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Chicago’s startup scene is finally getting the attention it long felt it deserved.

By now it’s common knowledge that 2021 is shaping up to be a breakout year for the startup and venture capital worlds, surpassing years of strong results in a long-term bull market for tech-focused business upstarts. But no boom is equally distributed.

Different markets are seeing differing amounts of activity, driven in part by their startup ecosystem’s maturity and the ease with which external capital can be deployed. African startups will set fresh venture capital records this year, for example. But markets closer to the leading hubs of venture capital are seeing even stronger results, as Latin America demonstrates. China’s venture capital market, meanwhile, is easing as others accelerate.

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Even inside the United States, there is divergence in how individual markets are performing. Chicago is an outlying benefactor from accelerating venture capital activity and the rise of remote investing. Data collected by CB Insights, for example, indicates that Chicago’s ability to attract venture funds has risen to new heights in the first half of the year.

While we anticipated Chicago might do well in a generally warm environment for startup investment, its results were better than we expected. To more fully understand just what is going on in the Windy City, The Exchange corresponded with M25, a Midwest-focused venture capital fund; Moderne Ventures’ partner Liza Benson (fresh off her firm raising $200 million for its second fund); Scott Kitun, of the Technori community and investing platform that has roots in the city; and Brian Barnes, CEO of M1 Finance, a local unicorn in the fintech space that TC has covered extensively.

The picture that emerges from their comments is one of a city long underfed in capital terms leaning into a changing investing market. And the investors don’t expect that the back half of the year will be too different from the first. That means Chicago-based startups are in the middle of their best year of raising capital ever. Let’s talk about how that came to be.

A venture capital run for the ages

The pace at which Chicago-area startups have raised capital reached a new, high plateau starting in the second half of 2020. In historical terms, data indicates that Chicago was a beneficiary of an accelerated pace of venture investment that took hold globally once investors, concerned that startup growth could slow, shrugged off initial COVID shocks. 

In short, startups were not affected as many feared, with many young tech companies actually accelerating during the pandemic’s first quarter of lockdowns, as many traditional businesses had to lean into software solutions and other services that startups sold.

The early boost to Chicago’s venture totals in the final two quarters of 2020 was easily bested in the first quarter of 2021. And then the second quarter of this year crushed that record.