Chicago companies raised $660 million in the second quarter in 86 deals, according to data from PitchBook and the National Venture Capital Association.

Although money raised was 7% higher than the first quarter, it’s well below the string of $1 billion quarters recorded in 2021 and 2022. The number of deals was the lowest since the second and third quarters of 2020, the first two quarters after the pandemic began.

Nationwide, the amount of venture capital invested has also been falling steadily. At $39.8 billion, it was the lowest total since the second quarter of 2020 but closer to pre-pandemic levels. The number of deals was 43% lower than the peak in the first quarter of 2022, when money flooded into venture capital from hedge funds and other players looking for new places to invest.

The amount of money invested nationally in the second quarter was down 13% from the previous quarter on 14% fewer deals. Total investment was 48% lower than a year before on 34% fewer deals.

In Chicago, funding in the second quarter was down a whopping 89% year over year because of the timing of a massive $5.2 billion investment that Walgreens made in VillageMD. 

At $660.3 million, funding in Chicago was about one-third of the $2.2 billion in investment during the second quarter of 2021, the high-water mark outside the anomaly a year ago. However, the amount of money and the number of deals in the second quarter were in line with pre-pandemic averages, reflecting national trends.

“U.S. deal activity has been roughly flat over the past few quarters, remaining elevated above pre-2021 levels, despite the swift decline seen from the end of 2021 and early 2022 figures,” PitchBook said.

The slowdown in funding comes amid a sharp decline in acquisitions and public offerings has caused startups to scramble for cash. PitchBook estimates there will be about $20 billion in total exits this year, which would be the lowest level in the past decade.

Companies often raise smaller amounts of capital from existing investors in bridge rounds. The amount of funding raised also reflects investors’ desires to hunt for new deals, which require less capital.

“The early stage had the fourth-most-active quarter ever in terms of deal count, and there remains a high number of investors looking to this area of the market,” PitchBook said. “Venture growth also saw a deal-count increase, but this increase is more likely rescue funding than simply new growth investments.”

PitchBook said 14% of second-quarter deals were so-called down rounds, or investments at a lower valuation than the companies’ previous rounds of funding.

Some companies that are showing growth in an otherwise choppy economy, such as Chicago-based Hallow, are raising large rounds at higher valuations. Hallow, a prayer and meditation app, raised $50 million in the second quarter at roughly twice its previous valuation.

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