End of The Road

I turned in my resignation to Hyde Park Angels, the organization I co-founded back in 2007.  Most of my co-founders left in the first couple of years for a variety of reasons.  Some never were part of anything past Day 1.  I won’t go into all the reasons why I decided to leave but the major one is I want to concentrate 100% on our fund at West Loop Ventures.  Frankly, we are investing in B2B Fin Tech and HPA has only done one B2B Fin Tech deal, Ycharts.  HPA hasn’t seen that much fin tech deal flow and what it has seen has been mostly B2C or not good enough to get funding.

Chicago is a great place for B2B Fin Tech.  I am sorry we didn’t do more investing in it at HPA.  We will try to remedy that at West Loop Ventures!  Our first investment a Chicago-based company, Megalytics, and when it’s time to announce our next investments I think you will see what we see.

In 2003, I knew trading was going to become difficult for me.  That was the year Eurodollars flipped to the screen.  I lost money.  I went to Chicago Booth and got my MBA from 2005-2007 in order to change my career.  I wanted to do a venture fund.  Vishal Verma approached me with the idea behind HPA. Our co-founders started working on it in November of 2006 and launched in April of 2007.  Trading was still going okay for me but I knew my days were numbered.  It basically ended in 2009 when the Hogs flipped to the screen.

In April of 2007 at our first meeting, someone asked if HPA was going to be like Silicon Valley.  I said, “No.  We are going to invest in what Chicago is good at.  Finance, B2B, Medicine, and Consumer Products.”  HPA has mostly invested in 2 out of the 4 categories but it wasn’t for lack of trying.  Medical is tough and it has been awfully hard to get that group going.  Finance is also tough.

When we started, there wasn’t a lot of deal flow in Chicago.  You had to be a Johnny Appleseed of capitalism to find it.  There wasn’t much of anything.  I tried to get us into three deals right off the bat; Grub Hub, Groupon and Braintree.  None of them were raising capital.  Grub Hub’s round closed a few months before we got going.  Groupon raised from its principles.  Braintree didn’t raise until 2011.  That would have been a pretty good portfolio right there!

There were plenty of other people that pulled on the rope that helped Chicago become a startup city.  HPA was one of the earliest.

My goal was to set up a network.  Networks are powerful, but they can be messy and hard to manage.  Not everyone is comfortable with a network.   If you like uniformity, control, are out for yourself, have a large ego, they are unsettling.  Tolerance is a key part of running a successful network. Coming from a trading pit, I knew how networks worked.

In the beginning, I would do anything I could just to get people to join or attend a meeting.  At meetings, I used to encourage guests to join, and members to recruit new members.  Eventually, it caught on and now there are around 120 members.  There is even a group of former members that meet informally and talk about deals.

With the advent of things like AngelList, it has gotten a lot tougher for angel groups.  They need to prove to entrepreneurs they can add value besides money.

I remember when Harper Reed asked me what I thought of AngelList.  I love online platforms like that which democratize capital and give access.  HPA did that too.  Back when it started, Chicago was a closed network of brokers.  They all charged high fees for entrepreneurs, and to investors.  Some of them are still out there. HPA blew that whole system up because we didn’t charge anything and we added money to our own investments to cover legal/accounting costs.  Diligence was highly unprofessional too.

There have been some interesting things that have happened because of HPA.

  • Chicago became a tech center since the start.  HPA had a lot to do with putting Chicago on the map.
  • Chicago deal flow has gotten a lot better.  You cannot believe the different places I used to go to try and find any deal worth bringing to the group.
  • Chicago Booth saw its entrepreneurship program blossom.  The number one concentration at Booth is Entrepreneurship.  It used to be Finance.
  • Other angel groups have started up.  I consulted on the startup of Irish Angels, Chicago Media Angels, West Suburban Angels and other angel groups around the Midwest.
  • Northwestern, UIllinois, IIT, and DePaul all have redoubled efforts and have great entrepreneur programs in place.  UWisconsin, Michigan State, Purdue, Indiana, Iowa, and Michigan all have started entrepreneurship programs.  Northwestern has a fund now too.
  • So far, 41 companies have received funding from HPA creating quite a bit of economic activity in Chicago which sorely needs it.  The state of Illinois, and city of Chicago economies are super depressed.  The city, county, and state are bankrupt and in such a deep black hole people are leaving.  At least the startup community is a reason to stay.
  • Entrepreneurs and people that want to work on startups aren’t going to the coasts as much. They are making the choice to come to Chicago.  Some who left for the coasts are now making the choice to come back to Chicago.
  • 120 angels have pledged to risk $250,000 of their own hard earned capital and invest it in local startups.  That’s $30M of capital injected over the next five years into Chicago and the greater Midwest.  I don’t want to hear how wealthy people just sit on their butts and eat bonbons and aren’t taxed enough and aren’t doing their fair share.
  • The Cubs won the World Series and the BlackHawks won the Stanley Cup three times.

That’s pretty cool.