Incubate on This
Chicago’s business incubators offer dynamic opportunities for the city’s entrepreneurial up & comers.
By Timothy Inklebarger |
You could have counted on one hand the number of Chicago-based co-working business incubators four years ago. Catapult Chicago, 1871 and a few others were just beginning to provide co-working spaces with tools, programming and—maybe most importantly—access to experts and investors. Today, there are more than 100 incubators in the Chicagoland area, working to help usher fledgling entrepreneurs through the arduous process of bringing a product to market. Groups as small as local community centers and as large as municipalities and multi-billion–dollar corporations are getting in on the action. And for some companies, building businesses means big profits.
WeWork, a New York-based global co-working space company with five locations in Chicago, for example, is among the largest in the business incubator game, achieving a valuation of $16B in March—that’s up from $10B nine months prior, Fast Company reports. And the more incubators brought into the mix, the more diverse the spaces become. The new generation of incubator is growing the field beyond technology, with dozens surfacing for a variety of industry specific markets, including entertainment, manufacturing and life sciences.
Here are just five making their presence known in and around Chicago.
2112 FORT KNOX STUDIO
2112 at Fort Knox Studios is one Chicago incubator that’s resonating loudly within the music and video production industries. A 160,000-square-foot facility that formerly served as a television-set factory on the northwest side, Fort Knox opened its doors in 2011 and launched 2112 at Fort Knox Studios in July 2015. It is now home to some 300 bands and startup companies, says 2112 Director Scott Fetters.
Chicago was never short on artists or industry startup companies, Fetters explains, but there were few places for the two to connect. “By taking the business incubator model and surrounding it with full verticals of the entertainment industry, we are providing our startups with real-time feedback, industry relationships, and insight into real-world market problems,” he says.
Fort Knox/2112 boasts 92 rehearsal rooms, six recording studios, four live sound production companies, a 7,200-square-foot film/video production facility, and 35,000 square feet of office space. Fetters says 2112 has helped to grow dozens of companies over the last year and a half, providing resources to fledgling businesses dealing with everything from equipment rental to music discovery apps to ticket sales.
“2112 was reactive to Chicago’s fragmented creative sector,” he explains. “It started from a very small group of five to 10 companies and grew to 85-plus in less than two years. We’ll have capacity to grow to 400 member companies with our next expansion.”
2112 also has hosted over 100 educational workshops, music technology showcases and Music Hack Day events, where participants share information about music technology. Like other business incubators, the operation is expanding quickly. “We created this hub for Chicago because there was a huge need,” Fetters explains.
Soon Fort Knox will open its second location—a 180,000-square-foot facility in Nashville. 2112 won’t have a presence immediately, but Fetters says the second location ultimately will replicate Fort Knox Chicago and get its own incubator. Future plans for Fort Knox and 2112 include expansion to additional cities in the United States and abroad to create an entire network that aims to “define the future of the music industry.”
Catalyze Chicago is among the city’s rapidly growing incubators. Having partnered with the City of Chicago to create mHUB last year, a co-working incubator focused primarily on manufacturing and physical product development, the operation recently relocated from its 8,000-square-foot West Loop facility to a 63,000-square-foot space in River West. Now if that isn’t a testament to growth, I’m not sure what is.
mHUB is an initiative of World Business Chicago, a public-private partnership between the City of Chicago and the Chicago business community, chaired by Mayor Rahm Emanuel. World Business Chicago touted the success of Catalyze in August, noting that since launching in 2014, the incubator has helped 56 companies develop nearly 60 products, and has generated $57M in revenue.
“mHUB builds on Chicago’s history as a home for hard-working men and women with bold vision and big ideas,” Mayor Emanuel said at the August 2016 rollout. “mHUB will unite the manufacturing sector with our vibrant technology focused entrepreneurial scene, and will encourage new and existing manufacturing as a driver of growth for our city, thanks to new applications in product development and manufacturing.”
mHUB lists big-name corporations as its partners, including Marmon Group, Argonne National Laboratory, Chase Foundation, GE Ventures, Comcast and Northwestern University, among many others. Private in-kind and cash donations to the group already have reached $5M, Catalyze founder Bill Fienup told the Chicago Tribune in August. mHUB will provide roughly $2M in manufacturing equipment, some of which is left over from the Motorola Mobility prototyping lab that previously occupied the space. A 3D printing lab, electronics lab, metal shop and other prototyping equipment will be available for a fraction of the cost to purchase or rent.
“Members will have access to manufacturers, distributors and angel connections we have, as well,” Fienup explains. “It’s not just the tools and the equipment but the community—mechanical and electrical engineers, industrial designers, software developers. And those partners will have expert knowledge of specific up-andcoming industries like IoT [Internet of Things], robotics, clean energy, sensors, unmanned vehicles and medical devices.”
Asked whether he believes the proprietary secrets of tightly held businesses are potentially jeopardized by working in a shared environment, Fienup acknowledges that the question comes up frequently. “Nowadays speed to market is one of the most important parts of succeeding,” he says, adding that if you’re not sharing the idea and getting some feedback, you could be headed down the wrong path. “Larger corporations are noticing the speed of entrepreneurs, and they want to be part of this open environment.”
