State of Midwest Investments Series: Chicago Edition

The State of Midwest Investments Series assesses top startup rankings culled from sources like award ceremonies, revenue growth lists, and holistic predictions to evaluate how Midwest startups are performing six months, one year, and two years out from being ranked. We specifically evaluate additional capital raised, new stage of investment, new hires, and current investors to make our determinations.

In our first State of Midwest Investments post, we looked at Built in Chicago’s Top 50 Startups to Watch in 2016. The list is made up of companies founded in the last 5 years with a digital, tech-centric focus that are just under the radar. That last criterion is important because it means Chicago unicorns (or almost-unicorns) Uptake, Avant, and Raise are not featured. Instead, emerging companies like OfficeLuv, Opternative, Motion.Ai, SwipeSenseShipbob, and Xaptum make up the core of the list.

Based on our analysis of the companies’ performance and stage in the six months since last being ranked, we uncovered a few key trends. First, the companies Built in Chicago originally selected were overwhelmingly in the early stages, namely the seed or Series A stages. Second, out of the 50 companies, 13 raised or are raising additional funding since they were featured. The average new investment size was somewhere between $4.3M and $5M depending on the companies’ respective stages. While there was clear diversity in which investors participated in these 13 rounds, KGC Capital(now KDWC) and Hyde Park Angels had made the most investments in these companies, participating in 4 investments each.

We also wanted to assess the valuations of these companies to look for patterns in companies that achieved additional funding and were growing. While we did find valuation for a little less than a third of these companies, we felt the data set was too incomplete to share or evaluate. As a result, we looked at other success metrics to assess the health of the companies on the original list.

Specifically, we looked at their recent key hires, sales growth, and product development. We found 22 out of 50 had made what we call key hires — new leadership and executives across the company’s core competencies, and that team sizes were growing to an average of 12 employees. Based on the publicly available data, all 50 companies are either reporting positive sales growth or having transitioned from alpha stage to a beta testing stage.

While this bodes well for Built in Chicago’s rankings, we will highlight that we did not have sales figures or beta launch numbers for more than half of the companies listed, and therefore cannot provide more granular information on growth or evaluate performance beyond what the companies and respective news outlets reported themselves.

As a result, we focused on the data we could verify more easily and reliably, which overwhelmingly related to talent. We found that 38 out of the 50 companies that reported growth in the last 6 months had made several key hires, had founders who had industry expertise in the company’s business vertical, and/or had started a company previously. Finally, we found that 47 of the 50 companies are still operating today, with one acquisition, one redevelopment, and one closure.

Stay tuned for assessment of this list at the beginning of next year.

Chicago from the Lake via Photopin (license)