2018 Chicago VC Ecosystem - PitchBook
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2018 Chicago VC Ecosystem
Chicago’sssflagship
Chicago’
Chicago’ flagshipventure
flagship venturecapital
venture capitalconference,
capital theChicago
conference,the Chicago Venture
ChicagoVenture Summit
VentureSummit brings
Summitbrings
brings
togetherthe
together
together thestrongest
strongestlocal,
local,regional,
regional,national,
national,and
andinternational
international venture
internationalventure firms
venturefirms with
firmswith
with
ourbest
our bestand
andbrightest
brightestentrepreneurs andindustry
entrepreneursand industry leaders.
industryleaders.
leaders.
2018 PLATINUM
2018
2018 PLATINUM PARTNERS
PLATINUM PARTNERS
PARTNERS
2018 GOLD
2018
2018 GOLD PARTNER
GOLD PARTNER
PARTNER
2018 BRONZE PARTNER
2018 PARTNER
2018 BRONZE
BRONZE PARTNER
2018 VENTURE PARTNER
2018 PARTNER SPONSORS
2018 VENTURE
VENTURE PARTNERSPONSORS
SPONSORS
2018 SPONSOR
2018 SPONSOR IN-KIND
IN-KIND
2018 SPONSOR IN-KIND
www.chicagoventuresummit.com #CHIVentureSummit
www.chicagoventuresummit.com #CHIVentureSummit
www.chicagoventuresummit.com #CHIVentureSummit
Foreword
U.S. News recently detailed why Chicago Second, because the Windy City isn’t
has become a top city for startups and as awash in capital as our coastal
entrepreneurs.1 Behind the scenes and counterparts, investors here tended to
fueling these entrepreneurial fires are be more conservative. Our financiers
investors who see Chicago as a leader like to see signs of success before they
in VC opportunity. Chicago surpasses invest, including customer acquisition,
every other city in the nation—including product execution and revenue. That’s
the Bay Area—in one important metric the opposite of the Bay Area, where
that is key to VCs: return on investment investors tend to bet on promising
(ROI). According to PitchBook, nearly ideas more than traction in the market.
half of Chicago investments (45%) have The result, as VentureBeat notes, is
provided a 10x ROI, compared to 25% of that our exit valuations are among the
investments in the Bay. highest in the nation.2 And many of the
entrepreneurs behind these high-value
It is through these successful investment exits continually return to the Chicago
outcomes that the city’s ecosystem of market to repeat their successes here.
investors, entrepreneurs and mentors Mark Tebbe
continues to strengthen. In fact, 2017 Third, startups are just one part of Chairman of ChicagoNEXT
marked the fifth straight year of record- Chicago’s sprawling economy. For
setting Chicago investments, at $3.8 example, the tech industry gets roughly and Facebook have grown their
billion invested across 623 deals. The city the same amount of press as any operations in Chicago. As a result, these
has become a startup powerhouse—but other industry here. In fact, our diverse well-known companies infuse even more
that didn’t happen overnight. economy is reflected even within the talent, experience and success into our
tech ecosystem itself, where there are ecosystem, which provides our startup
Chicago’s startup scene is the result of more than 15 innovation hubs, each entrepreneurs even more reasons (i.e.
long-term sustainability, committed specializing in a different sector of resources) to set up shop and stay here.
reinvestment and truly diverse startup technology, such as food innovation,
opportunities across a breadth of manufacturing and healthcare. All of these stakeholders in Chicago’s
industries. It is particularly strong in ecosystem work together to help
B2B sectors, including fintech, food, Finally, Chicago has a ready talent pool. startups leverage the city’s abundant
software, logistics, healthcare and service With the exception of Boston, Chicago resources and opportunities in the
industries. That breadth of opportunity is has more four-year universities than any nation’s most diverse economy. And
directly tied to the strength and resiliency other US city. These universities are also we celebrate that work annually at
of Chicago’s overall economy, where no fueling the startup ecosystem by driving the Chicago Venture Summit, where
single industry employs more than 14% entrepreneurship through accelerator investors from coast to coast combine
of the total workforce. and innovation programs (you can learn with Chicago entrepreneurs and
more about them in Forbes).3 Chicago community builders to showcase the
So what’s helping to drive Chicago’s is also a magnet for graduates of other best and brightest of the Midwest
ecosystem and high ROIs? top Midwestern universities, such as ecosystem. It’s an opportunity to
Illinois, Indiana, Michigan, Michigan nurture our entrepreneurial ecosystem
First, Chicago’s startup scene focuses on State, Purdue, Northwestern and and recognize its growth, and it’s a
business opportunities that tend to fly Wisconsin. We have more graduates prime time for investors to scout new
under most consumers’ radars. Many from those universities than any other opportunities to maximize their returns.
of our strongest startups are in logistics, city in the world. And the lower cost of
insurance, healthcare and back-office living, compared to similar US cities and Mark Tebbe is chairman of ChicagoNEXT,
efficiencies. While these businesses don’t particularly the Bay Area, keeps those the technology arm of World Business
grab broad consumer attention, they graduates here. Chicago and organizer of the Chicago
do deeply impact consumers’ lives. As a Venture Summit. He has more than 30 years
result, they provide unique opportunities Recognizing this wealth of talent (and our of entrepreneurial and startup experience,
for investors. lower operating expenses), established included the co-founding of two NASDAQ-
tech companies like Google, Salesforce listed publicly traded corporations.
