Chicago startups raise $5.5 billion in venture capital in 2021

However, third quarter financings were up 230% from the same quarter in 2020, the data shows. Startups raised $440 million in Q3 of 2020 and nearly $3 billion for the entire year. In 2021, Chicago-area startups have so far raised $5.5 billion, the most raised by local companies since PitchBook started tracking the data.

The influx of venture capital coming to Chicago companies this year is on par with trends around the country.

About $82.8 billion was deployed to startups across the U.S. in Q3, totaling to more than $238 billion this year, which surpasses the $166 billion raised in 2020, according to the data. The growth is attributed to companies raising larger rounds.

PitchBook data shows nearly half of all 2021 deals in the U.S. exceeded $10 million. A flurry of $100 million and higher rounds has helped venture capital numbers skyrocket in Chicago. The data shows the number of deals dating back to 2014 hasn’t grown that much. Instead, it is the size of the deals that’s grown.

The larger rounds are also contributing to the growing group of “unicorn” startups, companies that are valued at $1 billion or more, across the U.S. and in Chicago. The city now has 12 unicorn companies that were created in 2021, according to World Business Chicago.

The largest Chicago deals in Q3 include Nature’s Fynd, a meat-alternative food company, which raised $350 million at a $1.4 billion valuation, and M1 Finance, a personal finance app, which raised $150 million at a $1.3 billion valuation. Other large deals include Copado’s $140 million round and Vanqua Bio’s $85 million financing.

“This is a decade’s worth of investment in Chicago’s ecosystem that is finally paying off on a more national or global stage,” said Brad Henderson, the CEO of P33, a local tech and startup booster that’s working to recruit coastal tech workers to Chicago.

While Chicago venture capital funding is booming, the city still lags significantly behind the Bay Area, whose startups have so far raised $88.4 billion, and New York, whose startups have raised $38.9 billion. Chicago also falls behind Los Angeles and Boston, whose startups raised $27.5 billion and $23.7 billion, respectively.

The several incubators in town working to strengthen companies at the earliest stages, a growing group of local venture capitalist firms backing startups and work being done by P33 is collectively helping Chicago compete with its national peers, Henderson said. Besides more funding coming to local companies, the types of startups receiving venture capital has diversified, which he says allows Chicago to get noticed more often on the national stage.

“Chicago has had a reputation for being an enterprise business-to-business, SaaS platform town,” Henderson said. “When I look at the data now, I see consumer-facing fintech, deep-science companies (and) hard-tech companies. I just get really excited about how much more well-rounded the portfolio is.”