Why the Middle Market is the Engine of the American Economy

Research Report by Next Street, with support from J.P. Morgan Chase

Executive Summary

While small businesses and large corporations often dominate the headlines, the middle market—defined as businesses with annual revenues between $10 million and $1 billion—is the true backbone of economic resilience. These firms represent only 1% of all U.S. businesses but account for one-third of private sector GDP and employment.

Despite their outsized impact, diverse-owned middle market firms face systemic barriers to capital and advisory services that limit their ability to scale. "The Middle Matters," conducted in support with J.P. Morgan Chase and developed by Next Street, provides a comprehensive look at this landscape and the emerging solutions needed to fuel their growth.

Top Line Takeaways

1. A Powerhouse for Wealth and Job Creation

• Economic Impact: Middle market firms are vital drivers of regional economies, providing stable, high-quality jobs and fostering local wealth generation.

• Resilience: These businesses often show greater stability during economic downturns compared to smaller enterprises, serving as critical anchors for community stability.

2. The Diversity Gap in Ownership

• Underrepresentation: While diverse-owned firms are growing, they remain underrepresented in the middle market relative to their share of the overall business population.

• Systemic Barriers: Minority-owned middle market firms often encounter "thin" capital markets and a lack of culturally competent advisory services that understand their unique growth trajectories.

3. Specialized Capital and Advisory Needs

• Complex Financing: As firms grow from $10M to $1B, their needs shift from simple lines of credit to complex equity structures, mezzanine debt, and specialized M&A advisory.

• The "Missing Middle" of Support: Many traditional financial institutions are optimized for either very small businesses or massive corporations, leaving middle market firms in a service gap.

4. Regional Insights: Chicago, Dallas, and Los Angeles

• Local Ecosystems: The report features deep dives into these three major hubs, highlighting how local industry clusters and policy environments shape middle market success.

• Equity in Contracting: Enhancing federal and local contracting equity remains a primary lever for growing diverse-owned middle market firms in these regions.

Emerging Solutions for Growth

To bridge the gap for diverse-owned middle market firms, the ecosystem must evolve. Key opportunities include:

• Ecosystem Partnerships: Strengthening the links between banks, community leaders, and industry associations to provide a holistic support network.

• Targeted Market Strategies: Developing financial products specifically designed for the unique cash flow and scaling needs of mid-sized diverse firms.

• Awareness and Outreach: Proactively identifying and engaging high-potential diverse firms before they hit a growth plateau.