as the platform to manage employee development programs across the corporation. Founders moved MentorcliQ from California to Ohio in consideration of customer potential.
Imagine how powerful this early customer experience is for a startup that’s been in business for just a few years. It’s led to great credibility for MentorcliQ. The company now does business with multiple Midwestern Fortune 1000 businesses, including Worthington Industries and Huntington Bancshares.
MentorcliQ has honed features, tested its distribution model, and built a portfolio of references. These Fortune 1000 successes helped build industrywide recognition for MentorcliQ’s solution via case studies and articles. The company’s software is now used by employees in over 65 countries and in 10 languages to reach the global workforce of its customers.
Corporations are becoming a source of capital from the prototype stage through Series B rounds.
- As in other parts of the country, companies are beginning to invest directly, through corporate venture funds or syndicated rounds with other regional venture capitalists or angel investors.
- A first-of-its-kind for the region is a new $22 million corporate-backed seed fund, which has participation from Fortune 1000s, including Cardinal Health, Nationwide Insurance and other firms and institutions. The fund’s inaugural investment was in a $10 million Series B round in Prevedere, a predictive market analytics firm, that counts Fortune 1000s Brown-Forman in Louisville and Nationwide Insurance in Columbus among its customers.
Securing customers is the biggest challenge that most B2B startups face. An approach that focuses on signing up strategic early customers in a region populated with Fortune 1000 companies is changing the way early-stage startups are funded and grown. It’s accelerating startups and the economy.
Tom Walker is the president and chief executive of Ohio-based Rev1 Ventures and is the author of “The Entrepreneur’s Path: A Handbook for High-Growth Companies.” More info about Rev1 is available at www.rev1ventures.com.
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