Venture capital fundraising in Chicago dropped precipitously in 2022, as local startups raised nearly 34% less money from VCs throughout the year than they did in 2021, according to the latest PitchBook-NVCA Venture Monitor report.
VC firms invested just under $1.1 billion in Chicago startups in Q4 2022 across 79 deals, both lows for the year. In Q4 2021, VC firms invested $1.14 billion across 126 deals.
Despite a decline in investment activity, 2022 recorded the highest amount of capital raised by venture funds nationwide, with $163 billion closed across 769 funds, the second consecutive year the total exceeded $150 billion. It was up from $154 billion raised across 1,270 funds in 2021.
PitchBook analysts attributed much of the year’s fundraising strength to the momentum generated in 2021.
"Q4 could be a precursor to what we may see in 2023 if LPs [limited partners] remain overexposed to venture, and the total capital raised in 2023 could set a four-year low," the report said.
Four ecosystems surpassed a thousand deals for the second consecutive year:
- The Bay Area — 3,263 deals, $75 billion.
- New York — 2,323 deals, $31 billion.
- Los Angeles — 1,311 deals, $23 billion.
- Boston — 1,016 deals, $21 billion.
With Chicago not among these top markets, some continue to be concerned that Chicago may return to "flyover country" after the pandemic. For 2022, Chicago VCs completed 384 deals totaling $10.2 billion.
Deal counts dropped in every quarter in 2022 for Chicago from 111 deals in Q1, to 100 in Q2, 94 in Q3 and 79 in Q4.
“Unable to justify the sky-high valuations seen in 2021 and retreating from the ‘growth-at-all-costs’ mindset seen in recent years, many investors are pulling back until the ecosystem returns to a more palatable normal," said John Gabbert, founder and CEO of Pitchbook, with the release of the report.
Late-stage VC deal activity was hit the most by VC momentum slowdown. With just $71 billion in total exit value generated nationwide, 2022 saw a nearly 91% decline from 2021's record of $753 billion. It was also the first time the figure dropped below $100 billion since 2016.
With just 14 public listings occurring in Q4, public listings of VC-backed companies dipped to levels not seen since the early 1990s, according to PitchBook.
In Chicago, however, exit value was shown to increase year-over-year with 33 exits throughout 2022, including seven in Q4, for a value of $2.7 billion, while 2021 saw 42 exits for a value of $2.4 billion.
The PitchBook-NVCA Venture Monitor is a quarterly report produced by PitchBook and the National Venture Capital Association with support from Insperity, J.P. Morgan and Dentons.
