Last year’s Chicago Startup Report, an annual breakdown of funding for various entrepreneurial ventures in the Chicago Metro by Built In Chicago, explained that the Windy City just had it’s best year yet for start up funding. According to the Report, Chicago startup companies brought in $1.7 billion in funding, much of which was acquired by emerging tech companies like Avant, kCura and ArgonCredit. In total, more than 140 Chicago-area tech companies received funding.
J.B. Pritzker, managing partner and founder of venture capital investment firm the Pritzker Group, told Built In Chicago,
“Each year since 2009, Chicago seems to have another ‘best year ever. The Chicago tech scene matured in 2015 with very impressive capital raises and exits, and I expect that will continue in 2016 and beyond… There’s now a national recognition that Chicago has very fertile ground for technology entrepreneurs, investors and engineers.”
The high praise doesn’t stop there either: PitchBook named Chicago number one on a list of US cities that generate the best venture capital returns. To put things into perspective, the San Francisco Bay Area only came in eighth on that list. According to PitchBook, 45 percent of Chicago deals produced 10 times returns on investments, so in other words, in 14 of the 31 exits that met PitchBook’s criteria, if you put in $250,000, you took out $2.5 million or more.
Why is there so much start up success in Chicago? The reasons are plenty. According to ThrillList, big-name tech companies like Google and Amazon are expanding their presence in Chicago for the following reasons:
- Other big-name companies have thrived here: Early tech-era success stories like Groupon, GrubHub, and Braintree showed it’s possible to build a global business based in Chicago.
- Where there is money, there is innovation: As we mentioned earlier, a growing number of Chicago-based venture capitalists are betting on homegrown businesses.
- Chicago companies are seen as safer bets: One attractive thing about Chicago-based startups is their practicality: Most Chicago tech organizations focus on serving businesses instead of building the “Next Big Thing” for consumers.
- It’s easy on the entrepreneur: Chicago sports a lower cost of living than San Fran or NYC, making it a better option for would-be entrepreneurs than many major cities. According to Rent Jungle, the average overall rent for apartments in San Francisco is $3,770 and in New York it’s $3,519, compared to $1,989 in Chicago. This also means employees can do more with lower wages.
- Great business schools: Chicago boasts top-tier business schools such as the Kellogg School of Management, the Booth School of Business and the Quinlan School of Business.
- Accelerators, incubators, and coworking spaces: In order to facilitate all the top b-school talent, there is an increasing number of office space, mentorship, and investment opportunities for new companies.
So what are some of the top Chicago startups to look out for?
Here a list of some of our favorites, leaving out of some of the noteable big guns like Grubhub and Groupon:
- Charlie: Incubated by DreamIt Ventures and 1871, Charlie is a three-year-old company that has received $1.75 million in backing from Hyde Park Venture Partners and Lightbank, and now has 25,000 users. What does Charlie do? When you schedule a meeting with someone you don’t already know, the app combs through thousands of online sources to create a one-page description of the person, complete with work history and what you two have in common.
- Fandium: Chicago is a big-time sports town, so it’s no surprise that there’s a company based in town that’s riding the wave of the $1.4 billion fantasy sports market. Fandium‘s app aggregates text, photos, and videos that fans post on social media when they’re in and around sports stadiums. Users can follow other fans, track up-to-the-minute scores, and make friendly wagers on game outcomes. Founded in 2013, the company has received $1.25 million from angel investors and is now raising a $750,000 round in part to develop its app for Android devices.
- Raise: This peer-to-peer marketplace allows users can buy and sell gift cards and store credit from retailers ranging from Walmart and Target to Gucci and Louis Vuitton. With $81 million in venture capital from New Enterprise Associates, Bessemer Venture Partners and others, Raise grew its revenue by 500 percent from 2013 to 2014 .In January the gift card marketplace raised a $56 million round of funding, making it one of the largest tech deals in the Chicago area in the last year.
- Avant: Named one of the top FinTech innovators in the world, Avant has been backed by more than $2 billion in funding. Avant leverages big data and machine learning algorithms to lower the costs and barriers of borrowing for consumers.
- kCura: kCura develops web-based e-discovery applications for managing large volumes of electronic evidence during litigation or investigations. In 2015, the company secured $125 million in private equity for its first ever round of funding, marking the beginning of one of the company’s most successful years to date.
- ArgonCredit: Created by former mortgage banking executives, Argon is a next-generation online lending solution for prime and near-prime borrowers in the United States seeking near-instant access to loans from $500 to $25,000. In 2015, the company saw a $75 million debt financing round.