Chicago Startup Scene

The City That Works is A Work In Progress

About Jeff Carter• Partner, West Loop Ventures; Co-Founder Hyde Park Angels

• Born and raised in Chicago

• linkedin.com/in/jeffrey-r-carter

• Independent investor, CME Member for 25 years, former Board

member

• @pointsnfigures (Twitter) Pointsandfigures.com-blog

• Passionate about helping outstanding entrepreneurs turn promising

concepts into market-leading companies.

“Startups are transforming our society. Over the past 100 years, we’ve gone from an industrial era to a post information era where the network is rapidly disrupting

the hierarchy and transforming the way we work and live.”

-Brad Feld, Foundry Group

Society is Rapidly Changing

The MegatrendsNetworks not HierarchiesOrganizations operate from top down. Software and technology enables them to be flatter, fleeter, and first.Everything Will Be UnbundledOrganizations that are generalists will be disintermediated by focused competitors that engage specialized business silosEveryone is a Node on the NetworkMobile technology makes everyone a node on the network they operate in. This has deep ramifications for companies and societySoftware is Eating the WorldTechnological changes are changing the way we produce, interact and transact enabling flatter, customized chains of distribution and peer to peer networks.

“What’s different today is that we are seeing on a daily basis revolutionary new ideas, devices, and form factors, not evolutionary enhancements.”-Arvind Sodhani Intel Capital in the WSJ (Jan 1. 2014)

Unbundling of Industries

Trends In Venture Capital

“Smaller funds with smaller check sizes were 2-3x more likely to produce “venture returns”-greater than a 3x TVM-than deals in larger funds.

In our view, small specialist VC funds are better positioned to exploit the current opportunity than larger VC funds, which often avoid smaller venture deals.”-StepStone VC Research Report, June 2013

Smaller funds (less than $250M) outperform larger funds year after year.

Small Fund Advantage

Emphasis on Seed and Series A creates a “portfolio of options”.

Other Leading Funds

Series A Funding GapSeries A funding gap is especially acute in the Midwest. There are opportunities to invest in sustainable, disruptive businesses in the Midwest. Current headline VC funds cannot meet the need, nor do they have the networks to source deal flow.

Chicago is the hub for Midwestern startup culture. In 2012, a new startup company was formed every 48 hours. Strong in B2B, the Midwest is poised to ride megatrends and next waves in innovation.

The Midwest is home to 129 of the Fortune 500, some of the largest PE funds and Family Offices. All represent a deep pool of potential buyout partners

In the last five years, there were $23 Billion worth of exits out of Chicago and this region- source “Fast Company”

Chicago is the Hub

Chicago Ecosystem

• Seminal Moments were around 2005-20091. New Venture Challenge-University of Chicago2. Hyde Park Angels3. Excelerate Labs which became4. 5. UI Labs, Matter, Chi. Innovation MentorsIt takes a minimum of 20 years to build a sustaining ecosystem—be patient; Chicago has a ways to go.

• Top research universities in the “Big Ten” states are under pressure to monetize resources via startup companies. Some examples:

– Champaign/Urbana (Top tier Engineering and Business, UI Labs, Illinois Launch)

– Chicago Booth, Kellogg , DePaul, Notre Dame(New Venture Challenge, Polsky Center, Levy Center, Coleman Center)

– Madison (UWisconsin, Gener8tor)

• Major Midwestern cities are actively encouraging entrepreneurial movements

• Indianapolis/West Lafayette/Bloomington (INpac, SproutBox)

• Emerging start up ecosystems in Minneapolis, Kansas City (Google Fiber), St. Louis, Ann Arbor, Detroit, Columbus, Cleveland, and Cincinnati

• Virtually every major university in Big Ten country are emphasizing entrepreneurship programs on campus. Even small schools are embracing the entrepreneurial movement.

Midwest Embracing Entrepreneurial Movement

Chicago Potential

Where Can Chicago Be Successful as a Startup Power Player?1. Financial Services (ycharts.com)2. B2B-Manufacturing, Services (UICO.com, Intellihot.com)3. Real Estate (desktimeapp.com, Nextspace.us)4. Travel, Logistics, Supply Chain (supply-vision.com)5. Healthcare (healthy-txt.com)6. Agriculture (farmlogs.com)7. Personnel (JuvodHR.com)8. Retail (bucketfeet.com)

If we try to be just like Silicon Valley, we will fail.

Immediate Challenges

1. Money-not enough seed stage capital in Chicago2. Money-not enough Series A capital in Chicago3. Midwestern Sensibility (these are crazy, no money ideas)4. Density and Relationships-need more engineers and

entrepreneurial minded people locating here to build network

5. More Successful Exits-successful companies exiting for big numbers (Groupon, Braintree, Grubhub)

6. Corporate participation-as customers, investors and as acquirers

7. Government participation-as customer

What Makes A Good Investment?

It’s All About Perspective

When Startups Start Out

Quick Low Cap Investment Growth, Stealthy Attacks

Would You Have Invested?• Company turns 140 typewritten characters into a microblog (Twitter initial

description in 2006)• Delivery service that brings fast food to you (founded 2006 as Grubhub, IPO in

2014)• Company that helps online and mobile businesses accept credit card payments

by providing merchant storage, payment gateway (Braintree, 2007, acquired by PayPal for $800M)

• Company that creates memorable experiences for customers and employees (founded 2012, KapowEvents.com)

• Company that allows strangers to rent a room in your house or apartment (Airbnb)

• Social network for math and science geeks (founded 2012, Brilliant.org)• A company that provides free stock market charts (2008, ycharts.com)• Company that allows hourly workers to change their shift or find extra work

(2010, shiftgig.com)

What Can You Do?

1. Become A Customer of A Startup2. Make an Introduction to a Potential Customer3. Mentor Entrepreneurs for FREE utilizing

Ohours.org4. Give Startups FREE Feedback5. Talk about the local Startup Community with

your friends, neighbors and work associates6. Invest via an angel group, or local early stage VC

fund

If You Love Chicago, Get on Board