Venture capital investing in Chicago increases as more firms enter the market

Additionally, Jason Weingarten, co-founder of recruiting startup Yello, and Jon DeLuca, the son of Subway founder Fred DeLuca, launched a new fund with $3.2 million of their own cash. Dubbed Subconscious Ventures, the firm also invested in EarlyBird, as well as Chicago-based logistics startup MVMNT. 

“We’re seeing a lot of deal flow,” Weingarten says. “I didn’t see this stuff two or three years ago.” 

Some investors are leaving older Chicago VC firms to launch their own. Ezra Galston left Chicago Ventures to launch Starting Line, and Samara Hernandez left MATH Ventures Partners to launch Chingona Ventures. 

“It’s great to see people who have spun off and do things on their own,” Hernandez says. “It’s bringing new blood and new perspectives and new ways of looking at deals.” 

More funding is pouring into venture capital across the country. According to PitchBook, U.S. VC investment rose 98% to $330 billion in 2021. VC funding in Chicago surged to $7 billion in 2021 from about $3 billion in 2020. While it’s a record, Chicago still falls far behind the Bay Area, New York and Boston. 

“We turned a lot of money away for our second fund,” Galston says. “We’ve already got people offering us money—no diligence—for a third fund. There are a lot of people who want access to private early-stage companies.” 

While there’s more demand for VC investing, the market’s expansion also makes it more competitive to get in on the best deals. To compete, firms are taking on more risk. They’re cutting larger checks, requiring less equity in businesses and providing more flexible terms to founders in general. Other new firms, most notably LongJump, have set themselves apart by backing companies launched by members of minority groups, women or people without college degrees. 

“You can’t just be normal money in Chicago anymore and try to get into the best rounds because those rounds are full,” Gutwein says. “It’s not uncommon for a Chicago-based company to receive multiple term sheets.” 

Some older Chicago firms see opportunity in the new generation. Pritzker Group Venture Capital, which has been investing in startups for 25 years, tends to invest at the later stages of companies. But to expand its reach, the firm has invested in early-stage firms in town, such as Chicago Ventures, Hyde Park Venture Partners and MATH Venture Partners, says Pritzker Group Partner Sonia Sahney Nagar. And Pritzker Group plans to invest in more, she says. 

“More investors is good for the ecosystem. It will create more founders that are starting things we’re going to want to back,” Nagar says. “We kind of need this new class of investors that are emerging.”