Chicago has a reputation as hub for business-to-business software startups---and for good reason. Companies like Cleversafe, Fieldglass, Braintree, Coyote Logistics and Trustwave have all reached billion dollar or near-billion dollar exits. And Sprout Social (about to IPO) and Uptake (valued at $2.3 billion) are among the next wave of B2B startups headed for large outcomes.
But consumer tech startups also thrive in Chicago and the greater Midwest (think Grubhub, Groupon, Orbitz, Trunk Club and Reverb), even if they get less attention from the region's typically conservative-minded investors.
To help fund more consumer startups in Chicago and elsewhere, local seed investment firm Starting Line officially came out of stealth Thursday with a $17 million debut fund. Led by Ezra Galston, a former principal at Chicago Ventures, Starting Line says it invests in consumer startups "building products and services for the 99%," i.e. companies that leverage technology to make things cheaper, better and more accessible to users.
Galston believes there's a big opportunity to be an early backer in consumer companies operating outside of Silicon Valley.
"The Midwest has a reputation of being a more B2B enterprise town," Galston said in an interview. "But if you look at the data from the past decade, consumer outcomes outpace B2B outcomes, not just in size and absolute numbers, but also in quantity of outcomes over $500 million."
Starting Line, which has been operational for about a year, has so far invested in 11 startups. Its marquee portfolio company is Cameo, a startup that lets you request celebrity shout-out videos for you and your friends. Galston led Cameo's seed round and was one of its first outside investors. Today, Cameo has raised more than $65 million, including a Kleiner Perkins-led $50 million Series B round that reportedly valued the business at around $300 million.
Starting Line has also backed Made In, an Austin-based cookware company whose pots and pans are used by Chicago restaurant group Alinea, and Zoro Card, an Indiana-based debit card that builds credit for its users.
While at Chicago Ventures, Galston was also an investor in Flyhomes, M1Finance, Prettylitter and Spothero.
At Starting Line, Galston said he writes checks between $500,000 and $1.25 million, and he expects to back around 20 companies in fund 1.
Starting Line has several notable names among its LPs, including Grubhub CEO Matt Maloney, Maveron co-founder Dan Levitan, and venture firm Bloomberg Beta. Other investors in the fund include Chicago startup leaders like Kin CEO Sean Harper, Tovala CEO David Rabie, and Stella Garber, head of marketing Trello at Atlassian.
