Updated: Mar 20
Author: David Iannalfo – New Stack Venture Capital
What is one thing that Seattle, New York and San Francisco all have in common? Well, as the great NBA superstar Larry Bird once said, “[They’re] all playin’ for second place.”
Technology research and data collection company Pitchbook began tracking Chicago’s venture capital ecosystem in 2006. Since then, startup investing in the city has generated a nearly 5.2X multiple return for investors on their initial investments. The “Multiple On Invested Capital” ratio, or MOIC, is an industry standard that illustrates an investment’s exit value relative to its amount of capital raised. As per Pitchbook’s latest findings, Chicago “outperformed New York, Seattle and San Francisco in 2020, which scored second, third and fourth on last year’s list, respectively.” The findings from Pitchbook’s 2020 “Venture Monitor” report, published in January 2021, reaffirm that Chicago is yet again the country’s best city for VC investor returns.
In the midst of a year of uncertainty, the COVID-19 pandemic did not decelerate Chicago’s deal flow investing in the slightest. Chicago saw a record-breaking investment outflow in 2020, deploying just over $2.8b in technology company investments, equating to just under 2% of the $156.2 billion national total investment amount. Additionally, Chicago saw 273 companies raise venture capital funding in 2020. While this number is over 10% less than Chicago’s prior year company investment count, Pitchbook analyst Kyle Stanford noted, “this number is likely to increase as Pitchbook continues to gather data and companies report end-of-year funding rounds.”
For startup founders across the country, and particularly in the Midwest region, Chicago offers ample funding opportunities to founders who are looking for an influx of capital to help catapult their businesses to the next level. According to Crunchbase.com, the Chicagoland area provides technology entrepreneurs with a combination of over 200 venture capital firms, accelerator programs, start-up incubators, university and government sponsored competitions, and nearly 300 active individual Angel investors. To further assist budding Chicago companies in their pursuit of venture funding, Mayor Lori Lightfoot and other regional banking institutions such as JPMorgan & Silicon Valley Bank (SVB) have combined resources to initiate their newest platform, “Startup Chicago” (https://www.chicagoventuresummit.com/startupchicago/).
With additional partnership support from the Chicago Venture Summit, one of the largest and most reputable venture capital events in the Midwest, “Startup Chicago” uses its database and numerous showcasing events to connect the city’s Series A and B founding round startups with investors.
For newly created companies or founders who are experiencing the tumultuous waters of venture financing for the first time, New Stack Venture Capital (https://www.newstack.vc), a Chicago based Pre-Seed and Seed venture firm, has created a solution. One of the biggest growing pains that founders face when starting off is finding the right VC investment partner that aligns with their company. With New Stack’s development of “VC-Rank” (https://www.vc-rank.com/) the fund has introduced a revolutionary way to help entrepreneurs all over the Midwest solve this problem. VC-Rank is a back-end database for founders that compiles a list of potential venture capital investment partners that best fit a company’s stage and sector. New Stack Ventures Deal Lead Nate Pierotti explains, “after spending nearly 3 years on development, VC-Rank instantly delivers a list of the top 60 best-fit VC firms from a database of over 1700 firms. Upon filling out a short series of questions, the founder will receive a customized list based on their startup's stage, sector, and location.”
As the United States and the world continue to explore the next frontier of technological innovation, one thing is for certain—the Midwest is no longer simply a “fly over region.” When it comes to providing startup front runners with the capital and expertise necessary to transform their visions into reality, all founders should be looking heavily to the Midwest. Chicago’s Mayor Lori Lightfoot accurately described the future of the Midwest venture capital ecosystem, stating that "when it comes to supporting entrepreneurship, driving innovation, and—above all—delivering results, there is no better city in the nation than Chicago thanks to our vibrant ecosystem, diverse economy, and wealth of homegrown talent."
About The Author
David Iannalfo -
David is a current member of the New Stack Venture Capital Fellowship program and a Full-Time MBA student at DePaul University. Prior to joining New Stack Ventures, David enjoyed a career in Wealth Management where he worked for Goldman Sachs, Morgan Stanley, and Battery Global Advisors. David is from Boston Massachusetts and currently based in Chicago Illinois.