Over the years, Chicago and the Midwest has attempted to grow its technology ecosystem. This includes creating a friendly environment for startups and increasing the availability of venture capital.
Growing the ecosystem in the region has taken the form of government support (e.g. angel investing tax breaks in Wisconsin, incubator funding such as for 1871, etc.) and private efforts.
It always was that the entrepreneurs in Chicago complained there wasn’t enough venture capital available and the VCs complained there was a lack of good investable startups. A Catch-22 it seemed. I thought that the risk-adverse Midwestern culture was a big handicap.
I have been floating around the Chicago and Midwest tech startup scene for some time. Among other things, earlier in the 2000s I served as President and Board Member of the Big Idea Forum, a nonprofit dedicated to mentoring and helping entrepreneurs. I was on the Board of Directors of The Technology Innovation Center, an incubator located in the Illinois Science and Technology Park, Skokie, IL.
This experience was valuable but did make me aware of the challenges in the tech industry in the Midwest. In the USA, my firm has done business on both coasts and Texas. Having such exposure to other geography really made the differences in the vibrancy of these locations very obvious.
Among the various angel groups in Chicago, The Hyde Park Angels (HPA) may be the most prominent. Hyde Park Angels initially emerged out of the University of Chicago but now has spread a wider net. A special call-out to my good friend Stuart Baum who has been deeply involved in HPA in the past. Also Michael Polsky and his team from Invenergy plus Will Ander and Neil Stern of McMillan DooLittle. Hyde Park Angels is now located in the 1871 incubator in the Merchandise Mart.
Recently, the Hyde Park Angels team conducted an analysis into the Midwest Venture Capital ecosystem. It is a good report but does mislead slightly, in my opinion. It misleads in that it compares a larger multi-state Midwestern area to single cities/states such as New York, Boston, Texas and California. For example, Boston alone is equivalent to the entire Great Lakes area – six states.
That being said, here are some highlights.
- As HPA defines competitive geographies, the six state Great Lakes area is tied with Boston for the 3rd most deals behind California and New York.
- Not surprisingly Illinois leads the Midwest. There were $1.94B in dollars invested across 227 deals in 2017, most of these in Chicago.
- Chicago leads the nation with the largest number of exits that produced returns over 10x in 2017.
- Illinois startups received more investment than all other Midwest states combined.
- Illinois has seen better returns and lesser operating costs than elsewhere. This trend has been going on since 2014.
- Not surprisingly, HPA forecasts an even greater performance for the Midwest in 2018 and is generally upbeat on the entire region.
A graphic from the report:
