The Evolution & Future Of Chicago’s Startup Ecosystem

FoundersCircle, Chicago, Chicago Startups, Guest PostIn the past decade, Chicago’s technology community experienced incredible growth. Much  of the community’s success was driven by the strong history of big business in Chicago and the emergence of key stakeholders in the startup ecosystem.

While the Chicago startup scene is still relatively young in comparison to some other U.S. cities, the community’s key stakeholders are in place to drive long-term success. Chicago start-ups have already built amazing technology and will continue to build on the city’s big business roots, ensuring long-term sustainability and growth for this ecosystem.

A strong historical foundation

Chicago’s place as a home to startups can be traced as far back as 1928, when Motorola was founded in the city. Motorola went public in 1943 and its legacy lasted through the early 2000s before being acquired by Google in 2012.

A vibrant business community has set the foundation for sustained growth. Companies like Sears, Montgomery Ward, and McDonalds—and the recent relocation of Boeing—highlight Chicago’s strong history as a home for large businesses.

Recent tech successes

The technology foundation set by Motorola and others provided an ecosystem ripe for innovation in the 21st century. Orbitz, the leading online travel company, was founded in Chicago in June 2001 and subsequently went public in 2003 before being acquired for $1.25 billion.

Careerbuilder and Groupon, two startups founded a decade apart from one another, also exemplify recent Chicago-based technology successes. Careerbuilder receives more than 24 million unique visitors per month and ranks as one of the largest online career sites in the United States. Groupon, on the other hand, has already closed over 20 acquisitions, has 2,000 Chicago-based employees, and went public in 2012.  The paths of Careerbuilder and Groupon are emblematic of the rapid growth and success that Chicago-based companies can achieve, and the marketplace is listening.

Critical components of the ecosystem are in place to drive future growth.

The successes of Orbitz, Groupon, and Career Builder, to name a few, have sparked the explosive growth of startups in Chicago, but no start-up community can thrive without a certain set of valuable components.

Traditional elements of Chicago’s business-community—strong corporate and civic engagements and world-class universities—have anchored the technology infrastructure and community.  For example, after purchasing Motorola Mobility, Google decided to relocate 3,000 employees from the suburbs to downtown Chicago. Also, newer education-focused groups like the Starter League and Chicago Tech Academy are creating a strong base of technology talent.

However, the clearest sign of a sustainable ecosystem and a platform for future growth has been the number of new Chicago-based investors, industry groups, and incubators.

Chicago couples a strong angel community with co-working spaces and incubators for early stage companies. For example, 1871 launched in Chicago in 2012 and TechStars created a formal, local presence in Chicago earlier this year. VC funds like New World Ventures, Lightbank, OCA Ventures, Sandbox Industries, and i2A provide a local, institutional base for capital and operational support.

The result of this rapidly expanding ecosystem has been an incredible amount of new Chicago-based startups and early success stories.

In 2002, only 11 digital startups were launched in Chicago. By 2012, that number was 197 and the startup community received over $391 million in funding.   Companies like GoHealth, Braintree, Belly, SilkRoad, and many others are showing early promise of not only achieving success, but also creating meaningful, sustainable businesses.

Successful exits and the reinvestment of gains back into Chicago will fuel future growth.

As the Chicago technology community develops, the reinvestment of capital and talent into the local ecosystem will be critical to sustain long-term growth.

In 2012, Chicago saw more exits than any previous year. As this number continues to rise—and the value of these events grows—Chicago entrepreneurs, angels, and venture capitalists must invest those gains back into the community to successfully continue the evolution of Chicago’s startup community.

Chicago’s unique culture will shape the future.

With cheaper cost-of-living and office space than cities like New York and San Francisco, Chicago maintains a reputation as a livable city for technology companies and their employees. Chicago’s Midwest heritage, its big business history and its separation from the influences of Silicon Valley and New York set the tone for a unique founding and operating environment. This change in perspective can often be valuable for start-ups and others in the ecosystem.

The duality of a city with strong, historic business roots and a young, thriving technology ecosystem has made Chicago a fantastic place to live and start a business.

Chicago’s recent growth as a legitimate technology hub has created a palpable energy in the city. The technology scene is young and on the upswing: start-ups, incubators, educators, and investors all are able to play a meaningful role in its development.

As this ecosystem continues to gain traction, the sky is the limit for companies and entrepreneurs who call the Windy City home.

Gregory Grossman is a Partner at DLA Piper who works with venture capital firms and emerging growth companies, from the earliest stages of formation and seed capital through the entire company life cycle, including exit events.  He holds a law degree from The George Washington University and an accounting degree from the University of Illinois at Urbana-Champaign.

Marina Dedes joined Lightbank in April 2011. Prior to Lightbank, Marina was a Senior Associate in the Valuation Group at Duff & Phelps. Marina holds a BS in Materials Science and Engineering with a concentration in Biomaterials from the University of Illinois at Urbana-Champaign

Greg and Marina are both among the founders of the Chicago Founder Circle, a new Peer-to-Peer networking group for founders and CEOs of emerging growth companies in Chicago. More information can be found at: http://www.chicagofounderscircle.com

Check out some of our great Chicago startup coverage.

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The Evolution Of Chicago’s Tech & Startup Scene In An Infographic

chicagoWe travel all across the country and check out startup communities and ecosystems everywhere else. One of the ones that caught our eye early on is Chicago.

Going back to the early 1900’s Chicago has had hustle. Much like many don’t want to succumb to the fact that drug kingpins (the ones that don’t get caught) are the grittiest of hard working entrepreneurs, Chicago has heart, hustle and loyalty that can date back to the seedy underworld that once played home to the most notorious of gangsters Al Caone and later Sam Giancana.

Why in the world did I go there? First off it’s history but secondly the Chicago startup ecosystem is an extremely loyal bunch. They help each other in good and bad and they lift each other up whenever and where ever they can. That’s why, despite the fact that Chicago produces 100 startup events a month, the entire community comes out for Chicago TechWeek.

Staples in industry like United Airlines, Fannie May and Sears grew up in Chicago, with countless others.

And then when technology took off (and despite what PandoDaily once said) BOOM! Chicago’s tech ecosystem and infrastructure skyrocketed which is still what it’s doing today.

Most recently we know the stories of GrubHub and Groupon but back in 1984 (yes 1984 before many startup founders were born), IT mail order powerhouse CDW was founded in Chicago. Millions of people have bought computers, storage, printers and other peripherals from the three letter giant.

Chicago also revolutionized and re-invented the classifieds department across multiple categories starting with CareerBuilder in the mid 90’s. Then in the late 90’s cars.com and apartments.com launched, in Chicago.  Chicago also has one of our favorite regional startup sites to visit, builtinchicago.com.

Let us also not forget that Motorola is based right outside of Chicago.

All of this is why one of Chicago’s other big startups, BigMarker, went ahead and made this trusty infographic highlighting the history of Chicago’s Tech Scene as a celebration of their tech community on TechWeek.

Oh and regardless of size, Chicago holds one mean tech party during TechWeek second only to the VegasTech party at SXSW.

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Click here to actually read or print this thing (enlarge)

Here’s more Chicago Techweek startup coverage.

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Chicago Announces 2013 Moxie Award Winners

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Built in Chicago held their second annual Moxie Awards on Thursday night at the swank Park West. Over 800 entrepreneurs, techies, and local dignitaries packed the ballroom for the awards, which highlight the city’s rapidly growing tech scene.

Chicago’s Mayor, Rahm Emanuel, who has been in the spotlight lately for his city’s climbing crime rate, took a break from the negative to highlight the positive. The event comes just a week before the national tech spotlight shines on Chicago Tech Week.

“The Chicago technology economy is vibrant and thriving,” said Mayor Emanuel, according to Built In Chicago. “The entrepreneurial spirit and innovation we see is creating jobs and opportunity now and will have an impact on the city for years to come. I look forward to working with all of these companies as they grow and evolve.”

Next week’s Tech Week event is expected to draw a crowd of a few thousand to Chicago’s Merchandise Mart, home to 1871. TechWeek will feature an exhibition area, several panels, and speakers including the creator of CRM, Mike Muhney, and the boisterous founder of MegaUpload, Kim Dotcom via video feed (Dotcom can not currently travel into the United States).

Here are the 2013 Moxie recipients, reported by Built In Chicago..

