A trend is emerging in venture capital that is good news for the Midwest startup ecosystem: Companies led by seasoned entrepreneurs who strategically opened major offices in both the Midwest and Silicon Valley attract funding from top-tier VC firms. While it is too early to determine whether this will be the next big wave in Midwest VC funding, recent evidence of this trend has clearly surfaced in Chicago.
Just this month, dually-located Livongo closed a $105M Series E led by General Catalyst and Kinnevik. Last month, Kenna Security — which has a Chicago and San Francisco office — closed a $25M Series C led by Bessemer Ventures (which my firm, Hyde Park Angels, also invested in). And last year, G2 Crowd closed a $30M Series B round led by Accel. G2 Crowd’s offices are a few blocks away from Kenna’s offices in both cities.
It is not surprising that these dually-located companies are increasingly earning the confidence — and capital — of top-tier VC firms. These startups’ founders are proven Chicago entrepreneurs whose past successes fuel new ventures.
Specifically, Livongo CEO Glen Tullman scaled Allscripts and oversaw its 1999 IPO. G2 Crowd co-founder Godard Abel’s previous startup successes were BigMachines, which Oracle acquired in 2013, and Steelbrick, which Salesforce bought in 2015. Similarly, Kenna Security founder Ed Bellis was the Chief Information Security Officer at Orbitz, which went public during his tenure in 2007.
In addition to having proven their ability to help usher a company toward a good exit, these repeat entrepreneurs have powerful talent networks that are now bridged between the Valley and Chicago. Just as noteworthy, this dual location model creates an opportunity for the companies to have a home in the Midwest, which boasts the headquarters of 111 Fortune 500 companies and serves more than 52 million consumers, thereby powering a $2.9T GDP in 2016 — greater than California, New York, and Texas.
In all of these cases, the entrepreneurs made the strategic decision to not create satellite offices but to establish a major presence in both locations. It allows them to leverage their social capital in Chicago and combine it with the talent base and financial capital that the Valley affords. This — along with the entrepreneurs’ track records of success — positions their companies to become safer bets to VC firms.
We expect this trend of dually-located offices to continue as more repeat Chicago entrepreneurs take advantage of their credibility and experience to build new local companies, all while immersing themselves among Silicon Valley’s resources. The result will be a virtuous cycle that bolsters Chicago’s ecosystem, one that will breed value for years to come.
Originally featured in Forbes.
Image credit Diego Delso, delso.photo, license CC-BY-SA.