Chicago doesn’t have a lengthy history of building $1 billion tech companies. But the ones it does create get to $1 billion valuations really fast.
Groupon was the fastest company to reach “unicorn” status, going from founding to a $1 billion valuation in just 1.46 years. But another Chicago startup may have the online deals giant beat.
Uptake is Chicago’s newest unicorn, having raised $45 million at a $1.1 billion valuation last month. The company quietly launched early last summer, which would put it just ahead of Groupon’s path to unicorn status.
Of the over 140 tech unicorns (private companies with $1 billion valuations) that exist today, just three are located in the Midwest, and each resides in the Chicago region. This year Avant and Uptake joined the list, along with Mu Sigma, which was valued at $1 billion back in 2013. And Chicago has another near-unicorn in Raise, which CB Insights has named to its list of 50 Future Unicorns. With the unicorn activity ramping up lately in Chicago, let’s take a quick look at Chicago’s billion-dollar tech companies.
Valuation: $2 billion
Date joined the unicorn club: 9/29/2015
Avant, a consumer lending platform that uses big data and machine-learning algorithms to get customers loans faster and more efficiently, became a unicorn in September. But CEO Al Goldstein isn’t much for the term unicorn, or other tech buzzwords for that matter.
“I just think anything that is overused to such an extent…and it’s not only unicorn. It’s things like big data, machine learning, internet of things. I think in general these monikers start in a very interesting, positive light, and then we get to this point where (they’re overused),” Goldstein said.
Goldstein, who’s been a serial entrepreneur in Chicago after launching Enova and Pangea, said a billion-dollar valuation was never really a goal for Avant.
“People peg the valuation at this billion dollar number, and I think in general you become very, very focused on it. And sometimes you miss the bigger picture, which is how do you build a really good business,” he said. “The core (focus) should be how do I build a really good business, not how do I get to that billion dollar mark.”
Avant has raised $600 million in equity and $1.1 billion in debt since it launched in 2012. It has been one of Chicago’s fastest growing and most recognizable startups.
“We are building a business that, regardless of valuation, I think can be a really, really big business,” Goldstein said. “Forget a billion dollars. We can be $50 or $100 billion based on the size of the market opportunity and the revenue opportunity we’re attacking.”
Valuation: $1.5 billion
Date joined the unicorn club: 2/7/2013
Industry: Big Data
Chicago’s oldest and perhaps least known unicorn, Mu Sigma, launched in 2004 and landed its billion-dollar valuation in 2013. Headquartered in Northbrook but with much of its staff in India, the company has raised more than $200 million in financing. Mu Sigma uses big data and analytics to help companies make smarter decisions, and its clients include Wal-Mart, Dell and Microsoft.
The company said back in April that it’s doing about $250 million in annual revenue, and it’s looking to increase sales to $1 billion in the next five to seven years, CEO Dhiraj Rajaram told Bloomberg.
Rajaram added that Mu Sigma is eyeing an IPO within in the next four years, and said during the interview that the company’s revenue is increasing 6-7% each month.
Mu Sigma is helping companies like Wal-Mart and Microsoft (and 140 members of the Fortune 500) take the massive amount of data they collects and turn it into valuable insights.
“We are building tools that will negate the necessity of a PhD in applied mathematics,” Rajaram told Bloomberg.
Valuation: $1.1 billion
Date joined the unicorn club: 10/27/2015
Industry: Big Data
Uptake is Chicago’s newest unicorn, joining the club in October after landing $45 million in a round led by GreatPoint Ventures and existing investors like New Enterprise Associates, Caterpillar and Chicago-based Lightbank. Founded by Groupon Co-Founder Brad Keywell, Uptake uses predictive analytics to help clients collect and better understand massive amounts of data.
Uptake works with companies in old-school industries like automotive, insurance, mining, and aviation to help with data collection. In its partnership with Caterpillar for example, Uptake captures data from Cat machines to know when a malfunction is going to occur before it happens, which then increases efficiency.
Uptake has grown incredibly fast since hitting the ground in 2014. The company employs 300 people in Chicago and is the city’s 35th largest digital company in terms of headcount, according to Built In Chicago. And in a recent story in the New York Times, Caterpillar CEO Douglas Oberhelman credited Uptake as the main reason the 90-year-old Peoria manufacturing giant hasn’t moved to the West Coast.
“Had Brad (Keywell) not come along, we’d probably be in Silicon Valley,” Oberhelman told the newspaper. “We’ve got some design engineers in Illinois and Chicago, so I felt it would be easier to get the two cultures together, and that’s one of the driving forces; other than that, he’s had a good success rate.”
In a blog post announcing Uptake’s $45 million investment, Keywell wrote in part: “Our aim was to build the leading predictive analytics platform for the world’s largest industries … Today, we’re further along in achieving that vision than even I could have foreseen in those early days. We’ve built a team of unparalleled skill and curiosity. We’ve grown incredibly fast, and we’re working with partners and leaders in a number of major industries, from agriculture and mining to energy and construction.”
Valuation: “Just shy of a billion”
Date joined the unicorn club: TBD
Raise is a logical choice to be Chicago’s next unicorn, as both CB Insights and Forbes have named it a billion-dollar startup in the making. (Forbes pegs Raise’s valuation at $500 million, Pitchbook says $615 million, and Raise CEO George Bousis told Re/Code it was “just shy of a billion”. Bousis told me the company has not publicly released Raise’s valuation).
But with Raise–a marketplace for buying and selling gift cards–on the doorstep of the unicorn club, Bousis’ mindset is very much like that of his friend and fellow Chicago CEO Al Goldstein.
“I think the whole billion dollar thing, the unicorn thing, is a bit ridiculous,” Bousis said. “For us, it’s just a milestone and something to get everyone really excited about. But it really doesn’t mean anything. I think what’s more important is the problem we’re solving for our customers. The fact that this year we’ll put many tens of millions of dollars back into our customers hands. Solving real problems and having a real impact on society and on our customers’ lives is much more important to us than just a price tag or a valuation.”
Raise brought in a $56 million Series B in January from NEA and other investors, with NEA General Partner Tony Florence saying at the time that “Raise is one of the fastest-growing companies we’ve ever seen.”
Gift card spending grew to over $100 billion in 2014, and Bousis said Raise has its focus on attacking this massive market, rather than hitting a billion-dollar valuation.
“I just think it’s unnecessary pressure that really doesn’t matter,” he said. “We just want to build a healthy business and build a healthy business that will last.”
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