In an overall nerve-wracking year for Chicago businesses — whether the trouble is pestilence, inflation, worker and supply shortages, or simply do-I-open-the-office-or-not — there’s been one unmistakably upbeat trend: The region is having a banner year in tech company formation.
It’s seen more than anywhere else in the continued vitality of Fulton Market, which benefits from having the “cool factor” as an office location and where developers continue to place heavy bets. It’s also starting to help the Loop, which almost qualifies as a bargain for those needing office space. The tech boom bodes well for job creation here in the years ahead.
Chicago closes 2021 having birthed 12 “unicorns,” the industry’s name for companies that reached a billion-dollar valuation based on the capital they’ve raised and the stakes awarded to the funders. The number comes from Pitchbook data tracked by World Business Chicago, the city’s economic development promoter, and is a record. In 2020, Chicago raised two new unicorns.
Behind that is the success Chicago startups have had in raising money, $7.9 billion in venture capital this year, a billion more than in 2020, World Business Chicago said. The group crows that Chicago now plays in the top-tier tech league of San Francisco, New York, Boston and Los Angeles.
Last week, Amazon said it is increasing its office space at the paired 222 W. Adams St. and 227 W. Monroe St. buildings by about a third, to 200,000 square feet, to accommodate 450 white-collar jobs it plans to add over a few years. Facebook and Google have added space here in recent years, and Salesforce is slapping its name on a new skyscraper.
But this also plays out in lesser-known tech names. One of the best examples is Tegus, which sells business and market intelligence to major investment firms and fund managers, private equity providers and large corporations. It has a niche among competitors such as Bloomberg, FactSet, Chicago’s Morningstar and many more.
According to Chief Financial Officer Bob Casey, Tegus had 35 employees when the pandemic hit in March 2020. It ended that year at 115 and will close 2021 with 275 employees, he said. “By the end of next year, we’ll be north of 650,” Casey said. Most of the staff will be in Chicago, where Tegus has taken two floors, or 47,000 square feet, at 200 N. La Salle St. It also rents at 120 S. La Salle St.
The company’s customer base has grown rapidly to about 1,500 accounts worldwide, Casey said. To fund expansion, it has gotten $90 million in second-stage capital. It’s also improving its product line through its purchase of BamSEC, which improves access to data publicly traded companies must file with the Securities and Exchange Commission. The SEC’s database known as Edgar, a go-to resource for investors, can charitably be called clunky.
Twin brothers Michael and Thomas Elnick founded Tegus in San Francisco but brought it to Chicago in its early days in 2018. Casey said Chicago has made all the difference. “It’s been an incredible accelerant to our business,” he said. “We’ve found unbelievable talent.”
Not to mention low turnover. Casey said tech workers on the coasts job-hop in search of stock-option riches. In Chicago, there’s more commitment to building something. “We needed to be where we could build an organization with the values and culture we wanted,” he said.
Tech companies that have left the coasts for Chicago, and there are several, also find lower costs. Illinois’ flat-rate income tax benefits most tech employees, especially compared with New York and California, and office rents here are about half the rate in San Francisco, Casey said. Despite higher property taxes, the cost of living here is lower than in other tech hubs.
Those are facts for Chicago-bashers to get their heads around.
Casey’s enthusiasm for the toddlin’ town is so great the civic boosters should bottle it.
“Chicago has a lot of strengths, and we’re best when we play to them,” Casey said. He said it comes down to Chicago being a “sale city,” focused on getting the product to the customer, perhaps a legacy of its history in food production and packaging, mail-order fulfillment and even advertising. Workers here can be programmers but don’t need to be. They can work in sales and customer service, Casey said.
The universities, the startup incubation hubs and organizations that make connections between entrepreneurs and funders, such as TechNexus and Penny Pritzker’s P33, all contribute to the results.
Surveying Chicago’s record with startups in 2021, Pete Wilkins, managing director of venture capital firm Hyde Park Angels, wrote at Forbes.com that Chicago has become “the Midwest’s primary innovation hub, and arguably one of the country’s top three.”
A little positivity won’t hurt as we ring in the new year.