Billion-dollar babies: Chicago sees more tech success
The number of unicorns, companies with billion-dollar valuations, is surging here as entrepreneurs cite the benefits of more support for startups.
Spotted any unicorns lately? Chicago entrepreneurs say the city is seeing a population explosion.
Unicorns in the technology field are a creature that’s hardly mythical. The term refers to companies that have achieved billion-dollar valuations.
With 2021 only half over, Chicago has minted eight unicorns this year, according to World Business Chicago, the area’s economic development promoter. The total compares with two launched in 2020 and brings Chicago’s total unicorn count to 19, the group said, basing its analysis on proprietary data it gets from the firm Pitchbook.
“It’s a good year, but it’s the result of a lot of work over the last 10, even 15, years,” said Mark Tebbe, a serial entrepreneur and a leading voice for the tech ecosystem in Chicago. He’s the chairman of ChicagoNEXT, a World Business Chicago program to support innovation and startups.
Tebbe said Chicago tech firms now are raising more money than traditional strongholds in Los Angeles, Seattle and Boston. Just a few years ago, startup resources were slight here, and the best ideas and talent usually moved to the coasts.
Local universities deepened their tech programs, turning out graduates who more often stay in town, Tebbe said. Still, stopping the talent drain is an ongoing issue, and the Chicago nonprofit P33 has launched an effort to bring home tech professionals with Midwestern ties who have moved elsewhere. P33 is co-chaired by business leader Penny Pritzker.
Tebbe said Chicago has increased its ranks of funding sources for startups. The tech incubators such as 1871, MATTER for health care and mHUB of manufacturing have expanded and provide crucial networking opportunities, he said.
Also, Chicago affords access to customers. “Chicago is overweighted as a location for Fortune 500 companies,” Tebbe said. Big corporations are the end users of many new tech products. Also, he said many in business took notice when Google opened a regional base here in 2015, adding another location in 2019.
Other young companies here have benefited from the growth of e-commerce that got a push from the pandemic. “Some sectors did really well as a consequence of shutdowns and people staying indoors,” said Dhruv Saxena, co-founder of ShipBob, Chicago’s most recent unicorn.
It works for merchants who want a direct connection to consumers, bypassing the generic packaging of Amazon while still providing two-day shipping. ShipBob leases warehouse space and fulfills orders according to each retailer’s specifications.
“Six or seven years ago, it was hard to attract interest here and find the tech community in Chicago,” Saxena said. He said local startups now get much greater access to capital.
In ShipBob’s case, it crossed the billion-dollar threshold last month, when it announced $200 million in so-called Series E funding, meaning the fifth round of capital. The funders are well-known, including Bain Capital Partners, Softbank and Hyde Park Angels.
Saxena said his company is doubling its revenue every year and works for 5,000 merchants now versus 1,500 early in 2020.
Tebbe said the past success of homegrown startups such as Grubhub, Groupon and Coyote Logistics has led venture capitalists to take more chances in Chicago.
Other fresh unicorns include Cameo, which lets people buy personal video greetings from celebrities; the marketing platform ActiveCampaign; and Project44, which aims to eliminate bottlenecks in supply chains.
Steve Galanis, CEO of Cameo, said his company started “as a bold idea with strong roots at 1871 that was well-supported and championed by Chicago’s startup community.”
World Business Chicago said another factor supporting tech businesses is Chicago’s success at drawing data centers. A report by real estate firm Cushman & Wakefield ranked multiple factors and judged Chicago as the second-best place to build a data center in the world.
To keep up the momentum, the organization has scheduled the Chicago Venture Summit to connect venture capitalists with startups. Scheduled annually but canceled last year because of the pandemic, the event will occur Sept. 28 and 29 in a new office building at 167 N. Green St.