Higher Startup Valuations

The single best way to improve the attractiveness of Cleveland to high-growth startups is to increase the mean valuation of similar stage / similar industry companies in the Cleveland area. While “lack of startup funding” is repeatedly blamed for the midwest’s ecosystem woes, the more direct culprit is the low baseline of valuations offered by those funding sources.

Yes, it is unlikely that we’ll be able to convince local investors to change their valuations to Bay Area levels (this would literally require doubling or tripling for some), but if we can drive the average above an “acceptable level” then valuation will no longer be a reason to actively avoid or deride the area.

Increased Worker Salaries

Cleveland startup organizations tout "low cost of living” as an advantage for our ecosystem. Unfortunately, it’s also an indicator that founders and workers are undervalued.

Aside from living expenses, many costs are flat nationwide leading to "grass is greener" mentality. An A+ prospect engineering student looking for their first gig can do the math. [$110k in salary / options in a company with ~$100m valuation / $3k rent] is very different than [$50k salary / options in a company valued at ~$50m / $1.5k rent].

These median entry-level salaries and median rents have equivalent percentages of rent/pay, but the remaining raw dollar amount left over each month is considerably higher in the Bay Area, nevermind the higher company value which likely means increased potential payout of exit.

[Higher Salaries > Better Talent > Higher Valuations > More Competition for Talent > Higher Salaries]

Increased Standing of “Cleveland Startup” Brand

Much like a college that has a poor reputation, the standing of the “Cleveland brand” has a direct negative effect on investment and exit outcomes. The “pedigree” of a startup is largely based in their current location, cap table investors, advisors, mentors, and founding location.

Cleveland-based businesses automatically gain a black mark for many investment, partnership, or acquisition discussions due to the perception that startups in Cleveland are rare, poorly funded, and/or unsound.