Local Connectedness Is Driving Indiana’s Thriving Startup Ecosystem

Indiana is an ecosystem of movers and shakers: friendly people who undertake and accomplish big things. The state is an affordable, affable startup hub where entrepreneurs and their supporters weave dense webs of local relationships. Yet its startups, universities, and corporations are focused on some of the fastest growing global tech sectors, particularly those that address pressing issues such as health and climate change.

In Indianapolis, that combination of local performance and global promise soon will start generating $100-million-plus — and even unicorn-sized — scales-ups annually, according to an assessment by Startup Genome.

That potential has ignited investment: in 2021 Indiana startups broke records, raising $1.4 billion in 159 deals. About 30% of seed rounds clocked in at $1 million-plus: a larger percentage than in comparable ecosystems. In addition, the number of Indiana startups progressing from Seed to Series A was 13% higher than their peers, as revealed by a Startup Genome assessment. Elevate Ventures, which has funded 462 Indiana startups in 87 counties across the state, is the major force in this space.

Last year, 57 startups were involved in M&A activity, according to Indiana accelerator TechPoint. The ecosystem has produced three $50-million-plus exits in three years. Indiana’s dominant sub-sector, Life Sciences, has attracted the lion’s share of investment, raising $434 million in 2021. That included new funding for On Target Laboratories, which has earned FDA approval for an imaging agent used during cancer surgery.1 Co-founder Dr. Phillip Low has already notched one biopharmacy unicorn in Endocyte,2 and On Target Laboratories has raised more than $80 million in aggregate. The overall Life Sciences sub-sector exported a record $12.7 billion worth of products in 2021.

The Strength of Schools

The success of Life Sciences startups attests, in part, to the vision of investors such as Elevate Ventures, BioCrossroads, IU Ventures, and Purdue Ventures. But it also reflects the strength of Indiana’s first-rate universities, which produce industry-changing innovations.

In 1980, Indiana Senator Birch Bayh spearheaded the law that established universities’ ownership of patents,3 making Indiana the birthplace of modern technology transfer. That tradition continues. For example, MBX Biosciences, which has raised about $60 million, is developing a treatment for endocrine disorders based on discoveries made by its co-founder, the serial entrepreneur Richard DiMarchi, at his laboratory at Indiana University.

Purdue University and Indiana University offer world-class degrees and research facilities in Life Sciences, but the state’s universities also are strong in other sub-sectors — Cleantech, Artificial Intelligence, and Industry 4.0 are among the ecosystem’s fastest growing. In fact, Indiana’s universities outperform institutions in every comparable ecosystem except Michigan’s for all tech sub-sectors, according to Startup Genome’s assessment.

Good tech workers are notoriously hard to find. But Purdue University, Indiana University, and the University of Notre Dame, among other institutions, have strong reputations and draw top students from across the country and internationally, creating a deep pool of engineering and business talent for Indiana’s startups. Students come for the education. Graduates stay for the low cost of living and quality of life.

The Corporate Contribution

Indiana’s corporations — including Eli Lilly and Company, Anthem, and Salesforce Marketing Cloud — also attract talent to the state and invest in the ecosystem. Steve Case, the former AOL CEO who is an evangelist for widespread entrepreneurship, touts Salesforce’s 2013 acquisition of homegrown email marketing startup ExactTarget for $2.5 billion as a milestone in Indiana’s development as a tech hub.

Corporations are customers and collaborators too. Manufacturing thrives in Indiana, and companies in that field are rapidly adopting Industry 4.0 technologies, encouraged by the state’s Manufacturing Readiness Grants. The co-founders of MITO Materials — Haley Marie Keith and her husband, Kevin Keith, who made Forbes’ 30 Under 30 list 2021 — moved their specialty chemical company from Oklahoma to Indianapolis to be at the center of midwestern manufacturing.

Haley says, “Corporate venture partners in Fintech, Agtech, and science are a rapidly growing capital pool. Indiana's ecosystem of strong corporations give companies who grow here access to corporations that can be customers, mentors, collaborators, and investors. The Heritage Group hosted a manufacturing and materials based accelerator that initially drew us back to Indiana, and our company success has skyrocketed, in large part due to Heritage Group's corporate contributions.”

Indiana’s strong agricultural economy has attracted Agtech startups from around the world, including Taranis, a global business formerly based in Israel. A combination of conditional tax credits and the opportunity to operate from America’s largest commodity crop production region lured the company, which combines aerial imagery and AI to help growers’ decision-making. Overall, Indiana’s expanding Agtech sub-sector raised $78 million last year.

A Wealth of Connections

Among Indiana’s greatest assets is its high degree of local connectedness. That famous “Hoosier hospitality” has forged a strong sense of community and relationships among founders, investors, and experts, and this is what strengthens the ecosystem. Connections with global networks are expanding as expat Hoosiers interact with Indiana alumni groups and investment networks, and many who leave Indiana for Silicon Valley or New York eventually move back to the state, bringing their experience and contacts with them.