Best Consumer Web Startup: SpotHero

Best B2B Startup: Belly

Best Healthcare Startup: GiveForward

Best Education or Recruitment Startup: eSpark Learning

Mobile App of the Year: iAnnotate – Branchfire

Best Civic App: Chicago Bike Map App

Best Bootstrapped Startup: Branchfire

Best Startup Founders/Co-Founders: Marc Kiven, Mike Sands and Eric Lunt (BrightTag)

Best Service Provider: SurePayroll

Digital Agency of the Year: Rise Interactive

Mentor of the Year: Chuck Templeton (Impact Engine)

Investor of the Year: J.B. Pritzker (The Pritzker Group & New World Ventures)

Tech Woman of the Year: Shradha Agarwal (ContextMedia)

CTO of the Year: Harper Reed (Obama for America – 2012)

Best Beard: Jim Shea

Best Company Culture: Centro

Best Software Company: Sprout Social

Best Corporate Digital Innovation: Guaranteed Rate

Startup of the Year: Belly

Breakthrough Digital Company of the Year: Braintree

CEO of the Year: Mike Sands (BrightTag)

Nibletz is using Chicago startup Centup find out more here.

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Chicago’s Startup Community Announces New Founder’s Circle

Chicago,Chicago startups, Chicago Founders CircleChicago is a special place for startups. Despite a crazy warped opinion from Pando Daily a while back, people have started to see Chicago’s thriving entrepreneurial and startup ecosystem for what it really is.

While the verdict is out on the actual success of Groupon, we can’t discount the story of it’s rise to fame and popularity from it’s downtown Chicago headquarters. Despite the fact that ousted CEO Andrew Mason is retreating to Silicon Valley, Groupon, like Belly and GrubHub are products of the Chicago startup ecosystem.

While Groupon, Belly, GrubHub, Lightbank, SimpleRelevance and others are names a lot of tech entrepreneurs from across the country know, what’s really amazing is the success that the 1871 incubator has had since it opened it’s doors. 1871 has housed 225 startup companies, creating 800 jobs. 1871 companies have generated $12.7 million dollars in revenue and drew $27.6 million in venture capital. Of course we can’t forget to mention that Chicago is home to one of the newest Techstars programs.

With this wild growth at just one address (albeit a gigantic one) in downtown Chicago, the entrepreneurial leaders in the city announced Wednesday the formation of Chicago Founder’s Circle (CFC). CFC is a new Peer-to-Peer Networking Group offered exclusively to Founders and CEOs of emerging growth companies in Chicago, with a focus on supporting and nurturing the expanding and vibrant emerging growth company community in the region.

CFC was founded by thought leaders actively involved in the emerging growth sector from a variety of different Chicago-focused organizations, including: DLA Piper, Lightbank, Northwestern University, Deloitte, Dignitas, NEA, and Silicon Valley Bank. CFC is structured as an annual group of 25-30 entrepreneurs who will be invited to participate in a series of four events that will offer them the opportunity to connect with one another and listen to prominent speakers. A fifth networking event will serve as a “graduation” type event that will bring together the current class and, in future renditions, alumni from previous CFC classes.

“We created the Chicago Founders Circle because of the amazing entrepreneurial talent that exists in Chicago,” said Greg Grossman, Partner at DLA Piper. “By connecting world-class mentors, advisors and investors with Chicago’s most successful entrepreneurs, we’ll have the opportunity to contribute to the local economy in a very profound way. The CFC leadership team is excited to use its collective knowledge and skills to foster the growth of these companies and help these entrepreneurs succeed.”

“There is a growing and burgeoning startup ecosystem that has been building in Chicago for a while now,” added Bill Pescatello, Principal at Lightbank. “Last year alone saw a record-breaking $391 million in funding awarded to 197 local startups, which confirms the need and opportunity for a peer-to-peer networking group in Chicago. Our hope is that CFC will become one of the anchors of Chicago’s start-up community for today’s industry leaders and the future generation of motivated, young power players.”

Here’s more Chicago startup coverage at nibletz.com The Voice of Startups Everywhere Else.

