Note: This post originally appeared in Midwest Startups
Walking up the creaky, unfinished steps next to a tile gallery in River West, there is a litany of thoughts running through my mind, ranging from, does everyone else really wear jeans to work, if this building were to catch on fire, what’s the burn time? With the same excitement and nerves that come with the first-day-of-school feelings, I walk through the glass doors and am greeted by a house-shaped logo with silverware, people sitting on medicine balls while chattering to customers via headsets, a handful of people playing ping pong, and a noticeable absence of cubicles. I’m starting my first day of work at Home Chef, a meal kit delivery startup that launched from humble beginnings on Ohio Street. After a day of excitement meeting team leads from product, tech, operations, marketing, customer support, what I remember most about that day was a feeling of hope. I joined a group of people who believed in what they were doing and wanted to see it grow.
As an early employee on the Finance team, I was fortunate to see the massive growth of the company and be a part of that story. In the early days, the phrase ‘wearing many hats’ became real to me, as I played in CSV files, picked up some rudimentary code, and built out our investor reporting. My favorite part about working at Home Chef was thinking strategically about the company’s growth plans and working on the sell-side M&A process. As Home Chef continued to grow, our office relocated to the historical Wrigley Building and eventually announced a $200 million acquisition by Ohio-based grocery chain, Kroger.
Reflecting on my time at Home Chef, and most recently, joining the TechNexus team, I remember a handful of voices cautioning me that, “Chicago is no Silicon Valley”. No stranger to due diligence, I booked a flight to the Bay Area and spent time with tech founders of early-stage startups and unicorns, entrepreneurs in residence, and venture investors. There is an energy there that I think everyone in the tech industry should experience at some point in their career, but I came back from my trip feeling assured of one thing: Chicago is no Silicon Valley, and that’s probably why it’s been so successful. Chicago is a great city for startups because of its economic diversity, higher returns, and access to (affordable) top talent.
Chicago has one of the world’s most diversified and balanced economies, with no single industry employing more than 14% of the workforce (World Business Chicago). Unlike Silicon Valley, which was born from technology, Chicago’s tech scene has boomed by nature of practicality; Chicago tech is an application of technology, essentially applying a tech lens to improve the businesses native to the city. A city of industry made famous for manufacturing, finance, and retail, Chicago is presently the home of numerous Fortune 500 companies representing these industries, as well as food, agriculture, healthcare, insurance, and real estate. These industry leaders have domain expertise, staff, engineers, and resources, but realize that tech and startup innovation could either disrupt their businesses or be used to help improve them. Resultantly, Chicago’s diversification presents B2B startups with an opportunity to sell across almost any sector.
The thriving tech scene and hardworking talent pool make Chicago a welcoming home for startups. As Chicago tech has continued to grow, exits and returns have followed. According to Crunchbase research from 2018, Chicago has the highest multiple on invested capital of all metro areas over the past decade. While the total number of Midwest exits was lower than other areas, those startups tended to raise the least amount of money, making capital work most efficiently and ultimately achieving the highest median exit value.
With opportunity, comes talent. As the city has evolved to become a tech hub, graduates from Chicago’s top tier business and engineering programs have shifted perception: it is possible to create a successful career in technology right here. Recently, TechNexus co-founder Terry Howerton discussed this during an interview with UIC’s Engineering Program, mentioning, “We have the talent, we know the problems that need to be solved, and we have the momentum and opportunity to build the Chicago economy.” The tech scene in Chicago is defining what innovation looks like for these industries, and the future of these companies are benefiting from integrating these technologies.
The history of Illinois Tech Association (ITA) and TechNexus is an important part of Chicago’s tech story. When TechNexus co-founders Fred Hoch and Terry Howerton joined up in Chicago, they saw an uptick in the number of tech companies, but not much of a community. In 2005, they launched ITA as a way to unify the tech community in Chicago, give it an identity, and build a thriving ecosystem. ITA has gone on to help over 3,000 growth stage tech businesses and recently merged with 1871 in an effort to bring together founders from startup to growth, to enterprise across the region. In 2007, a couple of years after launching ITA, Fred and Terry co-founded TechNexus, one of the first technology incubators and co-working facilities in Chicago. As of today, over 550+ companies have grown at TechNexus. Those companies have raised over half a billion in capital, and several have exited over the past few years, valuing north of $3.5B+ dollars.
As tech startups gained traction, corporations became targets for disruption. In response, TechNexus created a Venture Collaborative business model to bring startups and corporations together through collaboration capital, promoting innovation and growth vs disruption and displacement. We have expanded commercial partnerships with large corporations, many of which are based in Chicago, to build and invest in early-stage tech startups that have strategic potential with our corporate partners. The capital helps startups reach the customer much faster, a better understanding of the problems customers need to solve earlier in their development cycle. The collaboration helps our corporate partners by creating access to new markets, generating new insights, and introducing new growth opportunities. This feedback loop, connecting startup to capital to corporate, is a force multiplier for real growth.
Thinking back to my first day of work at Home Chef, I remember all of the research and conversations that vilified my jump to an early-stage startup in Chicago. With its diversified economy, impressive returns, and high-caliber talent pool, the city is uniquely positioned to continue building its startup ecosystem. Yet, the tipping factor for me was the excitement and hope that came with joining a team that wanted to reimagine an age-old industry. Today, when I talk to local founders, I look for the same spark and excitement I had when I walked up the unfinished steps of the humble office in River West: a desire to build something new, something better, and something right here, in Chicago.
Sources:
- World Business Chicago
- Crunchbase — The Midwest Produces Fewer but Mightier
- Youtube — Terry Howerton
Additional Reading on Midwest VC: