It’s not a secret that Silicon Valley is saturated and the cost of living is basically pricing a lot of people out of the area. This is the primary reason why startups have started to look far and wide for more attractive options. The story is also the same when it comes to venture capitalists.
But this doesn’t mean that San Francisco won’t remain the supreme startup city. Other cities have also started to show positive signs of creating an ecosystem where startups can thrive.
According to research conducted by PitchBook, the Bay area doesn’t make the list when it comes to the highest percentage of profitable startups. In fact, smaller markets are a lot more profitable than other big cities. But one stands out from the rest when it comes to a healthy and profitable startup environment – the windy city of Chicago.
Chicago is leading the way because 45% of investments delivered 10 times on ROI. This is miles ahead of Raleigh who came second with a 26% return on investment. Further, 81% of startups in the city delivered 3-10% yield on the initial investment.
However, it’s important to note that Chicago didn’t get the highest overall return, as stated earlier, it had the highest percentage of large returns in terms of exits.
At the moment, Chicago hosts about 104 private companies (38 in IT) on the Inc. 5000 which places the city in second place when it comes to cities with the fast-growing companies (New York City still rules this segment).
Further, according to investment firm CBRE, the windy city is ranked as the 11th fastest and 5th largest growing tech market in the U.S. Further, technology is also making things much easier and cost-effective across the board (think of 3D printing making manufacturing cheaper).
So what’s powering startups in the windy city?
1. There’s an Abundance of Tech Talent
With universities like the University of Illinois at Urbana-Champaign (which has the 6th best engineering program in the country) in the area, there’s an abundance of computer scientists and engineers.
However, it’s easy to lure millennials away to sunny California, so it will be interesting to see how companies deal with the brain drain. But the odds looked stacked in favor of the city as it's lively, stable, and offers a high standard of living. Having said that, Chicago isn’t cheap even though the cost of living is significantly lower than NYC.
2. There are Diverse Industries in the Vicinity
Chicago is home to huge enterprises like United Airlines and Boeing. But there are also others thriving in the city, especially in education and health IT. With around 24 businesses focused on education and another 100 companies in eHealth, there’s a lot of scope for tech startups here.
Check out our Value Proposition for U.S. Startups!
Further, the mobility industry is also experiencing a surge lately with companies like SpotHero promoting shared vehicle services and parking in the area.
So if you’re thinking of taking a B2B approach for your next venture, Chicago can provide the ideal environment for you to start and grow. It’s also a great place for huge enterprises to get exposed to small companies.
3. Robust Venture Capital Scene
These days, you don’t really need much money to get a startup up and running, but the capital is there if you need it. Further, technological advancements are also continuing to make it cheaper for startups to get off the ground.
There are venture capitalists looking to place their bet on the next big thing, so that is also another positive for the windy city. So the future can only be encouraging for those looking to get something going.
Chicago has a lot of positive things going for it lately and a healthy startup environment is one of them. As you can also get the big city experience here while being close to the midwest, you can expect more talent to be drawn to the city.
Are you working for a startup in Chicago? What’s your experience in the windy city? Share your thoughts in the Comments section below.
Featured image courtesy of WeWork.