1: “Tech Companies Are Choosing Chicago,” U.S. News, Anna Marie Kukec, September 20, 2018
2: “How Chicago’s startup exits stack up against 4 other major cities,” VentureBeat, Pete Wilkins & Hyde Park Angels, May 12, 2018
3: “How Illinois Universities Power The Chicago Startup Ecosystem,” Forbes, Pete Wilkins, February 20, 2018
201 8 C H I C AG O VC ECO S YS T E M 3Investment overview
Chicago is the lodestar of the Great Lakes VC
Chicago MSA VC activity versus Great Lakes VC activity
$2,500 300
250
$2,000
200
$1,500
150
$1,000
100
$500
50
$0 0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*
Chicago MSA deal value ($M) # of deals closed in Chicago MSA
Source: PitchBook
Great Lakes deal value ($M) # of deals closed in the Great Lakes *As of September 1, 2018
At 155 completed rounds for an Top MSA s by deal value (20 06 -2018*)
Deal value
Top MSA s by deals closed (20 06 -2018*)
# of deals
aggregate of $1 billion+, venture ($B) closed
activity within the Chicago MSA is Bay Area $275.2 Bay Area 23,461
on a healthy pace to have volume New York-Northern New Jersey-Long
$72.0
New York-Northern New Jersey-Long
9,976
Island, NY-NJ-PA Island, NY-NJ-PA
nearly match the tally of 2017.
Boston-Cambridge-Quincy, MA-NH $67.5 Boston-Cambridge-Quincy, MA-NH 6,767
Moreover, VC invested looks set to
eclipse $1.5 billion handily. Chicago’s Los Angeles-Long Beach-Santa Ana, CA $41.4 Los Angeles-Long Beach-Santa Ana, CA 5,751
venture and startup scene enjoys a San Diego-Carlsbad-San Marcos, CA $19.9 Seattle-Tacoma-Bellevue, WA 2,989
slew of positive factors: significant Seattle-Tacoma-Bellevue, WA $18.8 Washington-Arlington-Alexandria, DC-
2,381
VA-MD-WV
supplies of talent, a dense nexus Washington-Arlington-Alexandria, DC-
$14.4
of flagship corporations, regional VA-MD-WV San Diego-Carlsbad-San Marcos, CA 2,327
transportation hubs, relatively lower Chicago-Naperville-Joliet, IL-IN-WI $14.0 Austin-Round Rock, TX 2,265
costs of living, etc. It is definitively Austin-Round Rock, TX $12.1 Chicago-Naperville-Joliet, IL-IN-WI 2,151
the centerpiece of the entire Great Philadelphia-Camden-Wilmington, PA- Philadelphia-Camden-Wilmington, PA-
$9.1 1,781
Lakes VC scene, although it still NJ-DE-MD NJ-DE-MD
remains within the cluster of US Dallas-Fort Worth-Arlington, TX $8.3 Denver-Aurora, CO 1,456
MSAs that are vying to join the Atlanta-Sandy Springs-Marietta, GA $8.1 Atlanta-Sandy Springs-Marietta, GA 1,435
vaunted trio of the Bay Area, New Denver-Aurora, CO $7.3 Dallas-Fort Worth-Arlington, TX 1,326
York and Boston when it comes to Miami-Fort Lauderdale-Pompano Beach, FL $7.3 Miami-Fort Lauderdale-Pompano Beach, FL 1,085
VC dominance.
Minneapolis-St. Paul-Bloomington, MN-WI $5.7 Minneapolis-St. Paul-Bloomington, MN-WI 1,014
Source: PitchBook Source: PitchBook
*As of September 1, 2018 *As of September 1, 2018
4 201 8 C H I C AG O VC ECO S YS T E MInvestors abroad continue to exhibit interest in domestic startups Analyzing activity within the Chicago
Chicago MSA VC activity with only non-Illinois-based investors MSA that boasted only outside
investors, it is clear 2014 saw a high
$800 100 tide of capital from abroad. Since then,
Deal value ($M) activity has remained roughly steady.
$700 # of closed deals The likely reason it hasn't grown is
$600
80 simply because the rate of participation
by the local investor ecosystem has held
$500 60 even stronger, with volume involving
$400
at least one Illinois-based investor
reaching a record 98 transactions
40
$300 across well over $1 billion invested.