PROPEL has been helping early stage life sciences companies bring their products to market over the last decade.
Pharmaceutical drugs, medical devices and other health related products can take years and millions of dollars to develop—some of the entrepreneurs currently connected to PROPEL have been with the incubator since the organization’s beginning, says LeAnne Tourtellotte, PROPEL’s director of grants and awards.
“These companies don’t come into our program and automatically graduate after a few
months,” says Tourtellotte. “There’s a big difference between developing a piece of software that can be commercialized in six months and taking a drug candidate through the FDA process. That can be hundreds of millions of dollars, and there are a lot of places to fall off the cliff along the way.”
PROPEL hosts a number of coaching, networking and educational programming events, and helps to prepare early stage companies to seek outside capital. As companies get closer to commercialization, PROPEL helps position them to go after further funding from institutional investors, Tourtellotte explains.
PROPEL also helps startups in their efforts to secure Small Business Innovation Research and Small Business Technology Transfer (SBIR/STTR) grants through the National Institutes of Health. PROPEL’s record of success speaks for itself; member companies have a 36-percent acceptance rate for SBIR/STTR grants—more than double the national 15-percent success rate.
What’s unique about PROPEL is that it doesn’t provide a physical space for entrepreneurs to set up shop. “We’re not purely a networking platform and not purely a stepwise-based organization,” says Tourtellotte. Rather, the incubator is focused on “providing long-term support and relationship programming for the development of a startup from the beginning to end.”
Located in River North, Catapult was founded in 2012 “by entrepreneurs for entrepreneurs,” says Executive Director April Lane. The nonprofit is supported by service provider sponsors and works with tech startups that tend to have funding, a team and customers before joining the space.
Catapult has a steady track record of working with promising new businesses. In four years, it has worked with about 35 companies that collectively have raised $100M and employ more than 500 people. The co-working space hosts about 12 companies at any given time for residencies of up to two years.
Lane says Catapult’s peer-selection process, where existing members vote on which companies to accept, sets it apart. “We bring them in to pitch to all the founders of all of our companies,” she explains. Catapult provides forums for the companies’ founders, educational programs with business experts and a mentoring program that aims to connect members with successfully scaled companies.
The members that “get voted on the island,” says Lane, work together to provide support, education and shared experiences. “If one of them is having a challenge with their business, they can get help from the community,” she explains, noting that the founders agree to keep strategies and business models confidential.
Catapult alumni also are part of the mix, providing expert advice to companies that were in their shoes just a few years ago. “All the companies can reach out and help each other, and share experiences and learning,” Lane adds.
While major municipalities and multinational corporations are jumping on the incubator bandwagon, so too are smaller community-based groups. Organizations like the Greater Englewood Community Development Corporation (CDC) have launched their own incubators to help small businesses get up and running at the local level.
Having opened its doors in June 2015, the Englewood Accelerator quickly evolved beyond its original scope by forging partnerships with the Women’s Business Development Center and Operation Hope. The incubator hopes to soon be designated as a Small Business Development Center by the federal U.S. Small Business Administration.
Like other business incubators, the Englewood Accelerator offers office and meeting space, mentoring opportunities, workshops and seminars. It also provides training in Cisco Network Academy, Microsoft IT Academy and Accenture for Entrepreneurs, giving members the opportunity to earn certifications. “Small-business entrepreneur adult education is empowering; it’s all about the enabling of people to increase their chances of success,” explains Jennipher Adkins, Englewood Accelerator's chief operating officer.
Furthermore, the incubator’s after-school training program, Urban Tech Squad, teaches students about programming, robotics and computer repair—on both the theoretical and practical levels. “We’ve comingled the learning and the entrepreneurial stuff where the students sell rebuilt donated computers for $75 to the public, and that’s a hot item,” says Adkins.
“In just four months, they have sold over 100 computers.” The Englewood Accelerator also works with micro-startups “that have nowhere to go,” says Adkins. “We have a member-only portal that provides an assessment and goal sheet to establish where they are and desired outcomes. We’re able to see what they want to do in ‘x’ period of time. For example, if a member wants to participate in a trade show in six months, we then work toward that goal. Or it could be bank loan preparation.”
Most recently, the Greater Englewood CDC signed a lease to rehab a building across the street from the recently opened Whole Foods Market. Set to open in late summer 2017, this venue will provide a café and give entrepreneurs a chance to demonstrate their products in a mobile demonstration kitchen. Adjacent to this, the Englewood Accelerator also recently became the community partner for Boombox retail structures. Boombox operates a leasing model that specializes in easy acquisition retail space.
“Small businesses and entrepreneurs can rent the Boombox for a week, two weeks or a month. Most importantly for small or startup businesses, this can be done for hundreds of dollars rather than thousands,” says Adkins.
With continued interest in business and technology, as well as increasing venture capital to spread around, incubators of all stripes are likely to be a tangible part of the city’s business landscape for a long time to come. For finance and accounting pros, this dynamic entrepreneurial landscape offers the opportunity to connect with startups and build trusted advisor relationships in the niche areas that interest them most, whether entertainment, technology, life sciences,manufacturing—or pretty much anything else.
for more information on Illinois’ incubators and where you just might fit in.