Excelerate Labs, perhaps Chicago’s best known incubator, held its second annual demo day yesterday, at the local House of Blues. It was a somewhat fitting venue, as the city’s mayor, Rahm Emmanuel, did drop by to give a short speech in between pitching sessions.
As with any tech event, there was no functioning WiFi. A network had been set up, but it immediately failed under the stress of a packed room filled with hundreds of investors and founders. Happily, all the pitches were slideshows and not based on live demonstrations. That would have been ugly.
“This event was off the charts”
Gary Vaynerchuk was so impressed with TNW Conference 2016 he paused mid-talk to applaud us.
This was Excelerate’s second year of operation. The leadership group of the accelerator announced before the day got underway that the operation has three years of runway in the bank; they promised to see those assembled in 2012. The team joked that a new venue might be required, as they had effectively filled a concert hall with an invite-only event.
In this post I am going to give a short rundown of the ten companies that pitched, list the amount of money that they are looking to raise, and provide a short opinion on each firm. I’ve also written a short summary of the mayor’s speech at the end of the post.
BabbaCo is a company that creates, and ships to families, a monthly box of activities and projects for children to use. Families sign up for the service, and inform BabbaCo of the age of their kids. The company then, for $29.99 a month, sends the family a new chest every 30 days.
The firm’s CEO, Jessica Kim, cited a study in her presentation that claimed that the number one concern among mothers is not the safety of their children, but the worry that their tots might ‘not be being exposed to enough.’ BabbaCo hopes to address that market by providing, ahem, ‘out of the box’ stimulation and learning.
The boxes focus on four areas:
- Digital [topics]
BabbaCo claimed that at launch, it will operate with 40% margins, a number it expects to improve as it hits scale. As mothers, it turns out, control some 85% of household spending, the company may enjoy some pricing flexibility. BabbaCo is is expecting to have low customer churn: “who wants to tell little Mikey that the box is not coming next month,” it joked.
BabbaCo is looking to raise $1.2 million, and has closed $875,000 from investors, including LightBank.
I’m bullish on the idea, mostly for its concrete execution plan and focus on detail (the company is working with expert groups on tailoring the boxes to different stages of child development). It’s not sexy like a hot, new web app, but it has the potential to make substantial profits. And that, in the end, is what business is all about.
Buzz Referrals, last to present, is a tool that brands and stores can use to bolster their referral traffic by making it social. The company used an example to illustrate its core concept, pitting a shopper who buys 8 items a year against one who buys 2. Buzz Referrals then asked the crowd which was the better customer. It then revealed, after a host of shouted answers, that the lower-volume customer was in fact worth more, as she was by far the more active referrer; her word of mouth actions, social network sharing, and the like meant that her total purchase influence beat the more active purchaser.
Buzz Referrals is working to build on that idea, hoping to use digital social sharing as the nexus of expanded referral sales.
The company’s social referral plugin (one line of code) enables a system of sharing, and rewards, that cuts down on direct email, making that sort of communication come from users, and not the company, which raises opening and click-through rates.
The company also has a self-service system, so that anyone can quickly use their technology. The company is looking to raise $500,000.
I find the data that was presented to strongly support the idea, but worry that the technology itself feels somewhat replicable. I am not able to see an element in the product that gives it a long-term edge. If the business is as profitable as the team hopes, it will unleash a host of competitors.
If you want a certain dish cooked, and you can’t do it, or simply don’t know how, you are likely out of luck. CookItFor.Us (CIFU) wants to help you out.
The company has compiled a massive database of recipes from top sources, and is building a network of cooking suppliers that will allow it to deliver any food, based off of any requested recipe, to anyone, anywhere.
To put this in perspective, think of how florists are networked with a central ordering center farming orders out to indie shops to meet local demand. This type of system allows CIFU to offer an ‘infinite menu.’ The company stated that it has built the capability to serve 3 million households in Chicago with 48,000 different recipes so far (and counting).
CookItFor.Us is looking to raise $800,000 to both fuel customer acquisition and enter new markets.
I like the idea, as your humble author can’t cook his way out of a paper bag, but the company has yet to put up any meaningful user numbers. CIFU listed a few metrics for August, but I wasn’t terribly impressed that it had managed to snag slightly over 2,000 users this month. That said, if the company can hit scale, the potential market, eating, is simply massive ($1.335 trillion yearly, in the US). Some things sound crazy until they work, and CookItFor.Us is just such an idea.
Exchangery is a tool that will allow people to set up exchanges, markets, to use a different word, to trade commodities. One of the founders helped to build the Chicago Climate Exchange, which was sold for $604 million.
After doing so, members of that team were approached by others also looking to set up a niche markets, but the team had little to tell them other than that it was extremely hard and expensive to do so. Noticing that there was a business opportunity to be capitalized on, Exchangery was born.
The idea is to provide the platform, technology, and regulatory certifications that an exchange needs for anyone who wants to build one while taking a trading fee, equity cut, and annual fee of the new market. This frees the people who want to set up a market (in this case, Exchangery’s customers) to do marketing, design, and other ‘consumer’ facing tasks.
The company said that according to conventional wisdom, there are many markets too small to support their own exchange. It hopes to change that. The firm is in advanced talks with several potential clients, and is looking to raise $500,000 to land their first client. Once it has done so, the company stated that it intends to raise more.
