There has certainly been a ton of press lately touting the (somewhat) recent emergence of the Chicago tech ecosystem. 1871 2.0 recently opened, expanding the already impressive space available to aspiring entrepreneurs. Braintree founder Bryan Johnson recently announced a $100 million fund, saying that, in addition to other investments, he is “excited to fund progressive entrepreneurs in Chicago.” And, it’s probably a safe bet that similar funds, or at least more investment capital, is to come following the $6 billion dollars in exits the city saw in the first 8 months of 2014.
The general sentiment seems to be that there has never been a better time to be raising capital to launch a business in Chicago. If an event held earlier this month by Breakpoint Ventures, a new angel investment club in town, is any indication, this just might be true.
The team behind Breakpoint has a background in real estate and recently decided to start allocating capital to the tech space. The concept is simple:
- The Breakpoint team sources and vets potential deals
- The ones that pass their initial scrutiny are presented to a network of investors who have expressed interest in seeing early stage tech deals
- Each individual in the network chooses whether they want to invest on a deal-by-deal basis
- Breakpoint aggregates the capital from all participating investors, forms an entity managed by Breakpoint, and invests in the company
Drew Whiting, a partner with Breakpoint, says that while the idea to aggregate capital in order to fund more deals is certainly not new, his team felt there is a gap in who is getting access to early stage tech deals. They see it as an asset class many may be interested in, but few know how to approach.
“There are a lot of relatively younger people in Chicago who have done well in their careers, and now want to get involved in the Chicago startup ecosystem. They hear about all these great companies launching and raising capital, and wonder how they can be a part of it."
Breakpoint held an event in mid-October where they introduced 3 companies to a network of potential investors:
- The Stylisted provides in-home beauty services for women
- tableSAVVY lets restaurants fill empty tables for the night
- Home Chef makes cooking fresh, restaurant quality food at home easy and fun
All 3 are raising capital to fund expansion and continued growth. The Stylisted, for example, is operating in Chicago and New York, and launching LA in the coming months. They are seeking funds to both launch additional cities while also investing in sales and marketing.
Lauren Katzberg, co-founder and CEO of The Stylisted, had this to say:
“We have a very clear plan, rooted in over a year’s worth of operating data, on how we will scale our business. We just need capital to fuel that growth.”
Speaking after the event, Lauren shared that she spends about 75% of her time focused on raising the capital that she and the team need to take their business to the next level.
“We are targeting individual angel investors and smaller angel groups, so there is a lot of networking and coordination involved. I spend a considerable amount of time going back and forth with interested investors - answering questions and sharing different documents as the relationships progress.... All well worth it, but it ends up taking up a lot of my time.”
Like most founders, I imagine Lauren would love to close out her round and focus more of her time on the actual business. It may be to early to really tell, but early indications are that Breakpoint will be able to help with this. They participated in the DRYV deal that closed earlier this year and the investor turnout at this past event certainly suggests real potential for future deals. With groups like Breakpoint stepping up to help fund early stage deals, maybe it really has never been a better time to be launching in Chicago.
If you are interested in learning more about Breakpoint Ventures or the presenting companies, check out this presentation they used to follow-up with potential investors. If interested, you can learn more about how they are efficently handling investor communications here.