$200
20 Top 20 investors (20 06 -2018*)
# of deals
closed
$100
Hyde Park Angels 92
$0 0
Pritzker Group Venture Capital 87
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*
Source: PitchBook Chicago Ventures 82
*As of September 1, 2018
Lightbank 61
Local firms dominate rankings of prolificacy Hyde Park Venture Partners 46
Median & average deal size ($M) in Chicago MSA OCA Ventures 45
Serra Ventures 35
IllinoisVENTURES 34
$16
$13.6 Sandbox Industries 32
$14
New Enterprise Associates 31
$12
G2T3V 30
$10
Origin Ventures 29
$9.0
$8 Right Side Capital Management 28
$7.3
$6 M25 28
$5.4 Lon Chow 26
$4
$4.1
$1.8 $2.2 Tribal Ventures 23
$2 $1.9
Service Provider Capital 23
$0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018* Lakewest Venture Partners 23
Median deal size Average deal size Source: PitchBook Jumpstart Ventures 22
*As of September 1, 2018
KGC Capital 22
Pallasite Ventures 21
Median post-valuations have stayed relatively steady Jump Capital 21
Median & average post-valuation ($M) in Chicago MSA FireStarter Fund 21
Techstars 19
$250 TechStars Chicago 19
500 Startups 19
$200 Listen Ventures 18
Apex Venture Partners 18
$150
$141.4 Amicus Capital 18
Cornerstone Angels 17
$100
$81.1 Bluestein & Associates 17
$50 Math Venture Partners 16
$42.5
Foundation Capital 16
$16.0 $14.5
$0
Source: PitchBook
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018* *As of September 1, 2018
Median post-valuation Average post-valuation Source: PitchBook
*As of September 1, 2018
201 8 C H I C AG O VC ECO S YS T E M 5people first™
In one figure Chicago tops all US This is primarily due to Chicago’s
MSAs—and that figure is quite numerator of capital invested
telling. The median multiple on combining with a remarkably steady
invested capital in Chicago is no less clip of exits for the past three years
than 5.6x, outstripping the nearest and counting.
competitor by a significant amount.
Chicago's MOIC surpasses all others
Median multiple on invested capital (MOIC) by US MSA (2006-2018)*
Median Bay Area 4.2x
Location
MOIC
Philadelphia-Camden-Wilmington, PA-
Chicago-Naperville-Joliet, IL-IN-W 5.6x NJ-DE-MD
3.8x
Seattle-Tacoma-Bellevue, WA 4.8x Boston-Cambridge-Quincy, MA-NH 3.6x
Los Angeles-Long Beach-Santa Ana, CA 4.7x Austin-Round Rock, TX 3.3x
Human
New York-Northern New Jersey-Long Island,
4.4x
San Diego-Carlsbad-San Marcos, CA 3.1x
NY-NJ-PA
Washington-Arlington-Alexandria, DC-
3.1x
Capital
Atlanta-Sandy Springs-Marietta, GA 4.2x VA-MD-WV
Source: PitchBook
*As of September 1, 2018.
Maximizing
Note: All US MSAs with fewer than 30 data points were excluded from the ranking.
Software, commercial services and sector-blurring startups stand out
Chicago MSA VC activity ($) by sector
Financial
2016 2018*
Capital
2014
Hyde Park Angels is trans-
forming early-stage investing
2012
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
by taking a people-first
approach. By matching our
Commercial services Consumer goods & recrea�on expertise with entrepreneurs'
Energy HC devices & supplies
HC services & systems IT hardware needs, we help develop
Source: PitchBook
Media Other *As of September 1, 2018 top-performing companies that
deliver extraordinary results.
The bulk of all activity has been concentrated in software
Chicago MSA VC activity (#) by sector
2016 2018*
Exclusively Investing
in Midwest Startups
2014
2012
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% hydeparkangels.com
Source: PitchBook
*As of September 1, 2018
6 201 8 C H I C AG O VC ECO S YS T E MExits & fundraising
By volume, liquidity has been flowing strong in 2018 2018 may see the most exits ever
Chicago MSA VC exit activity for the Chicago MSA, as the count
stands at 23 completed in the year
27 already. It is intriguing to note that
26
the bulk of all Chicago MSA exit
23 value occurred from 2011 to 2015,
22
21 aligning cyclically with subsequent
19 strong fundraising and a ramp-up in
18
the pace of dealmaking, as observed
above. It should be noted that more
recent exit values are not always
readily disclosed and thus will affect
aggregate tallies; what's more
important to highlight is the sheer
volume of exit activity in Chicago,
which has been undeniably healthy
and bodes well for capital recycling
$1.2
$0.2
$1.1
$5.5
$3.3
$3.2
$1.6
back into the ecosystem in the
future.
2012 2013 2014 2015 2016 2017 2018*
Post-valua�on ($B) # of deals closed
Source: PitchBook
*As of September 1, 2018
Recent fundraising bodes well for capital supplies, still disproportionate to deal flow
Chicago MSA VC fundraising activity
13
Capital invested ($M) 11 11
# of funds
9 9
6 6 6 6 6
3
$292.6
$424.4
$779.1
$610.8
$573.6
$211.3
$202.0
$748.0
$433.6
$278.4
$622.8
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*
Source: PitchBook
*As of September 1, 2018
201 8 C H I C AG O VC ECO S YS T E M 7The Chicago Venture Summit offers an opportunity for
top-performing venture firms to convene and collaborate with
the most promising entrepreneurs and industry leaders.
Learn more at http://www.worldbusinesschicago.com/chicagonext/You can also read
