Two Big Financings In Chicago

There was some big news in Chicago this week.  Caterpillar is moving their HQ here from Peoria.  Bad for P-town, but good for Chicago.  At least they didn’t leave the state.

In startup news, Brad Keywell’s Uptake raised $40M from Revolution Ventures.  Revolution is Steve Case’s firm.  They valued the company at $2 billion.  Uptake integrates sensors and big data.  The other startup firm that received funding is Aquilon Energy Services.  They are based in Lisle, IL.  They raised $19M from the big banks and other inside players.  If we use back of the envelope rule of thumb venture investing 101 heuristics their enterprise value is assumed to be $80-$120M.  They are an energy trading software firm.  The second is more interesting to me than the first.

Why?

I witnessed the first capital markets revolution.  I was a part of it. So was my partner Kenny.  Ground zero for that revolution was in Chicago.  Billion dollar companies were created here that didn’t need boatloads of venture capital because they solved real problems for firms-and generated a lot of revenue.  When many of those early entrepreneurs spoke with headline VCs, the firms didn’t understand it and passed.

What does Aquilon do?   They reconcile transactions  in the energy space after delivery. It’s currently done manually with spreadsheets.  They automate the process.

There are huge gaps in the backbone of finance.  Lots of processes are done off spreadsheets.  They can be automated.  Huge companies can be built off of them.  They are very attractive to invest in because they do a lot with a little capital.  In some cases, processes can be automated and the company would be a great cash flow business.  Those kinds of companies will exit for between $10M-$50M.  They need some angel money, but don’t need VC money.

Where is it being built?  Chicago.  Again.

But, unless you have been in the trenches it’s hard to understand it at early stages.  It’s also hard to add value to get them to the next level.  The game is not about “eyeballs to the website”.