I was at a Hyde Park Angels Financial and Business Services meeting last night. Our group has four focused independent groups inside it that look at deals. Four times a year, the entire group comes together to see deals that come out of the four focused groups. Amidst all the things that were going on, we looked at some data. I took a snapshot of one piece of data that should be pretty important to Chicagoans, and entrepreneurs. Remember, we started in April of 2007. We weathered the financial crisis and were a part of building the community here.
This year, HPA has done more deals than ever. The group has invested around $8M over the course of the year with one month to go. Traditionally, December is busy for us.
Here is the thing. If you look at the data and see which investors did well over the last several years, it was Chicago. Crain’s Chicago writer John Pletz says, “If you want to make money doing the most deals as a venture capitalist, Silicon Valley is the place to be. But if you want to make the most money on your deals, come to Chicago.” 81% of Chicago exits returned 3x to 10x.
We have some billion dollar exits. But, we have a lot of companies exiting at over $100M too. For investors that invest at seed, that’s a home run.
I think the stage you invest in here is the key. You have to be in early. Press your winners and cut your losers. The nice thing I have found about working with Chicago entrepreneurs is they are really really coachable. They work hard and they really understand the fundamentals of capital efficiency-otherwise known as bootstrapping.
There are other angel groups in Chicago. I don’t know their data, but I do know they are good organizations. If they made their data public like HPA it would help everyone. They aren’t quite as active as HPA, but they are populated with sharp investors. ArchAngels, Cornerstone, NextGen, Irish all do deals and they all co-invest with each other.
Chicago has some seed funds, but again, it’s not like NYC or the Valley. Chicago needs more money. With the returns that are getting posted, money should start flowing here. I recall some people wondering why they needed a footprint in Chicago. The data should speak for itself.
The Chicago entrepreneurial ecosystem is different than the Valley or New York. It doesn’t make it better or worse. But, it’s a great place to build a company. Office space is significantly cheaper, and so is the cost of living. No more hot bunking with 8 roommates! There are support networks. There are customers. There is a tremendously deep well of people that know how to sell. This is especially true if you are building something in the business to business sector. If you are thinking of getting out of a rut, Chicago is a great place to explore how to get out.