When Chicago fintech startup tastytrade agreed to be acquired by IG Group for $1 billion last week, it marked a rare "unicorn" exit for Chicago's tech scene. But it also resulted in another rarity: a female-founded tech startup to achieve a $1 billion acquisition.
Kristi Ross, tastytrade's co-founder and co-CEO, now joins the shortlist of U.S. tech companies with a female founder or co-founder to reach a $1 billion exit. Since 2016, just 15 other U.S. tech companies with a female founder have hit a $1 billion exit, and only five have reached the milestone via an acquisition, according to data provided to Chicago Inno from VC data firm Pitchbook.
Ross was quick to note tastytrade's success is the result of a team effort, alongside co-founders Tom Sosnoff, Linwood Ma and Scott Sheridan. But she acknowledged the significance of achieving the milestone, especially in Chicago.
"I myself hope that as a female co-founder of tastytrade with a billion-dollar exit, I can further solidify Chicago as a center of excellence for financial services, as well as for female entrepreneurship and talent," she said. "I do take my role as a woman leader, not only in the company but in the tech industry, very seriously, and making sure I am lifting up and paving a way for other female entrepreneurs and leaders.
"I am hoping this is an example of what can be done, no matter your gender."
The tech industry has long struggled with diversity and inclusion, and the Covid-19 pandemic may only be exacerbating the problem for women founders. In a Pitchbook report released last month, the firm detailed how the pandemic has disproportionately impacted female founders and CEOs, with funding to female founders down 31% in 2020 from 2019. The dip comes as VC investments in female-founded companies set records in 2019 with just over $20 billion invested. That number, however, represented just 13.5% of all VC investment in the U.S. in 2019.
Tastytrade raised relatively little funding since its founding in 2011, bringing in around $60 million from backers like TCV and Chicago-based Lightbank. Ross said the equity tastytrade provided to its employees will result in many of its employees becoming millionaires as a result of the deal, which over time could create a new crop of angel investors and startup founders in Chicago's tech scene.
"This deal will create dozens of millionaires right here in Chicago," Ross said. "We’re proud of the fact that many employees that have been with us and have contributed to the success of the company will benefit from their hard work as well."
IG, a London-based online trading platform, agreed to acquire tastytrade for $300 million in cash and 61 million IG shares, which are valued at $700 million. Tastytrade is the owner of tastyworks, a high-speed technology brokerage firm, and dough, a mobile-first brokerage firm. It also operates a popular online financial media network that offers live and interactive trading content to retail traders.
Ross said tastytrade spoke to several firms about a potential acquisition, both as the acquirer and the acquiree. It also evaluated a potential SPAC, a process designed to take a firm public without going through an IPO. But ultimately tastytrade determined IG was the right partner to help take the company global, Ross said.
"Doing this deal with IG helps us get in more countries faster. It accelerates our global expansion," she said.
Tastytrade joins just a handful of other Chicago tech companies to crack the $1 billion exit mark, which includes Cleversafe's $1.3 billion deal to IBM, Fieldglass' $1 billion sale to SAP, and Coyote Logistics' $1.8 billion acquisition to UPS, among others.
"Being able to put a billion-dollar mark on Chicago’s board, specifically for the financial services industry and financial derivatives specifically, is a win," Ross said. "I don’t think Chicago gets the credit it deserves for all the innovation that takes place, and for all the financial services talent, technology and incredible companies that are based right here in Chicago. I'm hoping this deal elevates the line of sight into the Chicago financial services and trading technology industry."
