Reflections After a Year in Raleigh-Durham

As you know, Red Rocket opened an office in the Raleigh-Durham area a year ago.  As I was reminiscing on my life changes over the last year, I thought it would make for a good blog post for any of you looking to break into a new market, or perhaps considering a move of your own.

RALEIGH-DURHAM VS. CHICAGO, AS CITIES

• Chicago is one of the most world-class cities, with around 9MM in the metro region, and the business community largely centralized in or near downtown Chicago.  The RDU area, in comparison has 2MM people in the metro market, geographically spread across very disparate cities (e.g., Raleigh, Durham, Chapel Hill, Cary, Morrisville).  The RDU area lacks the identity of being one central city, and the competition between the cities that comes with that.
• The Chicago economy has a lot of challenges with Cook County and the State of Illinois near bankruptcy, with rising taxes resulting in a leaky bucket of a slowly declining population.  The Raleigh-Durham area, on the otherhand, is exploding.  The population is forecasted to approximately double to 3.5MM over the next 20 years, creating new tax revenues.  Both Amazon and Apple are giving Raleigh a serious look for adding tens of thousands of jobs in the region, with new second headquarters locations.
• Chicago is a pretty diverse city in terms of industries served, including companies the technology, advertising, financial, retail, manufacturing, hospitality, consumer products, aerospace and other industries.  The Triangle area is very deep in technology and life sciences, as their primary industries served. And, the technology here is much more B2B facing, with a much smaller B2C community.
• The pace of business is a lot faster in Chicago, with a bigger sense of urgency to move at light speed.  People moving to the Triangle area, often do so to create a better lifestyle.  So, a lot less late nights and rush to get things done quickly in the area.  Which can be a good thing, or a bad thing, depending on your perspective.

RALEIGH-DURHAM VS. CHICAGO, AS STARTUP ECOSYSTEMS

• Chicago is a much more mature startup ecosystem, built over decades.  You have seen serial entrepreneurs build one successful startup after another, and reinvesting their "winnings" from their prior companies, back into the ecosystem with their next companies, spreading equity deep and creating hundreds of millionaires in the process.  Chicago has clear leadership propeling the ecosystem forward, in terms of what it wants to become in future years, and is flush with capital from investors across all stages of investment.
• The Triangle feels like Chicago about 10-15 years ago.  It has all the ingredients to make for a successful startup ecosystem, with a lot of key players in town trying to take the region to the next level.  But, the region is desperately short on capital, and needs more funds in town to support the local startups.  And, only a handful of entrepreneurs have built unicorn scale companies, with equity largely concentrated with the founders, many of which have not reinvested their "winnings" back into the startup community.  For this reason, many of the successful startups, typically sell much earlier in their growth curve, than their Chicago counterparts, and include a lot more "first timers".
• Both markets have world-class universities to lean on for talent and research innovation.  Chicago with greats like Northwestern and the University of Chicago. And, the Triangle with greats like Duke, North Carolina and North Carolina State.
• Both markets are equally conservative, not wanting to make mistakes with their venture capital investments.  Both markets equally unlike Silicon Valley with their "failure is a badge of honor" mindset, not afraid to swing for the fences on long shot game-changing ideas that may explode to success, or miserably flame out.
• Chicago invests about 2x the amount of venture capital into startups than the Triangle area does each year, most of which into the technology industry.  Raleigh-Durham splits its investments between the technology and life sciences industry.  So, that means there is about 25% of the capital going into tech startups in the Triangle area, as compared to Chicago.
• Both markets have equally warm and welcoming members of the startup ecosystem.  I had no trouble meeting about 200 key influencers in town over the last year, all willing to welcome me to the market and offer whatever assistance they could.  Just as easily as I could in Chicago.

MY PROFESSIONAL LIFE

• I typically like to work with growth stage B2C companies.  Those basically don't exist here in any material quantity.  Many of the B2C startups that have to gotten to that point, are sold beforehand.  So, it is like looking for needle in the haystack for B2C.  But, there is plenty of B2B here to keep me busy.
• I am loving running our newest acquisition, Restaurant Furniture Plus.  I am glad I was able to find a good business, that was not in the region, that could easily be managed virtually from here.  It is so much fun building another business of my own, in addition to my Red Rocket work.

MY PERSONAL LIFE

• I moved to a bigger, newer home for half the price of what I was paying in Chicago.  For example, my real estate taxes dropped from $20,000 to $5,000 a year.  So, I love the cost of living advantages, for largely the same nice suburban lifestyle I left behind.
• Our neighbors are all friendly and welcoming.  We live in the Cary area.  So, there are a lot of transplants from the north, like us.  Both regions lean liberal, politically (which is an outlier within the more broadly conservative state of North Carolina).  And, both regions are very diversified, ethnically and racially.  The people are down to earth here, and less concerned with competing for material things.
• Because the population is growing so quickly, the schools are having a hard time keeping up with the growth, which creates overcrowded classrooms and constant redistricting as they add new schools, in many areas.  But, overall, I think the education experience is actually equal or better to what we left behind, forcing the kids to compete on a bigger stage, sooner than they normally would have, with less hand holding in the process.  We also like how much more diverse the schools are, more representative of the real world.
• Chicago winters were so depressing--six months of grey, cold and snow.  I love the warmer climate here.  Winters rarely have high temperatures below 50 degrees and the sun is always out.  Which means I can workout outside year round.
• The Raleigh-Durham area is surrounded by a lot of great roadtrip opportunities with the kids--two hours from the ocean, three hours from the mountains, four hours from Charleston or Washington DC, etc.  So, we are loving the close proximity to a lot more great weekend trips.  Chicago was largely an island of itself, with not much to do within a few hours of the city.

