The startup scene in Chicago is finally receiving the attention it has long deserved.
It is now well-known that 2021 will be a breakthrough year in the venture capital and startup worlds. This will surpass years of positive results in a bull market for tech-focused businesses. However, not all booms are created equal.
Different markets see different levels of activity. This is due to the maturity of their startup ecosystems and the ease with capital deployment. For example, African startups will break new venture capital records in this year's Africa. Latin America is a good example of markets that are closer to the top hubs for venture capital. As others accelerate, China's venture capital market is slowing down.
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There is a wide range of performance in different markets within the United States. Chicago is a major beneficiary of the growth in remote investing and venture capital activity. CB Insights data, for instance, shows that Chicago's ability to attract venture capital funds has reached new heights in its first half of this year.
We were optimistic that Chicago would do well in a warm environment for startup investments, but the results were much better than we had expected. The Exchange spoke with M25, a Midwest-focused venture fund fund; Liza Benson, Moderne Ventures partner; Scott Kitun, of Technori, an investing platform and community that is rooted in the city; as well as Brian Barnes, CEO at M1 Finance, a local unicorn within the fintech sector that TechCrunch has extensively covered.
Their comments paint a picture of a city that has been long underfed in capital terms, but is now looking to the changing investment market. The investors don't expect the second half to be any different than the first. This means that Chicago-based startups are currently in their best year ever of raising capital. Let's discuss how this happened.
Venture capital for the ages
In the second half 2020, Chicago-area startups raised capital at a record pace. Historical data shows that Chicago was the beneficiary of a rapid pace of venture capital investment. This happened after investors who were concerned about startup growth slowing down, reacted to initial COVID shocks.
Startups were not as affected as people feared. Many young tech companies actually saw an acceleration in the first quarter of lockdowns. Traditional businesses had to look into software solutions that startups offered, while startups also sold other services.
The initial boost to Chicago's venture totals in 2020's final two quarters was easily beaten in the first quarter 2021. The record was broken by the second quarter this year.
