2023 has been a busy year here at M25: from the biggest Match Week and Club M25 Summit to date, adding a new full-time member to the team (Ruth joins us full-time after a nearly two years interning!), a few promotions (shoutout Sam and Katie), to welcoming seven new companies to the portfolio, we’re so proud of everything we were able to accomplish this year.
The team also spent some time compiling some of their own personal data, and we’ve summarized them right here on our 2023 Team Year in Review blog!
M25 & Friends Happy Hours
During 2023, the M25 team hosted a total of eight happy hour events throughout the Midwest region for a chance to catch up with their portfolio companies, fellow co-investors and other local community champions. This year’s happy hour locations included: Minneapolis, Kansas City, Ann Arbor, Madison, Indianapolis, Chicago, Omaha and St. Louis. The team really enjoyed the opportunity to check in on the various ecosystems and even forge some new relationships over the past 12 months. They look forward to seeing the list of visited cities grow next year!
The Return of M25 Match Week
In late March, we hosted our third annual Match Week for our portfolio companies to virtually meet with the variety of investors in our network. In very similar fashion to our annual Club M25 Summit, we played matchmaker between investors from around the country and our Club M25 founders in the hopes of not only igniting investment conversations but also fostering new relationships. During that week, we were able to schedule a total of 1,922 double opt-in virtual meetings between the 250 investors and 50 M25 founders.
Midwest Startups —Midwest Madness, Rankings and Talent!
From our annual Startup City Rankings to talent pushes, it’s been a big year for Midwest Startups. Our secondary brand, Midwest Startups has continued to grow and flourish this year.
Back in March, we launched our third Midwest Madness tournament. It was the biggest one yet! Bloomington, IN took the win for the second time, taking the lead in the last hour of the competition against Cincinnati, OH. We celebrated their big win at the Mill in Bloomington this August, welcoming nearly 100 members of the tech and startup community to our party.
In August, we published the 2023 Midwest Startups City Rankings, its seventh installment. The team leveraged thousands of data points, coming from 18 different data sources, to measure 64 Midwest cities across 27 weighted variables. We also welcomed a new addition to this year’s rankings, the 2023 National Peer Rankings: Major Metros. These rankings showcased how the top Midwest cities compare to major startup cities such as Los Angeles, Austin, Miami and Denver. Rankings SZN will return in 2024 (only eight months away!)—let the countdown begin!
One of our goals for 2024 on the Midwest Startups front was to increase our talent efforts to send more candidates to our portfolio companies. We welcomed over 400 new candidates to our talent network this year.
Find more of our Midwest Startups news from 2023 right here!
Madison Team Retreat
In the spirit of self-reflection and team bonding, we took a break from our usual day-to-day activities during August and took a trip to Madison, WI. To kick off our team retreat, we took a boat out on the beautiful Lake Mendota despite the intense heat, where we indulged ourselves with our favorite menu items from Culver’s. Once we wrapped up our time on the lake, we drove over to Eno Vino at the AC Hotel to freshen up and cool down before our co-hosted Madison Tech Week cocktail hour with Matchstick Ventures. After all of the fun and games, the team checked into their extremely hip Airbnb, which featured a fun and speedy slide from the second floor to the first and an indoor beach area in the basement.
The next morning, we gathered together bright and early to discuss the future of M25, team accomplishments, and our investment strategy moving forward. Following our strategy session, we went to lunch and grabbed some ice cream on the town square since it turned out to be a record-breaking, hot day in Wisconsin. However, despite the intense heat, a few of us decided to partake in a pretty intense hike over at Devil’s Lake before winding down around a campfire in the backyard of our awesome AirBnB. Overall, the team retreat was definitely a success and a great opportunity to switch things up a bit. Can’t wait to see what’s in store for us next year!
The Club M25 Summit
The Club M25 Summit was bigger and better than ever this year! This October, we welcomed nearly 200 investors and M25 portfolio founders to our flagship event. Between the 1000+ double opt-in meetings (!!!!) during the course of this two-day event to the fantastic founder sessions and the many happy hours and dinners that were held, the 2023 event was a huge success.
Year after year, the Club M25 Summit continues to grow and we’re so proud of the meaningful relationships we’ve been able to facilitate as part of it. We’ve got some exciting additions on the horizon for the 2024 Summit, and we’re already hard at work to make it the best Summit yet! Special thanks to Deloitte for providing a stellar event space for us again this year and thank you to our event sponsors Gunderson, Customers Bank, PacWest Bank and Insperity for making it all possible. Find our video recap of the Summit here!
Follow-up: 2023 Midwest Ecosystem Predictions
This year we asked the investment team to make a few predictions for 2023 and any trends they expected to see on the blog. We asked for some end of year feedback based on their original predictions.
Victor: I’m predicting a decline in mega-rounds, unicorn creation and a 50% drop (or more) in VC dollars Y/Y. For a more positive prediction, I think we’ll see an increase in funding rounds for vertical SaaS companies for ‘antiquated’ or ‘traditional’ industries that the Midwest traditionally thrives in — manufacturing, agriculture, supply chain, auto, healthcare, etc.
“I feel pretty confident that my predictions — for better or worse — came true. We saw much fewer mega-rounds, only a rare unicorn minted (looking at you Kin Insurance!) and a dramatic decrease in VC investing — with the Pitchbook numbers showing I called that 50% drop pretty well (even more of a drop compared to 2021),” Victor said.
“It was encouraging though to see the part of my prediction I was more eager to see actually come true also come true — and M25 may have been ‘self-fulfilling’ in this prophecy. We backed companies in old school industries like logging, ranching and road construction. We also saw national firms writing large checks to Midwest startups in these categories, from the $290M round in EquipmentShare’s to to Bushel’s $26M to Fulcrum’s $18M to Site Technologies’ $10M. One thing I didn’t foresee was the immense amount of energy, climate and battery technology companies the Midwest would celebrate this year, as companies like NanoGraf, Shine Technologies and Our Next Energy (ONE) raised major rounds to develop our future sustainable energy economy in the heartland.”