CONCLUSION

• Both cities have so much to offer.  Chicago a world-class city, and the Triangle a world-class lifestyle.  I love both for very different reasons.  And, startups can succeed in both regions, with a supporting ecosystem.  I am very excited to see how Raleigh-Durham evolves in the coming decade as all the new people and companies move into the region.
• Both cities are ripe with terrificly skilled people to work with, across all needs of the community (e.g., entrepreneurs, lawyers, accountants, bankers, investors, accelerators, community leaders).  So, you can't go wrong professionally or personally.  I am glad we have a presence in both markets.

For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #254: Managing For Meteoric Growth--A Home Chef Case Study

I am in investor in the FireStarter Fund, and when I received my investor update from one of our portfolio companies, I nearly fell out of my chair.  The company featured was Chicago-based Home Chef, and the company's revenue run rate had increased from $20MM in 2015 to over $200MM in 2016, a whopping 10x increase in one year.  It took me about ten seconds to pick up the phone and call their founder and CEO, Pat Vihtelic, to ask him to share his story with all of our Red Rocket readers, which he was kind enough to do in this post.

ABOUT HOME CHEF

Founded in 2013, Home Chef is one of the leading players in the growing home meal delivery kit business.  Consumers sign up for a weekly subscription of meal kits to be delivered to their home, and the buyers have all of the ingredients and recipes they need to prepare that meal at home, in less than 30 minutes.  They basically have removed the time-consuming need to go shopping for ingredients, and have made it incredibly simple to prepare with pre-portioned ingredients and step-by-step directions.  A great solution for time-started families that want a home-cooked meal, but may not otherwise have had the time to pull it all together.

Home Chef is one of many venture capital backed startups that are racing to dominate this space, including industry leading Blue Apron (estimated at over $1 billion dollars in sales) and Hello Fresh (a division of the publicly-traded Rocket Internet, estimated at over $400 million run rate at their U.S. operations).  But, what Home Chef has had, from the very beginning, perhaps to a greater extent than their competitors, was a data-driven approach to building their business to ensure their business economics were sound and scalable, before they began to hit the gas with their growth.  And, now they are reaping the benefits, as their competitors are still struggling to get their expensive marketing economics to pay back in a timely fashion.

THE CHALLENGES OF METEORIC GROWTH

My first question of Pat was, "how can you reasonably handle 10x revenues in one year, without the wheels of the business falling off?"  And, he detailed three areas of his business, to better educate me on how he was able to grow this fast in the first place, and more importantly, how he avoided growing faster than the business could "digest" (pun intended).  Those areas were: (i) marketing; (ii) fulfillment; and (iii) staff and culture, which I will detail in the paragraphs below.

MARKETING YOUR WAY TO 10X GROWTH

2013.  The company's website launched in September 2013, bootstrap financed by Pat. So, with cash in short supply, it started by getting the product and customer experience right. Where competitors were focused on other gimmicks, like promoting fancy chefs' recipes, for Pat, it all started with what does the customer really want to eat and truly learning their behavior.  With a lot of research and testing with his initial customers, he ironed out a winning customer solution to their day-to-day needs   And, the research paid off; the company's business started to take off with zero paid marketing spend.  In 2013 they were growing 30% month-over-month, driven simply by word-of-mouth referrals from their early adopters who really loved the product.

2014:  With that all-important proof-of-concept behind the business, it didn't take long for the venture capitalists to take notice, and Home Chef completed its first rounds of seed capital, closing $500,000 in July 2014 and a $500,000 in November 2014.  They used the proceeds from these rounds to prove out their paid marketing plan and economics, testing media buys in the search engines and in social media.  It was here they learned their cost of customer acquisition, their best promotional offers (e.g., get $30 of meals for free, if you refer us a friend, who will also be given $30 of free meals), their customer retention rates which drive lifetime customer revenues, which media sites performed better than others and how fast they could grow without hurting their business economics (e.g., no more than 10% new customers a month, relying on 90% returned customers each month).  And, they learned they would need to take the "long view" here, as three years of customer revenues would get them a 3x return on their marketing investment, which needed to be paid back in the first 6-9 months.  The company ended the year with a $1MM revenue run rate.

2015:  Marketing success in 2014 lead to more venture capital attention and monies coming in, raising $10MM in August 2015.  This is where they began to pour the gasoline on their marketing fire, accelerating both their customer referral program and their paid marketing efforts, still focused on the search engines and social media (primarily Facebook).  They learned social media was the key paid channel to focus on, as the industry was still new and people really weren't looking for "meal kit delivery" keywords yet in the search engines.  But, lets not forget, the great product was still driving a ton of free word-of-mouth business, which comprised over 50% of their new customers acquired.  The big increase in marketing spend, resulting in the business ending the year with a $20MM revenue run rate (up 20x in one year).

2016:  The huge lift in revenues had the venture capitalists frothy with excitement about Home Chef, and the company raised a whopping $40MM in August 2016.  Now, the marketing spend was increased to millions of dollars each year and their marketing team grew to 10 people.  The company tested new marketing channels to diversify their media mix and learned that customer acquisition costs per user rise by spending more in the same channels without diversifying the media mix, so they needed to turn the screws in terms of adding even more data-driven discipline to their efforts.  And, it paid off, as the company ended the year with a $200MM revenue run rate with only a modest impact to their marketing economic efficiency.

SCALING YOUR BACK-END FULFILLMENT TO HANDLE 10X GROWTH

Marketing was only part of the success story here, because what good is bringing in millions of new customers, if your back-end cannot support the growth.  The back-end for Home Chef primary means adding new kitchen and warehouse space to process the meal kits being ordered.  What started out as a 2,000 square foot test kitchen in Chicago from inception through September 2014, turned into an 8,000 square foot food processing facility in October 2014 and further expanded to a 50,000 square foot facility in July 2015.  Yes, that was two moves in just over a year, and all the distraction that comes with that.

