Why 2017 Was Incredible For Chicago Exits And Investments
According to a new report, Chicago continues to be the nation’s leader in investor returns in the U.S. Pitchbook found that out of 17 metropolitan cities, Chicago saw the greatest multiple on invested capital (MOIC).
Chicago emerged as a market leader for returns in 2016, when another Pitchbook study found that 81% of the city’s exits were over 3x, and almost half were over 10x.
At Hyde Park Angels, we did a deeper dive into the numbers in a recent report to understand how the Midwest and Chicago perform in the venture capital ecosystem, and we found the same trends bore out.
Specifically, over the last 5 years, Chicago exits have amounted to $12.7B. In 2017, the $1.7B exit of Naurex, $1.5B exit of Vivid Seats, and $600M exit of RXBar contributed to that overall dominance in exit values.
Moreover, we found that the Great Lakes region overall drives the most exits that deliver over 10x returns to investors. Chicago, however, is clearly the center of this data. Our analysis shows that Chicago is 1.5x more likely to return capital greater than 10x to investors.
2017 was a groundbreaking year for the Great Lakes across exits and fundraisings. Based on our analysis, in 2017, California led the nation in venture capital investments, but the Great Lakes region was one of the most active regions outside of California. In fact, the Great Lakes increased its deal activity between 2016 and 2017, jumping from 462 deals to 623 deals.
While the Great Lakes region accounted for fewer dollars invested than deals done, further analysis demonstrates this trend is tied to the fact that investors receive attractive valuations and greater overall value for deals done. Additionally, the percentage of dollars invested in the Great Lakes went from $2.7B in 2016 to $3.8B in 2017, accounting for a sizeable $1.1B increase.
Chicago made up a significant portion of that $3.8B. In fact, Chicago received more venture capital investment than all other Great Lakes states combined, with $1.94B invested in 227 deals in 2017. This was a marked increase from 2016, when $1.34B was invested in 171 deals.
This trend towards bigger exits and more dollars is also in keeping with a push towards Series B and later stage investments in Chicago. With companies like Uptake and Tempus – both funded by Lightbank – representing the next wave of Chicago companies, we expect the flight to quality we have seen in the region to continue.
Though its challenging to predict where emerging and dominant players in the Chicago tech ecosystem will go over time, we are watching companies funded in 2017 like Raise, Yello, Jellyvision, G2 Crowd, and ShipBob (which my firm Hyde Park Angels invested in) for positive outcomes.
All in all, 2017 was an exceptional year for Chicago, and expect to see the same in 2018.
This story originally appeared in Forbes on March 26, 2018.