Chicago’s startups continue to lead the nation in returns | Industry

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Today, PitchBook revealed its 2018 Chicago VC Ecosystem report, released in conjunction with ChicagoNEXT's Chicago Venture Summit. This report finds that Chicago continues to outpace every other U.S. venture ecosystem — including the Bay Area — in median multiple on invested capital (MOIC).

Chicago give investors a median MOIC of 5.6 times, thereby considerably exceeding the city's coastal counterparts. (MOIC is calculated by dividing startup exit value by the total amount of venture capital raised by that startup). Chicago's closest competitor is Seattle at 4.8 times, narrowly beating out Los Angeles at 4.7 times. New York trails at 4.4 times, the Bay Area at 4.2 times, and Boston at 3.6 times.

Rank  Location Median MOIC (2013 – 2018)
1Chicago 5.6x
2Seattle 4.8x
3Los Angeles 4.7x
4New York 4.4x
5Atlanta 4.2x
6Bay Area 4.2x
7Philadelphia 3.8x
8Boston 3.6x
9Austin 3.3x
10San Diego 3.1x

Source: PitchBook, as of September 1, 2018

While Chicago has consistently driven high investor MOIC, PitchBook's report suggests that the city is on track to set some new records as well. With at least 23 exits so far this year and an entire fourth quarter remaining, 2018 might see the city's most exits ever. As of September 1, Chicago has already been strengthened by more than $1 billion in exits. Driving these exits are startups like Aptinyx and Xeris Pharmaceuticals, which both saw IPOs valued at close to $1 billion.

There were several acquisitions as well, which total nearly $1 billion, including SpringCM's acquisition by DocuSign for $220 million, Dealer Inspire and LDM's $205 million acquisition by, Maestro Health's $155 million acquisition by AXA, and SingleHop's $132 million acquisition by Internap (among others).

The report shows that Chicago continues to be the epicenter of the Great Lakes venture region, with the city on track to exceed $1.5 billion invested in companies this year. Perhaps what's most interesting about these deals, however, is the shift in where the venture capital is flowing  from.

The top five firms investing in Chicago are my firm Hyde Park Angels, Pritzker Group Venture Capital, Chicago Ventures, Lightbank, and Hyde Park Venture Partners — which are all based in Chicago. In fact, of the top 10 investors fueling the Chicago ecosystem since 2006, only the 10th most-active investor (New Enterprise Associates) is based outside of Illinois.

Rank  Investor Deals Closed
1Hyde Park Angels 92
2Pritzker Group Venture Capital 87
3Chicago Ventures 82
4Lightbank 61
5Hyde Park Venture Partners 46
6OCA Ventures 45
7Serra Ventures 35
8IllinoisVENTURES 34
9Sandbox Industries 32
10New Enterprise Associates 31

Source: PitchBook, as of September 1, 2018

Additionally, the number of non-local firms participating in Chicago startup deals has fallen slightly or held steady every year since peaking in 2014. With the total amount of venture capital invested continuing to increase, that means more Chicago startups are able to find capital needed from local investors. This bodes well for Chicago's ability to retain startups throughout their lifecycle.

With over $1 billion already invested in Chicago startups this year, an increasing clip of exits that drive the highest MOICs in the country, and local investors doubling down on their interests in local startups, 2018 is proving to be a good year for Chicago's ecosystem. Even better is that, with success nurturing further success, Chicago can expect to be enriched by 2018's venture achievements in the years to come as well.

Pete Wilkins leads the most active early-stage venture group in the Midwest, Hyde Park Angels (HPA)


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