Chicago startups failed to raise $1 billion last quarter for the first time in almost two years as venture funding for startups across the country pumps the brakes.
Local companies raised $770 million in the second quarter, down from $1.6 billion in the first quarter, according to PitchBook, a firm that tracks venture capital deals.
It's the first quarter since the third quarter of 2020 that Chicago startups didn't collectively raise at least $1 billion in funding. In the same quarter last year, Chicago startups raised $2.1 billion.
The most recent quarter saw 77 deals in total, which fell behind the first quarter's deal volume of 97 investments and well off 108 deals from the same quarter one year ago.
Nationally, startups raised $62.3 billion in venture funding during the second quarter, a 24% decline from the first quarter and a 23% decline from the second quarter of last year, when startups raised $81.9 billion and $81.2 billion, respectively.
U.S. venture activity, while down quarter-over-quarter, still outpaced what startups raised in any quarter pre-2021, a sign of just how frenzied the deal pace was last year.
"2021 was a remarkable year and perhaps an unusual benchmark for VC investment activity," the PitchBook report said.
The report added that the the pace of VC activity is likely to slow further in the second half of 2022 "as the threshold for closing deals rises and pricing uncertainty extends to the early stages of the investment cycle."
Venture funds prioritizing their existing portfolio companies, rather than increasing their flow of new investments, is also likely to slow overall VC activity, according to PitchBook.
Initial public offerings were virtually nonexistent last quarter, with just eight VC-backed companies going public in the second quarter. That represented a 13-year quarterly low, PitchBook said.
But there's reason for some optimism. U.S. venture funds have collectively raised $120 billion this year, which is on pace to eclipse last year's record of $139 billion raised by VC funds.
"While this activity is likely mainly a continuation of momentum from 2021, it’s still an encouraging sign around the level of capital availability through the uncertainty that the next few years may bring," the report said.
