Further Insights: Investments in Black, Latino, and Women Founded Companies in Chicago's Startup Ecosystem

We can’t improve what we don’t measure.?

In the latest issue of the Chicago Business Bulletin, ?“Investments in Black, Latino, and Women Founded Companies in Chicago's Startup Ecosystem,” the Research Center at World Business Chicago found that just 10.2% of all venture capital funding has gone to these founders since 2019.?

In this report, we set a baseline for Chicago’s venture capital community to track progress against, and share the most comprehensive research on funding raised by underrepresented founders in Chicago’s venture capital ecosystem to date.?

Celebrating progress.

The data shows we have a long way to go before Chicago’s startup ecosystem sees an equitable investment landscape. However, the recent performance of Chicago’s Black, Hispanic or Latino, and women founded startups is impressive:

• Venture capital funding captured by underrepresented founders is increasing (159% between 2019 and 2021, compared to 136% for all companies).
• Companies founded by underrepresented founders are also doing comparatively well in 2022, especially in the broader venture capital downturn (raising $575M so far in 2022, almost what was raised in all of 2021).
• Black and Hispanic or Latino founders are closing increasingly larger deals.

Dr. Garry Cooper, Founder & CEO of Rheaply and General Partner of LongJump, shares his success launching a startup in Chicago:

“It's been a tremendous journey from being a Northwestern Ph.D student who used a push cart to enable reuse of excess materials in the hallways between labs. Being today's single-highest founded Black climate tech entrepreneur in Chicago was not something I ever dreamed of in the lab, but now have made my continued mission to uphold. My aim is to encourage others to join this uphill battle of fundraising as a minority while inspiring them along the way.”

Where are Black and Hispanic or Latino founders in the venture capital funding pipeline?

One topic we’ve noticed report readers being interested in: where are companies with underrepresented founders in the venture capital pipeline, and how do we get more of them into the pipeline??

Funding status is a rough performance indicator for how Chicago’s startup ecosystem is supporting founders at all stages. When a late stage company closes on a deal, it means that they may have had support several years ago. When there are more early stage or pre-venture capital deals, more companies are making it into the pipeline.?

We found:

• Over two-thirds (48 out of 70) of Black and Hispanic or Latino founded startups in Chicago received their first initial capital through accelerator or incubator program deals,? angel investments, or seed rounds.?
• Of these 48 companies, 30 went on to receive either venture capital funding or were acquired in their most recent deal.

Women reach early stage funding faster.

While our findings share that women still receive less venture capital funding than their non-women counterparts, women that are able to reach early or later stage funding do it faster than their peers.?

Why does this matter? This finding suggests that once women are on track to reach later stage funding, there could be fewer obstacles in their way. It’s getting women into the venture capital pipeline that’s important.

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About the Research Center

The Research Center at World Business Chicago leads research and analysis about Chicago’s diverse economy. We highlight Chicago’s competitive advantages and opportunities for growth through original publications, including the Chicago Business Bulletin.