The company considered adding new locations in the beginning of their growth, but again, to better control the business, they wanted to fine tune everything in one place first, to get their processes fine-tuned at scale.  Then, once they were comfortable they had the right fulfillment model, they began to export that model to new locations, adding a 70,000 square foot facility in California in March 2016 and a 120,000 square foot facility in Georgia in September 2016 (which is currently being expanded to 180,000 square feet).

This growth presented tons of challenges.  To preserve their desired process, they relocated key staff members from Chicago to get those new locations off the ground.  They needed to convince large landlords that Home Chef was worth backing for the long run, a startup that wasn't going to ultimately flame out.  And, in Pat's conservative approach, he would not open up new production facilities until he was 100% sure the sales volume was there to support it, so it had the old facilities running on overdrive, until the new facility could be opened to take the pressure off. Again, all of this expansion--growing to 300,000 square feet processing over 10 million meals a year across three locations--in only three years!!

MAKING SURE 10X GROWTH DOESN'T IMPACT YOUR CULTURE

If you thought growing your production capabilities was hard, imagine having to grow your workforce from zero to over 700 workers during this time, 150 of which in your headquarters.  All, in a way that doesn't negatively impact your desired "scrappy startup, customer centric" company culture.  Pat attributes his success here to a few things.  It was critical to get your initial hires (and subsquent hires) right.  Executives that weren't afraid to roll up their sleeves and lead by example.  Secondly, deal with growing pains as quickly as you can, so they don't last long.  And, thirdly, keep a relatively flat organization, without a lot of layers of middle-management.

IN CLOSING

It sort of takes your breath away, that you could build a business of this scale in just over three years.  And, with the company planning to at least triple revenues in 2017, this train is still just getting started.  A tip of my hat to Pat and the entire Home Chef team.  Yet another rising star in Chicago's exploding digital tech ecosystem.  So, now that we have the blueprint for scalable 10x growth that would have crippled most other businesses, let's do this thing for your businesses!!  Thanks again, Pat, for sharing your incredible story. Deep respect for what you have accomplished here, as I truly understand how hard it was to pull off.

For future posts, please follow me on Twitter at: @georgedeeb.

Chicago Private Equity Firms

In addition to our list of Chicago Venture Capital Firms and Chicago Family Investment Offices, here is a list of Chicago Private Equity Firms investing in later stage companies. I included a high-level summary of their investment criteria, as communicated on their websites.

Adams Street Partners (tech & healthcare, $27BN managed, $5-$25MM checks)

Aldine Capital Partners (generalist, $2-$15MM checks, $10MM+ revs, $2MM+ EBITDA)

Alpha Capital (mfg. & dist., $135MM managed, $500K-$5MM checks, $15-$100MM revs)

Anderson Pacific (telecom & infrastructure, $1-$50MM checks, $2-$10MM EBITDA)

Arbor Investments (food & beverage, $5-$50MM EBITDA, up to $300MM revs)

Baird Capital Partners (healthcare, industrial, tech & services, up to $150MM revs, $3-$10MM EBITDA, $25-$50MM checks, $300MM managed)

Beecken Petty O'Keefe & Company  (healthcare, $1.4BN managed, over $5MM EBITDA)

Benford Capital (CPG, industrial, services & dist., over $1MM EBITDA, over $3MM revs)

Beverly Capital (healthcare & biz services, $2-$8MM EBITDA)

Bounds Equity Partners (bldg mat., biz svs., CPG, dist. & mfg, $100MM mgd, over $1MM EBITDA)

Bridge Investments (biz svs., SaaS, cons., mfg,, health, up to $10MM checks, up to $5MM EBITDA)

Chicago Capital Partners (svs., CPG, dist., educ., & mfg., $2-$10MM checks, $1-$5MM EBITDA)

Chicago Venture Partners (tech/comm, media/ent, energy, CPG, biotech/pharma, up to $3MM check)

CIVC Partners (biz svs. & financial svs., $1.5BN managed, $5MM+ EBITDA, $15-$85MM checks)

CJM Ventures (small-to-middle market, mfg., dist. biz svs., fin svs.)

CM Acquisitions (industrial & transport infrastructure, up to $15MM EBITDA, up to $250MM revs)

Cressey & Company (healthcare, $1BN managed, up to $50MM checks)

Cognitive Capital Partners (mfg, biz svs, data, consumer, $3-$15MM EBITDA, $5-$50MM checks)

Dixon Midland (ecomm, health, energy/agric svs, CPG, biz svs, $4MM+ EBITDA, $25-$100MM valuation)

DN Partners (mfg, dist. & services, $20-$100MM revenues, $20-$100MM valuation)

D'Orazio Capital Partners (mfg., log., supply, svs., & oil, $10-$30MM revs, $1.5-$3MM EBITDA)

Driehaus Private Equity (energy, media, services & mfg., $5-$50MM revs, $1-$30MM checks, $3MM+ EBITDA)

Dunrath Capital (infrastructure)

Edgewater Funds ($2.4BN managed, $20-$500MM revs)

Flexpoint Ford (financial svs. & healthcare, up to $200MM checks)

Frontenac Company (food, services, & industrial, $3-$20MM EBITDA, to $250MM valuation)

Fulton Capital (dist., mfg., & biz svs., $10-$100M revs, $2-10MM EBITDA)

Geneva Glen Capital (biz svs., CPG, environment, educ., health, mfg., media, dist., $3-$20MM EBITDA, up to $50MM check, under $100MM valuation)

Glencoe Capital (generalists, $3-$15MM EBITDA, over $7MM checks, Michigan focus)

