Groupon-mania was going to usher in a new wave of venture capital funding and deal activity to Illinois. That didn't happen.
When Groupon was riding high, there were many breathless pronouncements that Chicago or Illinois or Silicon Prairie might be the next Silicon Valley. The idea was that the money and awareness that Groupon would bring to the community would help usher in a wave of new investment and startups in the area.
Then we noticed that Andrew Mason, founder and former CEO of Groupon, left Chicago for the sunnier pastures of Silicon Valley and Y Combinator. While that is clearly not a great thing (at least symbolically) for Chicago-land, we wondered if Mason and Groupon had actually helped to put Illinois on a different trajectory as many thought they might and maybe an eventual challenger to Silicon Valley?
Unfortunately for Chicago, the data clearly shows that it is not on a different trajectory nor is it going to be challenging Silicon Valley (or for that matter NY, Boston or SoCal) any time soon as a hub for investment activity.
Once you strip out Groupon, Illinois VC funding and deal volume have been flat. No Groupon bump, no irrational exuberance – just the same humdrum, modest levels of investment funding and deals. A look at the graph of the last four years clearly illustrates this. Outside of mega-financing rounds from Groupon which buoyed funding totals, VC funding in Illinois has never topped $200M per quarter and dropped 79% between Q4’12 and Q1’13.
But to put Illinois’ performance in perspective, comparisons with Silicon Valley are foolish. So instead, let’s compare Illinois to New York. New York has been growing quickly and while still not a real challenger to Silicon Valley in terms of size, exits, etc, it’s the market with the most momentum. If Illinois is going to be the next Valley, they’ll need to overtake NY first.
Below is a graph of funding activity to NY vs. Illinois from Q3’09 to Q1’13. Not pretty for Illinois. NY is trending up and Illinois is trending flat.
If we look at deal activity in Illinois compared to New York, we see NY’s deal activity accelerating quarter-over-quarter while Illinois has essentially flattened after modest growth through Q1’11. And the gap between the two regions is growing. Last quarter, New York saw nearly 10 times as many deals as Illinois.
Amid slumping funding numbers and tepid deal activity, the data provides little support to Illinois’ progression toward becoming the next Silicon Valley or even one of the country’s top tech hubs.