Chicago’s entrepreneurs fight for funds in city’s risk-averse business world
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Genevieve Thiers, founder of the online nanny marketplace Sittercity, has spent the pandemic acting as cook, cleaner and virtual camp counsellor. At the same time, she has been helping sell the business she founded in 2001, singing Saturday afternoon “corona concerts” from her Chicago balcony and assisting the city’s essential workers in finding childcare.
She seems to embody an “in-it-together” spirit which local entrepreneurs say makes Chicago’s start-up culture different from the more cut-throat atmosphere on the US’s Atlantic and Pacific coasts.
Thiers says the Chicago tech community is “very tight knit and supportive” and has become even more so in recent months. “I have seen an increase in giving back since the pandemic, versus an increase in trying to edge each other out of the market. I have done more mentoring calls, made more connections and advised on more pivots [business changes] in the last 150 days than in my whole career.”
Betsy Ziegler, chief executive of Chicago’s technology entrepreneurship incubator 1871, says the community is influenced by the values of its region. Chicago, America’s third-most populous metropolis after New York and Los Angeles, “takes on the vibe of the broader Midwest from the values perspective”, she says. “A win for one company is a win for all of us. You see tons and tons of collaboration.”
This collaborative entrepreneurial culture has evolved in the face of social divisions that have existed in the city for decades and significantly worsened during the pandemic, with the anti-racism protests and looting that followed. Homicides and shootings in Chicago went up more sharply than in other big US cities following the killing of George Floyd by police in Minneapolis in May.
Still, many of the city’s digital start-ups have prospered during the pandemic. Sittercity is one of them: it matches parents and caregivers online. “Marketplaces that connect people with people are more popular than ever,” says Thiers. “There are a lot of parents absolutely desperate for nannies, or what we’re calling ‘pod teachers’,” to teach the children of two to three families at home.
In 2009, Thiers stepped down as chief executive of Sittercity, which has attracted 10m users since inception. But she retained a seat on the board and remained an investor until the company was sold this year for an undisclosed sum to day-care provider Bright Horizons.
“The sale was going on for weeks of the summer while I was basically a virtual camp counsellor for my eight-year-old twins,” she says via a video link that stutters because of a faulty home router. “There are all these calls and signatures and craziness,” she says, displaying the voluble personality of one of her alter egos — opera singer. A trained musician who at one time planned a professional career, in 2015 she sang in a performance of The Merry Widow at the Lyric Opera of Chicago.
Like many women, Thiers, 42, says she has been struggling with multitasking during the pandemic. “We have a nanny, but we haven’t seen her for months,” she says. Thiers and her husband, Dan Ratner, also an entrepreneur, are being extra cautious about the virus because her elderly father-in-law lives with them.
Thiers estimates she has invested $500,000 in female entrepreneurs and donated $1m to women’s political causes. She has also helped thousands of healthcare workers and first responders in Chicago find childcare during the crisis with free access to Sittercity. “I had the chance to buy yachts, but I put the money into women instead,” she says. “My clothes are still from Target [the mass-market retailer] but I’m happy.”
There’s a certain irony to the fact that Thiers, the eldest of seven children, is stuck at home without childcare. “There was a reason I built Sittercity,” she says, after decamping across town to her husband’s office in search of more reliable WiFi. “My mom never got the chance to have the life she wanted — she just kept on having kids. My mother’s pain transferred over into me, creating [Sittercity]. We invented an industry and changed the world, so that no woman would ever not live her fullest life again due to lack of childcare.”
Thiers says she “went through some really awful experiences” as a woman trying to raise money for a tech venture. When she first sought funding for Sittercity in the east coast city of Boston in 2001, “I got laughed out of a lot of rooms”, she says. “A guy in a hoodie in San Francisco would walk in with an idea” and raise money. But even when she had revenues of more than $1m, Thiers found it impossible to raise funds. “That’s what women face, so now I have a compulsion” to invest in women’s success, she says.