Grand Crossing Capital (CPG & retail, $5-$25MM checks, $2-$10MM EBITDA)

Granite Creek Partners (food/agric., med. devices, transport., $10-$50MM checks, $5MM+ EBITDA, $25-$150MM valuation)

Growth Catalyst Partners (information, marketing, tech-enabled services, $3-$7MM EBITDA)

GTCR (fin. svs., tech, media, telecom, health, biz svs., upper middle-market)

Hadley Capital (mfg., dist., & biz svs., $5-$30MM revs, $1-3MM EBITDA)

Hand Capital (financial services & manufacturing, small businesses)

HCP & Company (consumer, education  & healthcare, $10MM+ revs, $5-$30MM checks, profitable)

Heico Companies (mfg., dist., & services, $30MM+ revenues)

Hennessy Capital (ind., mfg., dist., services, $500MM-$1BN valuations)

High Street Capital (biz svs., mfg., dist., & health, up to $100MM revs, up to $15MM EBITDA)

Hughes & Company (healthcare, $2-$20MM checks, up to $10MM EBITDA)

Industrial Innovation Partners (industrial, oil, tech, & health, $1-20MM EBITDA, $5-$100MM valuation)

Industrial Opportunity Partners  (mfg. & dist., $30-$350MM revs, $5-$50MM check, $460MM mgd)

Inoca Capital Partners (biz svs., consumer & mfg., $1-$8MM EBITDA)

JZ Partners (mfg., dist., ind., health, educ., trans., biz svs., up to $200MM valuation, $1BN mgd).

JVA Partners (home decor, industrial storage, IoT technology, $25-$150MM revs, $5-$25MM check)

Keystone Capital (prof./biz svs., industrial tech/mfg. & consumer/food, $4MM+ EBITDA)

Lake Capital (biz svs., cons. svs., fin svs., & health, $50-$75MM checks)

Lake Pacific Partners (food/bev., CPG, cons. svs., dist., & biz svs., $25-$250MM revs)

LaSalle Capital (food/bev. & biz svs., $10-$100MM revs, $2MM+ EBITDA, $5-20MM checks)

Linden Capital Partners (healthcare, $1.3BN managed)

Madison Dearborn Partners (industrial, biz. svs., consumer, fin. svs., health, telecom, media, tech svs., $18BN mgd, new growth stage B2B tech fund cutting $75-$100MM checks)

Madison Industries (filtration, medical, & industrial, strong cash flow, global focus, up to $250MM)

Maranon Capital (biz svs., consumer, health, dist., & mfg., $2BN mgd, $5-$50MM EBITDA)

McNally Capital (food/bev, biz svs., logistics, mfg, & health, $5-$25MM EBITDA)

Merit Capital Partners (mfg.., dist, & biz svs., $25MM+ revs, $5MM+ EBITDA, $15MM+ checks, $1.7BN mgd.)

Mesirow Financial (generalist, $4.5BN mgd., co-invest with professional funds)

Mid Oaks Investments (mfg., biz svs., & dist., $25-$250MM revs)

Midwest Mezzanine Funds (generalist, $750MM mgd., $3MM+ EBITDA, $4-$15MM checks)

MVC Capital (CPG, food, dist., mfg. & fin. svs., $10-$150MM revs, $3-$25MM EBITDA, $3-$25MM checks)

New Harbor Capital (health, education & biz svs., $3-15MM EBITDA, $10-$30MM checks)

North American Funds (mfg., food/bev., medical, consumer, dist., biz svs., educ. & fin. svs., $5-$40MM revs, $500K-$5MM EBITDA)

One Eighty Capital (generalist, $5-$50MM valuation, $0-$10MM EBITDA)

One Equity Partners (health, fin. svs., mfg., tech, travel, energy, food, media & consumer, $11BN mgd, $150MM average check)

Parallel49 Equity (mfg., biz svs. & dist., $5-$25MM EBITDA, $1BN managed)

Parker Gale (technology, $2-$6MM EBITDA)

Periscope Equity (tech-enabled biz svs., $10-$40MM revs, $2-$5MM EBITDA, $10-$30MM valuation, $5-$15MM checks)

Pfingsten Partners (mfg., dist. & biz svs., $15-$100MM valuation, $20-$150MM revs, $3-12MM EBITDA)

Plenary Partners (health, tech, mfg. & life sciences, $1MM+ EBITDA)

Polestar Capital (technology, smaller companies)

PPM America (consumer, energy, dist., health, educ., tech, mfg. & biz svs., $6BN mgd, $5-$25MM checks, $30-$300MM valuation)

Prairie Capital (biz svs., industrial, CPG, educ., fin. svs. & health, $20-$100MM revs, $4-$12MM EBITDA)

Prism Capital (industrial up to $7MM checks; tech, health, mfg. & biz svs. up to $3MM co-invest checks)

Promus Equity Partners (CPG, food/bev., industrial, special materials, dist. & biz svs., EBITDA up to $15MM)

Prospect Partners (mfg., dist. & services, $10-$75MM revs)

Range Light (active lifestyle, natural foods & tech svs., $1-$20MM check, $1-$30MM revs)

Red Arts Capital (industrial, biz svs., CPG, dist., mfg., food/bev., health & medical devices, up to $75MM revs)

Right Lane Capital (generalist, $3-$20MM EBITDA)

RiverGlade Capital (healthcare, $3MM+ EBITDA)

Rock Gate Partners (biz svs., consumer, dist., food & industrial, $3-20MM checks, $10-$75MM valuation, $10-$100MM revs)

Rock Island Capital (mfg., dist., & svs., up to $100MM valuation, $10-$100MM revs)

RoundTable Healthcare Partners (med. devices, pharma & healthcare, $2.75BN managed)