Chicago On Today: A New Startup Launches Every 44 Hours

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It’s hard to believe that less than a year ago Silicon Valley based PandoDaily sent a reporter to Chicago and he came back suggesting that their startup scene was sleepy. Fast forward to February 2013 and we’ve been tracking the startup communities rapid growth here.

Earlier this month NBC’s Today Show reported some amazing facts about Chicago’s startup community:

More startups launched in 2012 than any previous year.

A new startup launched every 44 hours.

197 of those were digital startups.

59 companies raised more than a million dollars.

We’ve also made three different trips to Chicago this year as part of our “sneaker strapped startup road trip”. We attended a kick off event at Chicago’s huge 1871 incubator, Chicago TechWeek and the Startup America Regional Champions Summit. On each trip we got to spend more time with Chicago’s seasoned startups like Groupon and Belly and some of their community’s newest players like KlutchClub and SpotHero.

Chicago’s startup ecosystem even caught the eye of TechStars founder David Cohen and Foundry Group’s Brad Feld, who recently announced a merger with Excelerate Labs to form Techstars Chicago.

We are looking forward to what Chicago has in store for 2013. Chicago is my kind of startup town.

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Chicago Funds 25 Startups For $188 Million In Q2 2012 Smashes Q1

Chicago recently played host to a great regional tech and startup conference called TechWeek 2012. Judging on the activity at the conference and the legendary after parties it should be no surprise that startup activity in Chicago is big. How big? Try $188 million dollars big of 25 startup companies. Two companies; Dealstar and Tribeca Flashpoint Acacdemy also exited in Q2 without disclosing financials behind their deals.

GoHealth received the most money in Q2 2012 with $50 million by Norwest Equity Partners. Valence Health came in second place with $30 million. In the tech space Singlehop led with $27.5 million. Total Attorneys was second in the non health space with $15 million.

Chicago’s startup de jour, Belly, pulled in two rounds of funding in Q2 for a total of $12.5 million. Lightbank Capital and Silicon Valley Bank teamed up for a $2.5m round for Belly in April and Silicon Valley powerhouse firm, Andreesseen Horowitz invested $10m in May.

The bigger story for Chicago is that in Q1 2012 there was just $33 million in funding split between 17 companies.

Here’s the complete list of companies funded in Q2 from BuiltinChicago.com

  • Arroweye              $3 million
  • Belly                       $12.5 million
  • BenchPrep            $6 million
  • BrightTag             $15 million
  • Dabble                   $140,000
  • Elevate Digital    $2.7 million
  • Future Simple     $6.8 million
  • GoHealth            $50 million
  • gtrot                     $920,000
  • Journatic            $3.2 million
  • Kapow Events   $700,000
  • Mediafly             $200,000
  • MentorMob       $150,000
  • Monthlys            not reported
  • Neighborhoods not reported
  • New Futuro        $1.3 million
  • Open Kennel      $440,000
  • Restaurant.com $8,000,000
  • Singlehop            $27.5 million
  • SocialKaty           $300,000
  • Tempo                  $750,000
  • Total Attorneys  $15M
  • Unmetric              $3.2M
  • Valence Health   $30M

Linkage:

Source: Built In Chicago 1   2

Check out Nibletz’ coverage of Chicago TechWeek 2012

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Startup Interview: Chicago Startup PrepHero

PrepHero is a new Chicago startup that bills itself as the premiere “social” development network for athletic training. While RocBob, another startup that exhibited at Chicago TechWeek, is about recreational sports, the team and “the game”, Prep Hero is about the athlete.

PrepHero allows the coach and the athlete to keep up with their training regiment, skill sets, areas of improvement and more.  The coach can then use the PrepHero platform to keep up with his or her entire team and map the progress of their athletes.

What sets PrepHero apart from other scholastic athlete focused startups is that PrepHero is about the conditioning and developing of the athlete. It’s more invested in the person who is the athlete rather than how many home runs, RBIs, rebounds or free throws they have.

Where some platforms for athletes are about bragging rights and wins, PrepHero is about achievement and progress. In fact those who support the athlete, outside of the coaches circle, are called boosters. Boosters can be dad, mom and other family members, even your grandfather states away.

We got a chance to interview Barry Tarter the co-founder and CEO of PrepHero about this unique new idea.  Check out the video below:


Linkage:

Find out more about PrepHero’s here

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