Mike: Securing lead investors will be more important than previous years as non-lead investors will be less willing to join party rounds or rounds where the company sets terms.
“I think this was generally correct for what we saw both within our own portfolio and across the broader ecosystem. The exceptions here to a large degree seemed to be companies that had a harder time raising from new investors than they may have in previous years, and internal investors decided to all chip in and support to get the company more runway.”
Katie: I’m predicting increased investment in the Midwest region with more outside investment. We’ll see a unicorn in St. Louis and an agtech unicorn somewhere in the region.
“Listen, you can’t win ’em all. Some larger company valuations were hit pretty hard in 2023, and we definitely didn’t see any new unicorns in St. Louis or in Midwest agtech. In fact, due to decreased valuations of existing companies, we probably lost a couple of unicorns in those categories. We’ll see the 2023 data in early 2024 to know for sure if this was a year of increased investment in the Midwest or if coastal investors went back to the regions they know best. We already know that deal count was down this year (shoutout to Victor’s data above!), so we’ll see how that impacted the Midwest’s share of 2023’s deals,” Katie said.
“I think the momentum we saw in the energy/sustainability/battery and electrification space will continue to grow here in our region, and 2024 will see an uptick in deals and round sizes in those areas.”
Leandro: Rise of new wave of angel investors in major Midwest ecosystems by founders with acquisitions in the last 2 years that’ll invest in new founders raising <$500K friends and family rounds for their new startups. The Midwest startup community will embrace their industrial roots and launch/fund companies serving manufacturers, transporters, the trades, etc. The nation’s VC ecosystem attitude towards “responsible growth” being cool now will draw even more non-Midwest based investor’s interest to the historically capital efficient Midwest founders that have been executing at the Seed+ and later stages. Spurned by post 2021’s and macro environment’s impact on revenue multiples, valuations, and paper gains, it’ll become more common for founders to take some chips off the table through secondaries when raising Seed+ and later rounds.
“Given the nature of our industry, many angel rounds, especially in Midwest based startups, are unreported which makes it tough to look back with data on whether there was a rise of new angel investors in major Midwest ecosystems by founders with acquisitions in the last two years investing in the ‘friends and family’ rounds of new startups. Anecdotical based on the Pre-Seed stage founders I spoke with this year from pre-everything to a few $K of monthly revenue from pilots, I know that a decent amount of them did close their first rounds of $100K+ of which most of the capital was from angels (including the founders of late stage startups and those with exits), or catalyzed by angels. Based on my travels to various Midwest cities/ecosystems, I know that many of them have doubled down on efforts to grow their angel investor communities (and have succeeded on that), are sharing deals with each other, and investing in their local founders’ first rounds. Based on a quick Crunchbase search, it does seem like the Midwest continued to have local startups in manufacturing, transportation, and the trades raise their first round of capital in 2023 from institutional VC firms. Thinking back to my conversations with founders throughout this year and especially the last 2 quarters, that momentum will likely carry into 2024 as well. It seems that the number of Series A and B rounds in Midwest based startups from coastal investors announced in 2023 was 58% of the number in 2022 which is around the same national YoY decreases reported by Pitchbook-NVCA’s Venture Monitor Q3’23 report. If I extrapolate that through Q3’23’s $30.1B deal value in U.S. ‘Early-Stage’ deals (Series A and B as defined by Pitchbook) ends up with a 2023 total of $40B. That would be a 57% decrease YoY in deal value at that stage and around a 54% year-over-year decrease in deal count expected; in-line with my estimated Midwest decrease in volume (deal count). While not an increase for Midwest based startups like I had predicted/hoped, coastal folks likely expected even greater proportional decline from our ‘flyover states.’”
M25 Portco News
This year we added seven new companies to Club M25. Below is some notable news from across the portfolio this year.
Startup Funding
- Kin | $33M extension ($142M Series D at a $1B+ valuation)
- Axuall | $20M Series B led by Noro-Moseley Partners with participation from M25 and $7M in additional funding
- Authenticx | $20M Series B led by Blue Heron Capital with participation from M25
- Blumira | $15M Series B led by Ten Eleven Ventures
- Workshop | $12M Series A led by McCarthy Capital with participation from M25
- Pitchly | $7M Series A led by Homegrown Capital with participation from M25
- Aspinity | $5M Series B from existing investors
- Elate | $4.9M Series A led by WestWave Capital with participation from M25
- Hummingbirds | $3.3M Seed led by ground game with participation from M25
- AMOpportunities | $2M in additional funding
- Pavewise | $1.3M round led by M25
- Playbite | $1M round with participation from M25
- Aerovy | $800K Pre-seed from M25, Purdue Innovates and Flywheel
Exits
- Preflight | Acquired by Applitools
- Ryvit | Acquired by Trimble
From the Blog
- 4 Considerations for Your 2024 VC Platform Strategy
- Why We Invested in Aerovy
- Why We Invested in Pavewise
- Recapping the 2023 Club M25 Summit
- Madison, WI—M25 Team Retreat 2023
- Why We Invested in TitleWise
- Racing to Lexington
- What is ‘Platform’ in Venture Capital and why is it important?
- Drafting the Next Great Midwest Unicorn
- Rediscovering the Impact of Platform
- A Pitt Stop
- 2023 Midwest Ecosystem Predictions
- Why We Invested in Hummingbirds
Curious about what the M25 team has been up to this year outside of work? Check out part two of our year in review.