SE Capital (biz svs. & gov. svs., $5-$50MM revenues)

Sheridan Capital Partners (healthcare & consumer, $20-$150MM valuation, $10-$30MM checks)

Shore Capital Partners (healthcare, $5-$50MM revs, $1-$5MM EBITDA)

Shorehill Capital (industrial & distribution, $25-$100MM valuations)

Silver Oak Services Partners (biz svs., cons. svs. & health, $10-$30MM checks, $15-$150MM revs, $3-$20MM EBITDA)

Skyline Global Partners (health, mfg., biz svs., software, CPG, food/bev/agric., & oil/gas, $10-$100M checks, $10-$100MM revs, $2-$15MM EBITDA)

Sterling Partners (biz svs., education & healthcare, $25-$125MM checks, $10-$30MM EBITDA)

Stockwell Capital (generalist, $3-$15MM co-invest checks, $50-$500MM valuation)

Svoboda Capital Partners (dist., biz svs., cons. svs. & CPG, $25-$100MM valuation, $10-$25MM checks, $10-$100MM revs, $3-$15MM EBITDA)

Synetro Group (B2B tech, biz svs. & mfg., $8-$50MM revs, $0-$3MM EBITDA, $1-$4MM checks, under $50MM valuation)

The Pritzker Group (mfg., services, health, food, cons., industrial, transport, medical and pharma, $100-$750MM valuation)

Thoma Bravo (enterprise, infrastructure tech, security tech and tech-enabled biz svs., $20MM+ EBITDA, $100-$750MM checks)

Thurston Group (healthcare/practice mgt., technology, services and telecom, $3BN managed)

Traverse Pointe Partners (biz svs., bldg. prods., fin. svs., mfg., industrial, media, telecom, packaging, retail, CPG, transport & dist., up to $6MM in EBITDA, $10MM+ revs)

Turnout Capital (biz svs., mfg., logistics, $1-$3MM in EBITDA)

Tyree and D'Angelo Partners (health, cons., agric., biz svs., $1-$5MM EBITDA, under $50MM revs)

Valor Equity Partners (cons., infrastructure, industrial & mfg., $10-30MM checks)

Water Street (healthcare, $50-$500MM checks)

Waterside Capital Partners (ind., CPG, food, mfg. & biz svs., $3-$25MM checks, $25-$150MM revs)

Waud Capital Partners (generalist, $50-$100MM checks)

Waveland Investments (mfg., dist. & services, $10MM+ revs, $1-$8MM EBITDA)

Willis Stein & Partners (infrastructure, mfg. & education, $30-$500MM valuation, $3BN mgd)

Wind Point Partners (industrial, CPG & biz svs., $30-$150MM check, $10MM+ EBITDA)

Winona Capital (CPG, retail & cons. svs., $10-$100MM revs, $1MM+ EBITDA, $10-$30MM check)

Woodlawn Partners (mfg., bldg. svs., tech, fin. svs., food/bev., transport & dist., $5MM+ revs, $1MM+ EBITDA)

Wynnchurch Capital (mfg., transport, biz svs., dist., energy, ind. & metals, $50MM-$1BN revs, $5-$100MM checks)


Be sure to dig deeper on their websites to make sure they invest in your specific industry, revenue stage, geography and desired minority/majority deal structure before reaching out to these investors. Red Rocket can help make introductions to many of these investors, so please leverage our relationships here.

For future posts, please follow us on Twitter at: @RedRocketVC

Chicago Family Investment Offices

One of the growing trends in the venture scene is the addition of family offices to the mix of prospective investors.  It used to be family offices would just invest in professionally managed venture funds, but many are now building in-house teams and starting to make direct investments.  Most family offices like to keep a low profile, and are hard to find, so I did my best here.  I also included some venture funds that have outside money, as well, if the lion's share of the fund is the personal investment vehicle for one family.

Here are some of the bigger family offices I am aware of here in Chicago, including the key family investor in parentheses:

Ashland Capital (a collection of families)

Breslow Forsythe Group (confidential)

Caretta (Eric Becker)

Certare Ventures (Art Wong)

Chaifetz Group (Richard Chaifetz)

Concentric Equity Partners (Harrison Steans)

Corazon Capital (Sam Yagan)

Crown Family Office (Lester Crown) -- no website

Diversified Capital (Larry Levy)

DRW Venture Capital (Don Wilson)

Duchossois Capital Management (Craig Duchossois)

Equity Group Investments (Sam Zell)

G2T3V (Howard Tullman)

Grand Crossing Capital (Clay Naccarato)

Harrison Street (Chris Galvin & Michael Galvin)

Huizenga Capital Management (Wayne Huizenga)

Incisent Labs (Pat Ryan)

Jump Capital (Paul Gurinas & Bill Disomma)

Jumpstart Ventures (Rishi Shah & Shradha Agarwal)

Lead Lap LLC (David Zucker)

LEO Capital (Randy Rissman)

Lightbank (Brad Keywell & Eric Lefkofsky)

Longview Asset Management (Lester Crown)

KB Partners (Keith Bank)

Kenex Holdings (a collection of families)

Keystone Capital (the partners of Keystone's personal money)

KGC Capital (Dick Kiphart)

Mansueto Ventures (Joe Mansueto)

Matthew Pritzker Company (Matthew Pritzker)

Merrick Ventures (Michael Ferro)

McNally Capital (a collection of families)

OCA Ventures (Jim Dugan, John Dugan & Peter Ianello)

Old Town Capital (Jamie Crouthamel)

Origin Ventures (Steve Miller)

OS Fund (Bryan Johnson)

PFG Group (a collection of families)

Pritzker Group Venture Capital (J.B. Pritzker & Tony Pritzker)

Promus Ventures (Andy Code)

PSP Capital Partners (Penny Pritzker)

Reyes Holdings (Christopher Reyes & Jude Reyes)

Romar Partners (Scott Wald & George Colis)

Sawdust Investment Management (Michael Krasny)

Skydeck LLC (Michael Polsky)

TCS Group (Ted Schwartz)

Be sure to research their website to ensure your industry and the stage of your business qualifies for their investment criteria, as many of these prefer private equity stage to venture capital stage businesses.  If you are aware of other big ones I am missing, please add them to the comments field.