She and her husband moved from Boston to his home town of Chicago in 2002, soon after Sittercity took off. She did a masters in opera performance at Northwestern University in Evanston, north of the city, and today considers Chicago her entrepreneurial home — even if she finds the atmosphere a little cautious. “The tech scene in Chicago is both the best and the worst at the same time,” she says. “We have a farmer mentality — we have a cultivate-and-grow mentality here. We don’t ‘swing at the fences’ like they do in California — just hurl money at something that looks promising. But if we took a few more chances, it might pay off.”
She notes that Chicago-based start-ups are often absorbed into other companies — “but I’d like Chicago to become the assimilator”, she says. Thiers mentions that Grubhub, the meal delivery service that, along with Groupon, is among Chicago’s most famous tech success stories, was sold in July to European food delivery company Just Eat.
Chicago has a storied history as a centre of finance and commerce stretching back to the city’s gilded age in the 19th and early 20th centuries. That includes entrepreneurs such as Cyrus McCormick, who invented the mechanical reaper, which transformed the efficiency of American agriculture; George Pullman, who popularised rail sleeper cars, and Marshall Field, who founded the eponymous department store in the city.
Billionaires who have made their fortunes more recently in and around Chicago include the Pritzker family, founders of the Hyatt hotel chain: entrepreneur and heir JB Pritzker is the governor of Illinois. The family created a philanthropic foundation.
Since the 2008 global financial crisis, Chicago has again become a vibrant centre for technology businesses, says Steven Kaplan, professor of entrepreneurship and finance at the University of Chicago Booth School of Business and head of its Polsky Center for Entrepreneurship and Innovation. “People complain there’s no money here, but the good businesses get money just fine. Maybe there’s a bit more pressure to generate cash earlier, but that’s not a bad thing,” he says.
Still, the city’s tech ecosystem faces big uncertainties. Not only does the pandemic present a challenge but so too does the prospect of a new graduated state income tax aimed at the wealthy. This may be voted in at a local ballot in November, held alongside the US presidential election.
Nor can business escape the effects of the widespread anti-racism protests sparked by George Floyd’s death. Some non-violent protests were followed by looting, though local officials said the two were often not directly connected. Still, destruction of property has shaken the city’s business community. The authorities raised the river drawbridges on numerous occasions to keep protesters and looters out of the central business district (CBD), but they could not prevent widespread destruction of several areas, including the prime Magnificent Mile shopping district.
Racial tensions have been exacerbated by the fact that, as of early September, 42.9 per cent of those who had died from coronavirus in the city were African American, though only 30 per cent of the 2.7m population is black.
Before the pandemic, Chicago’s CBD had been one of the US’s fastest-growing urban centres. Some multinationals had shifted their headquarters from the suburbs, such as fast-food company McDonald’s, which moved into the city’s hip West Loop neighbourhood in 2018, largely to attract millennial workers who preferred to live downtown. It is too soon to say whether the pandemic and fears of rising urban crime will prompt some of these younger workers to move out to more spacious suburbs.
But one of the city’s best-known millennial founders has decided to leave altogether. Steven Galanis, 32, founder of Cameo, the online marketplace where celebrities sell personalised video messages to fans, has told the Financial Times that he plans to move to Florida.
His business exploded during lockdown, he says, as customers rushed to buy messages from stars who were no longer appearing at venues. Meanwhile, those celebrities were suddenly keen on the extra income.
“In a world where all live entertainment just stops, suddenly the whole creative class finds itself unemployed,” he says. “Every celebrity at their core is actually a gig worker.”
The pandemic also fundamentally altered his business plans. In mid-March, just before Illinois went into lockdown, he says he was “one day away from signing a 10-year lease” on an office at the city’s trendy Fulton Market. He held off, deciding that working from home would become the norm. “We’re going to go fully distributed after this,” he says, adding that “even if there’s a cure tomorrow, we’re not going back to an office”.
