Chicago saw its first VC-backed tech IPO in five years, several major office expansions from West Coast tech giants, and the latest twist in the Outcome Health saga where its founders were indicted for fraud.
2019 kept us busy at Chicago Inno, as we've worked to keep our readers up to speed with everything happening in Chicago's tech and startup scene. To recap the year that was, we wanted to take a look back at some of the biggest headlines of the year.
These were the stories that shaped Chicago tech in 2019.
Outcome Health Founders Indicted in Fraud Scheme, Plead Not Guilty
In November, Outcome Health co-founders Rishi Shah and Shradha Agarwal were indicted by a federal grand jury for their role in a “massive fraud” scheme where Outcome clients were allegedly over-billed for ads that were never delivered, and revenue figures were allegedly falsified in an effort to raise nearly $1 billion in equity and debt funding.
The two face multiple charges of mail fraud, wire fraud and bank fraud. Both have pleaded not guilty. Shah and Agarwhal could be sentenced to up to 30 years in prison if convicted.
It's a story that has continued to dominate the tech headlines in Chicago over the last three years. In 2017, Outcome raised roughly $500 million at a $5 billion valuation from top investors like Alphabet, Goldman Sachs and Pritzker Group Venture Capital. Once poised to become Chicago's next great startup success story, Outcome is now the latest cautionary tale of a fast-growing startup in legal trouble.
Chicago startup Sprout Social officially began trading on the Nasdaq in December, making it the first VC-backed Chicago startup to IPO since Grubhub went public in 2014. In the IPO, Sprout sold 8.8 million shares, raising $150 million. The IPO price gave Sprout a fully diluted market cap of $894 million at the time. As of December 20, its stock was trading below $16.
The public offering represented a win for Chicago's tech community, including Sprout's local investors Lightbank, a VC fund launched by Groupon founders Eric Lefkofsky and Brad Keywell. Lightbank led the startup’s Series A round and was the first outside money in Sprout. It owned 21 percent of the company's shares at the time of the IPO.
Sprout wasn't the only local tech company to IPO in 2019. Motorola spin-off Cambium Networks also went public earlier this year. And Livongo Health, a healthcare startup founded by Chicago entrepreneur Glen Tullman, also went public in 2019. The California-based company has a large Chicago office and is backed by Chicago VC firm 7wireVentures.
Several tech giants made news in Chicago in 2019 with expanded offices and increased headcount as they double down on the Windy City. Google opened its second office in the Fulton Market neighborhood, officially unveiling the new, 132,000-square-foot space in November that will be home to Google’s Cloud team. Google's Chicago headcount snow above 1,200, which includes product, engineering, technical infrastructure, finance ad advertising roles.
In September, Uber announced plans to hire 2,000 new employees over the next three years. They'll be based out of Uber’s new space in the Old Main Post Office, which serves as the company’s headquarters for Uber Freight, its logistics arm that matches carriers with shippers. Amazon also announced in September that it plans to add 400 tech jobs in Chicago, roughly doubling its local corporate office headcount.
Cancer-Fighting Startup Tempus Valued at $3B
Chicago startup Tempus, led by Groupon founder Eric Lefkofsky, raised a $200 million Series F round in May that valued the Chicago startup at $3.1 billion, giving it the highest startup valuation among startups in Chicago. Tempus has raised a total of $520 million since it launched in 2015.
Tempus, which partnered with top medical centers like the Mayo Clinic and the University of Chicago to sequence cancer patients’ genes, says its platform now touches more than one in four cancer patients in the United States. The startup also announced that it's bringing its technology to other areas like diabetes and depression.
Cameo Raises $50M to Connect Fans With Famous Faces
Chicago startup Cameo, an app that lets users pay for video shout-out messages from celebrities, raised a $50 million Series B round in June led by Kleiner Perkins. Its other backers include Bain Capital, The Chernin Group, Lightspeed Venture Partners and even Snoop Dogg.
The funding and growth has helped propel Cameo into the mainstream, as not just top investors but A-list celebrities gravitate to the fast-growing startup. In September, Cameo was named one of LinkedIn's 50 hottest startups in America.
Chicago Finally Gets Its Electric Scooter Experiment
After more than two years of major U.S. cities experimenting with dockless scooters, Chicago finally launched its own scooter pilot program last summer. Around 3,500 scooters descended on the city’s West and Northwest Sides in June, from companies such as Bird, Lime, VeoRide and others.
The pilot program came to an end in October after about 800,000 rides were taken throughout the city. It's not clear how, or if, scooters will be rolled out in Chicago in the future.
Legal Weed Presents a Big Opportunity for Chicago Startups
For cannabis growers and dispensary operators, Illinois' marijuana legalization on Jan. 1 represents a big business opportunity. But the new law also creates a potentially lucrative moment for tech startups. Several upstarts have launched this year and have raised sizable funding rounds to help the growing cannabis industry in Illinois and beyond. Fyllo, a cannabis ad-tech startup, raised $18 million in funding, and Leaf Trade, a B2B SaaS enterprise software startup for cannabis companies, raised $4.5 million.
20 Chicago Startups to Watch in 2020
In Chicago Inno's annual Startups to Watch list, we highlight the up-and-coming tech companies that should be on your radar in 2020. These early-stage companies have established solid traction, either by early fundraises, fast revenue growth, impressive hires, or innovative approaches to important problems---and could see even more growth in the next year and beyond.
This year's list includes a startup helping companies easily create mobile apps, a "Keurig for cocktails" countertop device loved by Oprah Winfrey, to a Shark Tank standout making products for people with curly hair, a startup helping moms re-enter the workforce, and more.
From the hallways at the University of Illinois and Northwestern University, to the city’s accelerator programs for budding entrepreneurs, there is evidence in all corners of Chicago that shows it’s not just tech veterans pushing the city’s innovative spirit forward. To highlight some of Chicago’s youngest entrepreneurs and technologists, Chicago Inno compiled a list of 25 promising and accomplished techies in the city’s startup scene.
This year’s list includes a variety of young innovators, ranging from tech employees at local upstarts like ReviewTrackers and Avail, to founders and CEOs with innovative ideas of their own.
With 2019 being the 50th anniversary of the moon landing, Chicago Inno took a look at the local startups that are taking moonshot-like approaches to solving some of our most challenging issues. We took a deep dive into the startups that could have a massive impact on our society and how we live, and rounded up 12 companies working on projects with "moonshot" potential.