For future posts, please follow us on Twitter at: @RedRocketVC

Chicago's Startup Accelerators, Incubators & Co-Working Spaces

I have previously written about Chicago's exploding startup ecosystem.  And, startup activity is organizing around certain startup accelerators, incubators, startup studios and shared offices in town. A few entrepreneurs asked me to compile a list of the key players in this space, so here you go.

Chicago Accelerators

Accelerators have a formal education curriculum and program.

Founder Institute

Goldman Sachs 10,000 Small Businesses

Platform Venture

Sunshine Enterprise (for Woodlawn area companies)

Techstars

Chicago Incubators--Generalist

Incubators are lead by one organization, who co-locate many startups in one place.

Blue 1647

Catapult

1871

Seedary

TechNexus

Venture Shot

Chicago Incubators--Specific

These incubators have a specific focus for startups they work with.

Arts Incubator in Washington Park (art)

Bunker Labs (veteran run)

Chicago Connectory (Internet of Things)

Chicago Fashion Incubator (fashion at Macy's)

Cleveland Avenue (food & beverage)

Coalition Space (energy & social impact)

DMDII (manufacturing)

Fulton Street Collective (art)

Good Food (food)

Healthbox (health care)

IHCC (hispanic run)

Insight Accelerator Labs (healthcare)

Impact Engine (social impact)

Leap Innovations (education)

Lost Arts (makers)

Maker Lab (at Chicago Public Library

Matter (health care)

mHUB (manufactured products)

Panzanzee (social impact)

Propel (life sciences)

Reach (real estate from Natl. Assn. of Realtors) (real estate)

2112 (music/film/creative)

Windy City Harvest Farm (agriculture with Chicago Botanic Garden)

Chicago Incubators--University Related

These incubators are affiliated with startups at specific universities.

Chicago Innovation Exchange (U-Chicago)

Coleman Entrepreneurship Center (DePaul)

Innovate (UIC)

LUC @ 1871 (Loyola)

The Garage (Northwestern)

University Tech Park (IIT)

Chicago Incubators--Venture Fund Related

These incubators are run by venture funds who co-locate their portfolio companies

Lightbank

Moderne Ventures (real estate)

New Coast Ventures

Ringleader Ventures

Sandbox Industries

Chicago Startup Studios

Startup studios or venture labs, build startups for third party companies or themselves.

Digital Intent

Incisent Labs

Insight Studios

L Street Collaborative

Prota Ventures

Roniin

Startup Foundry

Wavetable Labs

Chicago Co-Working Spaces

Co-working spaces simply allow many startups to rent smaller spaces or cubicles, with shared services, at affordable rates.  But, it is typically only a real estate play.

Amata

Be Office

Carr Workplaces

coLab (in Evanston)

CoWorkers (in Wilmette)

Creative Coworking

Deskpass

Desklabs (in Lakeview)

Free Range Office (in Wicker Park)

Industrious

Inspire Business Center

Office Port

Onward Coworking

Platform Coworking (in Wicker Park and Ravenswood)

Regus

Serendipity Labs

Suite Spotte (in LaGrange)

The Study

The Warehouse (at Lightbank)

WeWork

Work Better (at Willis Tower)


These are everyone that I am aware of as of the date of this post.  I am sure there may be others I missed or that are in development.  So, let me know if I should add any others.

For future posts, please follow me on Twitter at: @georgedeeb.

[NEWS] 2016 Moxie Award Winners in Chicago Tech

Congratulations to Maria Katris, Matt Moog and the Built In Chicago team for putting on yet another great Moxie Awards event tonight, celebrating the best in Chicago's digital tech community in 2016.  Here is a shout-out to all of the winners:

Best Consumer Web Startup:  BucketFeet

Best B2B Startup:  Strike Social

Best New Startup:  DRIVIN

Most Disruptive Startup:  VISANOW

Best Social Impact Startup:  Zero Percent

Startup of the Year:  Uptake

Digital Agency of the Year:  Rise Interactive

Best Consumer Web Company:  Avant

Best B2B Company:  Yello

Best Office Space:  SAP Fieldglass

Best Company Culture: kCura

Breakthrough Digital Company:  Uptake

Woman in Tech:  Amanda Lannert, CEO of Jellyvision

CEO of the Year:  Rishi Shah, CEO of Outcome Health


Congrats again to all of you, for doing terrific things in Chicago's tech ecosystem.  Keep up the great work!!

For future posts, please follow us on Twitter: @RedRocketVC

Thoughts on Chicago's Growing Tech Scene, And How to Improve It Over Time

I recently read a very good post on Chicago's tech scene: where it is today, from a talent and ecosystem perspective, and where it is heading.  But, honestly, many of the recommendations herein can apply to any startup ecosystem that is in the early years of getting off the ground.  It was written by my good colleague, Jeff Carter, an angel investor at West Loop Ventures, co-founder at Hyde Park Angels and author of the Points and Figures startup blog.  Jeff was kind enough to let us share this post with all of our Red Rocket readers.  So, here it is:

[SLIDESHARE] Chicago's Exploding Startup Ecosystem

I have an upcoming speaking engagement talking about Chicago's exploding startup ecosystem.  I put the below presentation together for that event.  I thought it would be useful to anyone else interested in learning more about what is going on in Chicago's tech scene.




