Illinois Venture Funding Gaps

Closing the gap between entrepreneurs and investors is a common goal behind institutions like the Illinois Technology Association (ITA), Chicago Entrepreneurship Center (CEC), and the Women’s Business Development Center (WBDC).

And, it’s a significant gap.  The 2013 National Venture Capital Association PWC MoneyTree reports that Illinois attracted only 2.4% of the venture capital funding that California attracted during the first three quarters of 2013, and only 15% of the venture capital funding New York State attracted.

Venture Capital Funding 2013 Q1-Q3




Average Investment Per Deal

Average Investment Per Capita*











New York










*Per capita figures from state population in the 2010 U.S. Census

When it comes to venture capital, most funding occurs on the coasts.  Why aren’t venture capitalists making as many deals in Illinois as they are in California or New York?  One reason may be that there are simply more venture capital firms on the coasts than in the Midwest.

Attracting more venture capital firms to Chicago is part of the strategy says Phil Nevels, executive director of ChicagoNext—an effort within World Business Chicago to raise the city’s tech profile by attracting talent, and finding funding with a particular emphasis on clean tech, bioscience, and web and mobile. Silicon Valley and the East Coast have reputations for being complete ecosystems where venture capitalists can find successful business ventures. In Illinois, however, there is an assumption that talent and resources still need to be imported into the state. To combat that assumption, Chicago continues building its startup ecosystem reputation.  The strategy: to link an array of venture capitalists with successful members of Chicago’s entrepreneurship communities.

It’s about how do we connect people, says Nevels, part of my role at ChicagoNext is to make sure we’re bringing these different groups of entrepreneurs and VCs together.  Ultimately, we want VCs to set up offices here.

The City of Chicago’s action plan for linking entrepreneurs with capital includes bringing venture capitalists from other cities to Chicago at a Venture Capital Summit in 2014. The summit, scheduled for late July, will kick off just before Lollapalooza begins on August 1st.  The goal is for a diverse group of VCs to meet and interact with Chicago’s entrepreneurs.  Nevels would like to build on this momentum and turn it into a platform for attracting venture capitalists and venture firms to Chicago.  

Although there are fewer VC firms in Illinois, some coastal investors have been picking up the slack.  Silicon Valley Bank, for example, a large California-based investment bank, opened an office in Chicago back in 2001.  NEA also has an office in Chicago, they opened in 2012.  Fewer firms may mean fewer funds for Chicago, but the funding gap between the midwest and the coasts needn’t deter entrepreneurs.  SVB Chicago managing director John Hoesley says that although there are few venture capital deals in Illinois than on the coasts, Chicago’s entrepreneurs can also benefit from the active angel investment scene in the city. 

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