Chicago venture funding hit a decade high last year as VC funding surpassed $2 billion in 2019.
Chicago companies raised $2.186 billion in 2019, according to a new report released Tuesday by Pitchbook and the National Venture Capital Association. That's up from $1.9 billion in 2018, $2 billion in 2017, and $1.3 billion in 2016. Chicago's best year for venture funding was in 2000, when it raised $2.6 billion during the dot-com era.
A total of 279 companies landed VC investment in 2019, which was the highest since 2014, when Chicago also saw 279 VC deals, according to the report.
Large healthcare deals helped push Chicago's venture activity to near-record highs. Tempus, a startup using genomic sequencing and artificial intelligence to treat cancer, raised $200 million in May at a $3 billion valuation. Healthcare startup VillageMD raised $100 million. And Buffalo Grove-based Phantom Pharmaceuticals raised $140 million.
“The Chicago metro saw a decade record VC capital investment in 2019 of $2.2 billion in large part due to momentum in the healthcare sector," said Cameron Stanfill, a VC analyst at Pitchbook. "22.9% of all Chicago VC deals in 2019 were healthcare deals, and deal value was buoyed by three healthcare mega-deals."
Other large funding rounds from last year include AMP Americas' $75 million round, SpotHero's $50 million round and Cameo's $50 million fundraise.
Chicago's 2019 venture funding kept pace with cities like Austin ($2.2 billion), D.C. ($1.9 billion) and Atlanta ($1.8 billion) but fell behind metros like Seattle ($3.5 billion), L.A. ($8 billion) and Boston ($10 billion).
The greatest concentration of venture dollars continues to be in California and New York. California startups raised more than $63 billion across 3,623 deals. The state had several multi-million-dollar deals from San Francisco companies such as DoorDash, which raised $700 million last year, and Databricks, which raised $400 million in October. New York startups raised more than $27 billion across 1,315 deals.
"Silicon Valley's advantage is still in the 'mega-rounds', where one company can raise $2.2B in one private, VC-backed round," said Victor Gutwein, a managing partner at Chicago VC firm M25. "That's unheard of in Chicago still."
Brad Henderson, CEO of P33, an organization working to boost Chicago's reputation as a tech hub, said that while Chicago has seen early-stage startup success, growth in the city's later-stage startups will be key to Chicago's growth as a tech hub.
"We have made great progress building a seed state ecosystem," Henderson said. "The question is, how do we translate that into strength at the growth stage? We see a huge opportunity to translate Chicago’s ample private capital and long list of enterprise customers into strong assets for our later-stage startups. The strength of Chicago’s talent pipeline is likely one of the factors driving the momentum we’re seeing."
2019 saw Chicago's first VC-backed tech IPO since Grubhub in 2014, as Sprout Social hit the public market in December. The company sold 8.8 million shares at $17, raising $150 million. Today, its stock price is trading above $19. The IPO was also a win for local VC firm Lightbank, which was an early backer in Sprout Social and owned about a 21% stake in the company.
Last year was also a healthy year for local VC firm Hyde Park Angels, according to Managing Director Peter Wilkins, who called 2019 "a historic year" for the firm.
"Not only did we invest a record amount, but we also returned more capital to investors than in the previous ten years combined," Wilkins said. "This shouldn't be a surprise. Chicago is a great place for venture capital because more and more of our startups are becoming industry leaders, attracting capital and clients from across the globe."
Nationally, U.S.-based companies raised about $136.5 billion across more than 10,700 deals in 2019, according to PitchBook.
2019 VC activity was slightly lower than 2018, when U.S. companies raised $140 billion across 10,500 deals. The dip was due to a slower fourth quarter, PitchBook says. But overall, the data shows that venture capital raised by U.S. companies has been steadily rising since 2006.
When it came to startup exits, 2019 hit a new record for U.S. VC exit value, coming in at $256.4 billion across 882 liquidity events. One of the year’s largest exits was Honey, which was acquired for $4 billion by PayPal in November.
Female-founded companies also saw record activity on both a capital and deal count basis, raising $18 billion across 2,184 deals in 2019, compared to nearly $17 billion across 2,057 deals in 2018.