For future posts, please follow me on Twitter at: @georgedeeb.

[NEWS] Congrats to @ross_w_petersen at @BlitsyCrafts. Winner of the 2015 @IR_Events (IRCE) Startup Pitch Competition

Yesterday, I had the pleasure of hosting and judging the e-commerce startup pitch competition at the 2015 Internet Retailer Conference & Expo.  It was a close battle between three veteran e-commerce startup entrepreneurs in Chicago:  Chris Conn at MightyNest, Sharon Schneider at Moxie Jean and Ross Petersen at Blitsy.  But, there could only be one winner of the $1,000 in free consulting from Red Rocket.  Congratulations to Ross Peterson and Blitsy!!  A nice job by everyone, so be sure to check out each of these great up-and-coming e-commerce companies.

[NEWS] Red Rocket's @georgedeeb Hosts Startup Pitch Competition at Internet Retailer Conference in Chicago (June 3rd)--10% Off Tickets

I have been invited to participate again in this year's Internet Retailer Conference & Exhibition in Chicago on June 2-5 at McCormick Place.  I will be hosting a startup pitch competition between three leading Chicago e-commerce startups:  Blitsy, MightyNest and MoxieJean.  The session will be held on June 3rd at 4pm.  You can learn more at this link.

If interested in attended the biggest internet retail event of the year, as event participants, we are pleased to offer all Red Rocket readers a 10% discount on your entry ticket price.  When you go to register, be sure to enter the discount code SPEAKER10 to receive your discount.

It will be fun to see our three FireStarter Fund portfolio companies duke it out for Best E-Commerce Startup (at least in Chicago).  Hope to see you there.

For future posts, please follow us on Twitter at: @RedRocketVC.

Six Chicago Venture Capitalists Reveal the Best Pitch of 2014

Crain's Chicago asked six of the city's busiest investors to describe the best pitch each heard this year: the ones that got their attention and, in most cases, pried open their checkbooks. The front-running companies have two things in common: They solve a clear pain point in the marketplace and they're headed by dynamic leaders. Read on for an edited version of our conversations.

Read the rest of this post in Crain's, which published this week.

For future posts, please follow us on Twitter at: @RedRocketVC.

Chicago: The Next Big Startup Ecosystem

When I started iExplore in 1999, Chicago was jokingly referred to as a “flyover city” because the big venture-capital firms in Boston and Silicon Valley would fly back and forth to each other looking at deals, ignoring Midwestern startups altogether. Even worse, these funds would insist that any startup wanting their support would need to relocate to their city (which many aspiring entrepreneurs did, having no other choice) in order to leverage their expertise and tap into their local ecosystem.  That was a different time for Chicago, before it started to build a robust startup ecosystem of its own.

Read the rest of this post in the Wall Street Journal, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

[NEWS] University of Chicago Booth School Now Accepting Applications for New Venture and Small Enterprise Lab

Client applications are now being accepted for the New Venture and Small Enterprise Lab at the University of Chicago Booth School of Business. The class places teams of four to six MBA students with Chicago-area startups and small businesses to work on a special project over a 10-week quarter. The class gives students exposure to the working environment and culture of smaller companies and the opportunity to work with owners and managers while earning academic credit towards their MBA.

Client companies get to tap the talent and expertise of Booth students through a structured, 10-week class after which they will receive a delivered project addressing their specific business challenge. Past projects have included marketing strategies, sales programs, client assessment tools, investor packages, pricing strategies, developing new markets and even customer-service dashboards.

This course offers a blend of theoretical constructs and practical experience as they relate to emerging businesses through classroom lectures and on-site client experiences. It is taught twice during the 2014-2015 academic year. Once in the Fall quarter starting in late September and once in the Winter quarter starting in January.

If you are interested in learning more about becoming a client company for the University of Chicago New Venture and Small Enterprise Lab please visit www.34701.org and complete a client application.

[VIDEO] George Deeb Presents "The Birth of the Startup Excubator" at Techweek Chicago 2014

In case you missed it, here is the presentation made by Red Rocket's George Deeb at Techweek Chicago on June 27, 2014.  On behalf of the Ensemble alliance members, George presents "The Birth of the Startup Excubator Model", and compares its strengths and weaknesses versus other startup accelerator programs.

Here is the video from Techweek's YouTube Channel:



Here is the matching powerpoint presentation from SlideShare.

Hope this helps you to better understand Ensemble's "startup excubator" model.  If interested in learning more, feel free to reach out to Ensemble via their website.


For future posts, please follow Red Rocket on Twitter at: @RedRocketVC.

[EVENT] Hear George Deeb Present Ensemble's Startup Excubator Model at @TechweekCHI on 6/27 at 1pm

As many of you know, Techweek Chicago is in full swing this week. Red Rocket's George Deeb will be speaking about Ensemble's "startup excubator" model on Friday June 27th at 1:00pm, followed by a breakout session for Q&A at 1:30pm.  If you are already going to be a Techweek, please swing by and listen in.  We would love to have your participation.  Hope to see you tomorrow!!

For future posts, please follow Red Rocket at: @RedRocketVC.

[NEWS] 2014 @MoxieAwards Winners: Best of Chicago's Startup & Tech Scene

Congrats to all of the winners of last night's annual Moxie Awards event, produced by BuiltIn Chicago, who did a great job, as usual.  You are all well-deserving of your wins, and you are doing great things to make Chicago's startup and tech ecosystem world class.  Keep up the great work!