Cameo, which expects revenues of “north of $100m” this year and has 120 employees, will still be based in Chicago, says Galanis. But he himself left the city in May and has been back only briefly. A Chicago native who worked as an options trader in the city for five years before founding Cameo, he expresses his sadness at leaving his home town. “I love Chicago — my Twitter handle is ‘Mr312’,” he says, a reference to the city’s telephone area code.
The decision to have the entire company work remotely because of the pandemic means Galanis no longer needs to live in Illinois. He expresses concern about crime and the possible increase in state taxes (Florida, in contrast, has no state tax). “Illinois is going to be in trouble,” because of taxes, he says. Chicago will suffer from the recent spike in crime and looting, he adds. “I live across the street from Trump Tower [a Chicago landmark] where everything’s been going on. There have been two murders within four blocks of my condo in the last few months . . . a bullet was shot into my condo building.”
For now at least, there is no sign of a wider exodus of tech entrepreneurs from the Chicago area.
Mike LaVitola, 33, founder of Foxtrot, a Chicago-based chain with 10 upmarket convenience stores, is among the many staying put. He aims to make his stores like old-fashioned general stores — “a hub for the community” — and says that is what they have been, even during the pandemic. He declines to give financial details but says revenues have doubled or tripled since lockdown as online sales have soared and millennial urban dwellers dine out less. “You can’t go to a restaurant on a Friday night, so maybe you grab an awesome bottle of wine and some great cheese . . . bars are not places where people are hanging out, so they hang out on their patios.”
LaVitola echoes the theme that it is hard for a start-up to raise money in Chicago, but he also endorses the notion of a collaborative founder culture. “The bar to raising money here is like night and day [compared with] the coasts,” he says. “Here it’s really challenging. But it really shaped early parts of our business. We had to figure out how we were going to grow this thing — all the basics of building a business. That put us in an advantageous situation because our business model works. We are not just burning money.”
Others businesspeople were willing to help, he says: “Greg Watson was chief executive of Walgreens [Chicago-based and one of the US’s biggest pharmacy chains]. I sent him a cold email, and he became an adviser and investor, a board member.”
Ziegler, from the incubator 1871, says she thinks the Chicago tech ecosystem “will emerge stronger than we were before”, even if founders such as Galanis decide to leave. The new distributed nature of work could mean some Midwesterners move back to Chicago “because of its [lower] cost of living, quality of life — it’s a great place to raise kids. More people might move here and work for a company headquartered in San Francisco or New York.”
But the culture will suffer, says Ziegler, if the pandemic drags on. “My innovation hub had more than 500 people in the space every day [pre-Covid]; now we have 11,” she says. “What people are craving most is the spontaneity of bumping into people and having a creative discussion.”
Will the city’s already relatively risk-averse funders become even warier because of the pandemic? Kaplan, who recently conducted a global survey of venture capital firms’ attitudes after Covid-19 struck, says he does not think so. “The more dire predictions on funding have not materialised, including in Chicago,” he says. Venture capital firms surveyed said they expected to invest at about 80 per cent of their normal pace over the coming year — a smaller drop than during the global financial crisis, according to Kaplan.
Thiers sees positives in the pandemic: “In tech you have incredible innovators. We can pivot really fast to help with issues.” But she worries about the loss of spontaneous, unscripted meetings that create innovation. The chance encounters at conferences and other events where “this one’s a doctor and that one’s a psychologist and that other one is something else”.
“Innovation happens at the intersections where things collide,” she says. “And there’s no way to get there any more.” Neither she nor anyone else knows when there will be.
The article has been amended since publication to remove a mistaken reference to the billionaire Koch family. The Kochs are not, as was wrongly stated, local to Chicago.
This article is part of FT Wealth, a section providing in-depth coverage of philanthropy, entrepreneurs, family offices, as well as alternative and impact investment.
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