Deeper Dive: Venture Capital Preseed Activity in Nebraska

One Silicon Valley investor recently said that coastal startups are more likely to die from indigestion, whereas midwest startups are likely to die of starvation. These numbers show that Nebraska startups are, in fact, dying of venture capital starvation. The capital required to get them to a return-worthy point is nominal.

Fewer, bigger deals hamstring our innovation economy. Nationally, venture capital has been steadily consolidating more money into fewer startups. Locally, many of the funds and angel groups that pioneered midwest venture have moved downstream, writing bigger checks to later-stage companies. This trend has left new Nebraska founders with almost zero options for early capital. Which reinforces our earlier point about Nebraska’s rising dealflow representing a ripe investor-friendly market. 

A recent study by PitchBook correlated the amount of venture capital funds within a region and the number of early and later stage startups in that region. The data was clear: more available venture capital was a key indicator of success to more early stage startups. 

Fewer companies at the top of the startup funnel mean fewer companies will scale up. Our state has a preseed venture capital challenge. The preseed stage acts as a catalyst for any downstream investments, yet there is no institutional investor that is able to take a lead investment position in order to get a company funding between $50-$500k. The earlier you get on a company’s capitalization table, the more equity you own. The disappearance of preseed in our state leaves gaps in our startup funnel and in our return opportunities.