Best Consumer Web Startup:  SpotHero

Best B2B Startup:  TempoDB

Best New Startup:  Civis Analytics

Best Startup Co-Founders:  Jimmy Odom, Daniela Bolzmann & Kirk Lashley of WeDeliver

Best Service Provider:  VineSprout PR

Digital Agency of the Year:  Rise Interactive

Mentor of the Year:  Chuck Templeton of Impact Engine

Investor of the Year:  Stuart Larkins of Chicago Ventures

Tech Woman of the Year:  Kristi Ross at dough

CTO of the Year:  Aaron Rankin at Sprout Social

Best Software Company:  Signal (formerly BrightTag)

Startup of the Year:  Sprout Social

Best Company Culture:  Centro

Best Enterprise Web Company:  kCura

Breakthrough Digital Company of the Year:  GrubHub

CEO of the Year:  Amanda Lannert of Jellyvision


And a special shout-out to our Red Rocket client, ViaForensics; FireStarter Fund porfolio company, Hireology; and our Ensemble partners, Walker Sands and Ora Interactive, for your nominations.  The full list of nominees can be seen at this link.


For future posts, please follow us on Twitter at: @RedRocketVC.

[EVENT] T-Minus One Week to @EnsembleHQ "Open Mike Night" Office Hours & Pizza Party on June 4th

Ensemble Alliance members George Deeb (Managing Partner at Red Rocket Ventures), Mike Kelly (CEO at Ora Interactive), Brent Payne (CEO at Loud Interactive), Katy Lynch (President at SocialKaty) and Mike Santoro (President at Walker Sands) will make up this panel of digital all-stars, who will power this "Open Mike Night" office hours session to answer any and all startup questions you may have for your business, as it relates to startup strategy, fund raising, staffing, design, development, search engine optimization, pay-per-click marketing, community managment, social media marketing, public relations and more. Come and get free advice for your business from proven digital experts across their various fields of expertise.

Date: June 4, 2014
Time: 5:30-7:30pm
Place: TechNexus (20 N. Wacker, Suite 1200, Chicago, IL 60606)

The agenda will include:

5:30-6:00 Pizza Party & Networking (courtesy of Ensemble). Please bring your own drinks.
6:00-6:15 An Introduction to Ensemble (by George Deeb)
6:15-7:15 "Open Mike" Q&A Session Between the Ensemble Panelists & Attendees
7:15-7:30 Closing & Networking

We would like to thank our friends at TechNexus for hosting this event. This will be a great opportunity to check out their brand-new 50,000 square foot startup collaboration space at the historic Chicago Civic Opera Building.

Any questions can be directed to George Deeb via the contact form on the Red Rocket Website.

Please RSVP on this Eventbrite page, so we know how much food to order. And, thanks for helping us spread the word about this event by clicking the social sharing buttons. Thanks!

For future news from Ensemble, please follow us on Twitter at: @EnsembleHQ

[EVENT] Red Rocket Office Hours With George Deeb: Tomorrow Monday April 21st 2-5pm.

If anyone has any pressing questions about your business, Red Rocket's George Deeb will be downtown Chicago tomorrow, Monday April 21st from 2-5pm with some time to kill between other meetings.  If interested, George will be holding a last minute office hours session at the food court on the 2nd floor of the Merchandise Mart in Chicago. 

To express your interest in meeting with George, please send an email to us via the contact form on our website.  In such email, summarize your business, size, stage, needs, budgets or other relevant information about yourself, your business and your challenges.  If George can add you to his schedule, he will reply with a good time to meet in the above range.  Based on the volume of leads, George may not be able to meet with all of you, and apologizes ahead of time, if he can't fit you into his schedule.  If you do not hear back from George, assume he was unable to meet with you.

For future posts, please follow Red Rocket on Twitter:  @RedRocketVC.

[NEWS] Nominations Now Open for Moxie Awards in Chicago-- Vote @Freebie_App, @EnsembleHQ and @GeorgeDeeb

Nominations are now open for the third annual Moxie Awards, celebrating the best entrepreneurs and companies in Chicago's digital startup/tech ecosystem.  Voting is open through through April 30th, after which time the finalists will be announced.  You can vote once a day at this link: http://moxieawards.builtinchicago.org/nominate.

If you are needing inspiration of who to vote for, consider Red Rocket's portfolio company, Freebie, for best consumer startup, Ensemble for best service provider and our own George Deeb for best mentor (assuming you are enjoying the valuable startup lessons shared in Red Rocket's Blog).  Thank you for your votes and shoutouts in social media here.

And, if there are any other startups or entrepreneurs in Chicago who deserve some love here, be sure to call them out in the comments section below.

For future posts, please follow Red Rocket on Twitter at:  @RedRocketVC.

[NEWS] @RedRocketVC Launches New Group on @Meetup--Please Follow Us There For In-Person Startup Events in Chicago

Red Rocket launched a new events profile page on Meetup today:
http://www.meetup.com/Red-Rocket-Ventures-Meetups-for-Startups-in-Chicago/

If you are interested in attending in-person educational events for startups in Chicago, and are members of Meetup, please follow us there.

Our first event will be  "Ensemble Office Hours: "Open Mike" Q&A Night for Startups (& Pizza Party)" on June 4th at TechNexus in Chicago.  The event will feature the five senior executives of Ensemble's members:  Red Rocket (startup consulting & capital), Ora Interactive (technology development), Loud Interactive (search engine marketing), SocialKaty (social media marketing) and WalkerSands (public relations), who will share their digital expertise for free, for your businesses.  You can learn more here:
http://www.meetup.com/Red-Rocket-Ventures-Meetups-for-Startups-in-Chicago/events/175134482/

And, you can make your reservation for this event on Eventbrite, here:
https://www.eventbrite.com/e/ensemble-office-hours-open-mike-qa-night-for-startups-pizza-party-tickets-11176239433

For future posts, please follow Red Rocket on Twitter at:  @RedRocketVC.