It’s one thing to raise venture capital. It’s another thing to make good on that investment.

A recent PitchBook analysis found that Chicago companies offer the highest VC returns of any startup hub in the United States.

PitchBook analysts set out to discover which startup hubs had the most success/returns multiple. In other words, what city’s startups offered investors the most return compared to their initial investment?

The private equity and VC funding database found that 81 percent of the Chicago exits they measured had a 3x to 10x return (the term they use is Multiple on Invested Capital, or MOIC, being exit value/total VC raised). That’s the highest of 12 startup hubs PitchBook surveyed, and nearly 10 percent higher than the Bay Area.

In addition, 45 percent of Chicago’s exits had a 10x return, by far the highest proportion of any startup hub.

(Credit: PitchBook)
(Credit: PitchBook)

The exits they analyzed had to have the following qualifications: full exits (acquisition or IPO) in last 10 years, companies have raised at least $500,000 in VC funding before exiting, a confirmed record of and amounts for all funding rounds to ensure accurate total invested capital, and confirmed amount for the exit. Cities had to have at least 30 companies that meet all that criteria to be considered.

PitchBook noted that they only included companies with confirmed exit amounts, which means data will be skewed positively, “as successful exits are more likely to be reported than smaller ones,” they explain in a post. Companies under 1x return were not included.

“The results are a bit surprising, with cities like Washington, D.C., and Chicago ranking ahead of the Bay Area and NYC,” analyst Mikey Tom wrote. “That said, there are many ways to cut the data that may give alternative results.”

And indeed, when the data is reorganized to reflect the number of exits by MOIC, Chicago has just 31 exits compared to the Bay Area’s 613, and even Austin’s 86. Chicago’s average investment multiple is 8.17, below Washington DC (11.04), Los Angeles (10.89), and the Bay Area (8.23)

Ezra Galston, senior associate at Chicago Ventures, said the report is encouraging.

“It reflects that Chicago has recognized some absolute venture backed home runs: Groupon, Grubhub, Fieldglass and Trunk Club to name a few,” he told Chicago Inno over email.

It can also suggest that Chicago investments occur at more balanced valuations, he said. But Galston similarly cautioned against any broad conclusions given the sample size.

“The data reporting is simply opaque,” he added. “Many Chicago investors don’t report exit data publicly because they lack public pension or endowment LPs that require such reporting so Chicago and other smaller markets will skew more heavily positive than other [areas].”

Read the full blog post here.