Despite its unfortunate tourism slogan, Nebraska is, in fact, for everyone. And it’s an especially attractive area for startups to plant their roots and bloom.
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Nebraska’s tech scene, centered around the nearby cities of Omaha and Lincoln, has become an under-the-radar hub for innovation. With large examples of success like Hudl, which has raised over $100 million, and BuilderTREND with its estimated $45 million in yearly revenue, the ever-evolving “Silicon Prairie” is primed to earn a spot in the national spotlight with a new generation of startups.
Recent successful fundraises have the innovation sector excited for an even brighter future, with Omaha’s Fanbox $1.3 million Series A, Lincoln’s Opendorse raising $3 million, and Retail Aware out of Omaha raising $450,000 in their seed round.
But this type of activity wasn’t always so sunny on the prairie. According to trend data compiled by Invest Nebraska, a local venture development fund, startup activity has changed rapidly for the better.
In 2011, the Cornhusker state was actually tied for last place out of all 50 states in terms of aggregate venture investments into in-state startup companies. In 2015, Nebraska saw a jump in ranking to 25th place and as of 2018, Nebraska ranks at 38th when compared to other states in the U.S.
As for the number of deals, Nebraska went from zero in 2011 to a peak of 19 in 2017. It rests at 17 for the last year of available data in 2018. In terms of aggregate investment dollars, Nebraska began at a startling zero in 2011 and surged ahead to $119 million in 2015 and $80 million in 2016. For the year 2018, Nebraska’s investment dollars were $26 million.
So, what makes Nebraska an increasingly attractive spot for startups and what factors have contributed to the shift upwards? Besides a low cost of living, an overall friendly climate, and a short commute (less than 20 minutes), Omaha-Lincoln has some amenities worth bragging about.
The area was included in Entrepreneur Magazine + Livability’s list of Best Cities for Entrepreneurs 2016. Additionally, with government resources dedicated to improving tech success and the business landscape, buy-in from key stakeholders is there.
In fact, the Nebraska Legislature has a dedicated task force to support Innovation and Entrepreneurial activities; this body is supported by the Nebraska Department of Economic Development, numerous private donors (both foundations and individuals), USDA Rural Development Grants, and the Nebraska Investment Finance Authority. Additionally, Nebraska Angels has been around since 2006 to help provide structure around angel investing in Nebraska.
According to Nebraska Angels Executive Director Stephanie Luebbe, the non-profit aims to make it easier for startups to find investment dollars and for angel investors to manage funding requests—all while building the entrepreneurial community.
“In regard to cash, entrepreneurs can make a dollar stretch much further in the Midwest than in other regions,” said Luebbe. “Whether spending money on employees or office space, a lower cost of living in the Midwest does allow for longer runways. In addition, nearly every startup at some point will need access to funds to help the company scale, and our organization along with others in Nebraska aims to be the source of seed-stage funds as well as provide connections to other investors across the region.”
According to Invest Nebraska’s program director Matt Foley, there is “a strong connectivity where introduction can quickly lead to key decision makers,” which is helpful for early stage startups seeking honest feedback from initial clients.
“Founders who have moved to Nebraska from out of state have noted the general helping spirit as people appreciate being asked for advice and enjoy the co-creation process of helping an early stage idea,” he noted.
Foley also pointed out that Business Innovation Act programs as a whole, including The Seed Innovation Fund, Nebraska Prototype Grant, as well as Academic R&D and SBIR matching grants are critical for the entrepreneurial ecosystem.
For many start ups it provides the capital needed to test the feasibility of business model or prototype. These programs have a high return on investment for the state and the state government deserves a lot of credit in jumpstarting this initiative, he believes.
Other successful endeavors on the startup scene are the Startup Collaborative (a program of the Omaha Chamber of Commerce), 1 Million Cups (meet-ups in both Lincoln and Omaha), Biotec Connector (at the University of Nebraska Lincoln’s Innovation Campus), NMotion Accelerator (with support from UNL and the Lincoln Chamber), and the Nebraska Business Development Center (at the University of Nebraska Omaha).
One more key factor worth noting is the availability of affordable tech-focused co-working spaces in both Nebraska cities. Omaha is home to Populus, Watts, the female-only Trouvaille, and Commerce Village among others. Lincoln’s coworking spaces include Fuse, Turbine Flats, and space at the aforementioned Nebraska Innovation Campus.
Close To The People
Nebraskan startups have the advantage of being based outside the bubbles of New York and Silicon Valley.
“It’s much easier to build solutions when you live in the midst of the market that is facing a problem,” said Luebbe.
For example, one portfolio company Luebbe mentioned has found a way to provide data analytics to critical access hospitals that previously didn’t have in-roads to rich data that would allow them to better serve their patients.
“The Midwest is home to hundreds of these smaller hospitals in rural areas, providing the landscape that is prime for disruption that this Nebraska-based company aims to tackle,” Luebbe said. Invest Nebraska also plays a large role in growing the health of the state’s startup ecosystem. It is the most active startup investor in the state (looking at data from 2012-2017) and was recently recognized as one of the most active VC in the Midwest and Mountain region.
Additionally, the Nebraska Angels network, of over 60 individual investors, not only co-invests with Invest Nebraska but is the second most active VC in the state. According to Luebbe, “Over the past five years, Nebraska Angels invested $20M across new companies and existing portfolio companies, with over 60 percent of the funds supporting Nebraska based companies.”
Despite these developments, the Nebraska startup landscape has areas that need improvement. Like many Midwestern locations, Nebraska suffers from the so-called “brain drain.” The United State Congress’ Joint Economic Committee defines this phenomenon as when states are hemorrhaging their homegrown talent and failing to attract out-of-staters who are highly educated.
Capital isn’t the only thing companies need to grow; the right people are also necessary. Luebbe said that thankfully, “Nebraska is home to very strong collegiate programs through UNL, UNO, Creighton; all geared at building a large pool of talented individuals that are educated and driven to help companies make a difference.”
Additionally, according to Invest Nebraska’s Foley, “an increased connectivity between larger established business in Nebraska partnering with startups can be improved.”
Diversity in startup leadership is another area that needs improvement in both Lincoln and Omaha, as well as across startup communities. But there is reason to celebrate some strides being made in this arena in Nebraska.
“Starting by looking in the mirror, we recognize as the leading investor in the state we must strive to be a leader in this regard. Examples of past investments into women-led businesses include: LifeLoop, TAGG (Together A Greater Good), Nobl, Bulu, Encounter Telehealth, Pincurl Girls, Pawlytics, and Jord Producers. [And], NMotion, the startup accelerator, recently selected a cohort of highly qualified entrepreneurs who happened to be entirely women led business[es],” according to Foley.
Additionally, the executive director of the Nebraska Angels is a female. Luebbe shared that, “Diversification in thought is always encouraged, whether founders are building out a leadership team or investors are building a portfolio of investments.”
Overall, it’s easy to see that there’s a reason for the innovation sector optimism pervasive throughout the friendly Midwestern state of Nebraska. Despite brutal beginnings, the combined areas of Lincoln and Omaha have a lot to be excited about as they continue to attract venture funding and government support.