Peter Thiel Is Bullish on the Midwest. So Are We at iSelect

Peter Thiel is one of the savviest investors of our time. His $2.5 billion net worth is proof of that.

So when Thiel says the next big innovations will be born in the American Midwest, it’s probably a safe bet that he’s onto something — especially since he is planning to put his money where his mouth is.

Bloomberg recently ran a piece about Thiel that read, in part:

[Thiel] joins a growing group of venture investors searching the country’s heartland for startups to bankroll and says the next innovations will likely come from less insular, less expensive areas. Despite a steady decline in recent years, Northern California and New York startups still attracted more than half the $70 billion total venture capitalists invested in the U.S., according to the 2017 MoneyTree report.

Along with geography, sector is important, Thiel said. Artificial intelligence companies don’t appeal to him, but “charismatic” technologies do like Bitcoin, biotech and anything his longtime friend and fellow PayPal co-founder Elon Musk develops.

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So why exactly is Thiel homing in on the Midwest as the new epicenter for his VC funding?

It’s simple: Because costs are low and innovation is high.

Some estimates suggest that a Chicago startup could have a 50% lower burn rate compared to a Silicon Valley company of a comparable size. Lower costs mean a quicker turnaround on profitability — which means a lower chance of failure and a higher chance of return on investment.

Nashville, for instance, is drawing a lot of attention for its strengths in healthcare IT. Several reports have shown an increase in VC funding there for health IT, reaching $62.5 million in 2014.

As of 2015, Chicago, which got put on the tech startup map thanks to companies like Groupon and GrubHub, was the 5th largest and the 11th fastest-growing tech market in the United States, according to a report by investment firm CBRE. The city also boasts the country’s third largest growth rate in tech jobs, beating out Silicon Valley.

And these cities are hardly islands of innovation. In a list of the 14 best startup cities in the country, St. Louis is #1, followed by Des Moines, Cleveland, Urbana, Illinois; and Detroit.

Obviously, when it comes to investing in the Midwest, Thiel knows what he’s talking about.

We couldn’t agree more. That’s why our team has been doing early-stage investing in the Midwest for over two decades. In the last three years, we’ve evaluated over 4,000 Midwest companies and invested in 34.

And we’re not alone in our belief in the Midwest startup culture. We’ve also co-invested with 80 venture firms and strategic investors.

So, to all those looking to come to the Midwest to invest — from Peter Thiel, to his Founders Fund, to the Rise of the Rest and more — reach out. Give us a call. Find out more about how iSelect is investing in the future of the U.S. and what you can do to help.

Consideration

With 2021 well underway and with public markets still strong, we think it is an important time to highlight some of the key private market, venture investment themes that iSelect fund has identified for the year. We believe technologies transforming the Agriculture, Food and Wellness markets will flourish, with a focus on four areas: technologies that enable better food choices to drive better health outcomes, technologies that drive better, more profitable farm operations, technologies that drive the Consumerization of Healthcare, and biome-based treatment technologies. At iSelect, we invest for impact AND performance. We offer qualified investors access to emerging growth companies through our national venture capital strategy. Our unique structure allows our investors to continue to invest in these companies as they develop.

Timing

Why is now the right time for venture? The answer is that now is not explicitly the right time. Venture is something we need in our economy at all times. Now is not better than any other particular time. The question is, why ever stop? When we look at the challenges we’re facing in food and healthcare the reality is there is someone, somewhere who has an insight about how to build a product that will solve those problems. And if they put the right resources to it, they will succeed. As long as we need new technology to make life better or make our lives more enjoyable, we need venture capital to help fuel those entrepreneurs.

What is iSelect as a product?

iSelect is a very unique product, but when you break it into its parts it’s fairly easy to understand. On the front end we’re a traditional venture capital fund. We have a diligence process. We have an investment process. We have categories of industries where we have focus and real expertise, and we invest in companies in those areas that meet requirements for the fund. On the back end we’re unique in that we don’t raise a large amount of capital at one time and deploy it over the life of our fund. Each deal that we bring onto the fund, our investors have to prove and determine to invest in that deal. We have to constantly prove our diligence standards. It’s accessible, transparent and easy for investors to come in and see our comprehensive process.

What is the ideal iSelect company?

We are looking for founders that are passionate and we want the problem they’re trying to solve to be big, real, and painful. We want the solution to be revolutionary and we want our capital to be able to help them solve that problem. We want to know that they have customers involved and that the solution they’ve come up with actually meets those customers’ and market needs. And we want the team to be capital efficient with the money they’re spending.

What does the ideal iSelect company look like?

We’re looking for a company that has an opportunity to have a 10x return to our investment or greater in a period of three to seven years. What excites us at iSelect are companies that are solving big problems. We want companies that are going to be the Monsantos of the future. Not just in the size and the scope, but the impact they have on people’s lives. We want to create positive impacts on people’s lives, so we invest in areas like agricultural production and areas like producing healthy foods for our kids. They are problems that impact real people’s lives on a daily basis. That’s what we’re trying to do at iSelect. We’re trying to solve the big problems out there. Find ways to bring capital to the entrepreneurs who are the real heroes out there getting up every morning, beating away at these things that are problems that you and me and everyone else faces in their everyday lives.

What is iSelect?

iSelect is a venture capital firm. What that means is we look at hundreds and hundreds of different companies and we apply tough diligence standards to each of them, looking at whether the team has a good plan for growing the business, whether the team is qualified and credible, and more. We do that to resolve the few who provide the best opportunities for investors. And then iSelect takes that smaller set of investments and goes to investors who are interested in venture capital and provides a way for them to invest in these companies, either individually or all at once. We co-invest alongside other venture capitalists. We source transactions through to an exit where the company would become public or get bought. And we manage that whole investment process on behalf of our investors.

Peter Thiel Is Bullish on the Midwest. So Are We

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