I am in love with this idea, as a finance dork. Even better, it is feasible due to the strength of its founding team and advisers. This is a disruptive idea that could bring new clarity and efficiency to markets that are currently quite undeserved while making a pile of money in the process. What’s not to like?
Food Genius continues the culinary theme of CookItFor.Us, also focusing on dishes as its chief concern. The team made the case that all current websites that deal with food are too focused on restaurants, and not individual items of food. You don’t eat restaurants, the team pointed out.
The app (available for mobile, slates, and normal computing environments) is a recommendation-based tool that leans on your tastes, and what people you trust have rated. The company has built a webpage for each dish in its database, through which it hopes to receive a large dose of Google love.
What is interesting about Food Genius is how it plans to make money. Instead of selling advertising space or deals and the like (it could do both in the future), the company plans to sell data. There is a growing market for consumer taste data in regards to restaurant consumption, and Food Genius wants to serve it. The firm claims that with 7 paying customers, it becomes cash flow positive.
The team is looking to raise $700,000, of which is has secured $160,000.
I find the business model to be the most compelling side of the company. The app itself is not innovative enough to write home about, but provided that the company can get enough users, that matters less than one might think.
Goshi’s plan is to become the storefront for your neighborhood. The application, a mobile and location-based tool, integrates with retailers near you and filters what they have on sale for you to browse and buy.
The company claims that this uses your ‘real social graph,’ the people in your community who have the same tastes as you. To validate its vision, the company pointed out that 51% of consumers are ‘impatient’ and prefer to buy things near their house instead of online, and that 42% of people value being able to see an item before they purchase it.
Goshi wants to take a leading role in what it referred to as ‘commerce 3.0,’ which it labeled “tech influenced offline sales.” To profit from this vision, the company says that, upon hitting scale, it could take cuts from sales and also sell data, à la Food Genius. Ironically, despite a rather skeletal revenue plan, the company managed to have the best joke about money from the whole day: “We are in Chicago: so the question is how do you make money,” the team deadpanned. People not from Chicago might not get why this is funny, and if so, can read this post for more on the humor.
The company is looking to raise $800,000 to solidify itself in Chicago, and to hire engineering talent.
I’m not convinced that the company is properly prepared to address the difficulties of growing a marketplace, even if the firm focuses on just Chicago to start. That said, the market that the company plans to address is large indeed, perhaps giving the company room to maneuver.
According to the IntroFly team, 55% of American’s are unhappy with their jobs. The group is out to change that.
The team quoted noted venture capitalist Mark Suster as saying that if one wants to improve their career, they should go on 50 coffee dates. It is not clear what effect the coffee dates have on a person, but nevertheless, that notion forms the core of what IntroFly is building.
The company has put together a tool that digs through your various social networks and, using its special algorithm, digs up people for you to meet on any topic. It is your guide, in a way, to find the people that you need to send time with (those coffee dates). The company stresses continual action. Obviously you are not going to go on 50 coffee dates in a row unless you are dating a real caffeine-head.
To grow its userbase, the company is looking to for-profit universities, which are soon to be compelled under Federal law to help their graduates find jobs. IntroFly is selling its service to those schools, to help their students, thus giving it a potentially rapidly expanding user base.
The company is looking to raise $750,000, of which it has $350,000 committed.
I like the fundamentals behind the idea, but the product itself feels a bit underdeveloped. That could be addressed, however, with whatever funding it secures.
Throughout the day, only Joystickers managed to confuse us. The company took to the stage, showed off two innovative, and cool physical products, announced a deal with peripherals giant SteelSeries, and then told the audience that it was leaving all that behind to make every day gaming objects ‘mobile gaming enabled.’
Instead of doing hardware, the company is moving into software. Other companies will bake in the firm’s software to the goods they make, such as jump ropes, charge more money for them, and then the purchaser of the digitally enabled toy can download apps for their phone to interact with it.
A QR code is the conduit between the owner of the digitally enhanced jump rope and the apps that will work with it. It feels like a long, winding path to us, especially as the consumer has to shell out three times the money (the firm’s numbers) to buy equipment that will run with the software, compared to normal equipment.
The firm is looking to raise $500,000.
I almost wants to ask them to go back to making paintbrush styluses that feel like a normal brush, but interact with digital screens perfectly. Seriously, why leave such cool tech behind?
Power2Switch was the obvious hit of the day. It will, probably, make the most money of the whole day’s lot.
Just as FeeFighters helps businesses pick the credit card processor that is cheapest, Power2Switch helps people pick a power provider in states in which energy deregulation has taken hold. In Illinois, for example, there are 18 different power providers. ComEd, the old monopoly, manages the grid and sells to most people, but consumers can pick a different power supplier.
The best part? There is no ‘transition.’ ComEd maintains the power lines, and the consumer, or business, simply begins to pay someone else. It’s actually that simple. Power2Switch provides a tool that compares various providers, and helps people to pick what is best for them.
Power2Switch gets a 5% recurring commission from customers that it sends to new companies. For the life of the customer. That actually caused the entire room to erupt in applause. How much money does this make? The company said that its cost of acquiring a consumer customer is about $6. Lifetime value? $81.
The company is raising $950,000, and has $500,000 committed.
TNW loves the idea, the execution, the market, and the business model. Our only fear is the potential for regulatory winds to shift, perhaps lowering the number of states that the company could expand into.
And finally, there is Shortlist.
Shortlist is an application designed for conferences. Conferences themselves can be wooly events, with people awkwardly standing around, not meeting the ‘cool kids,’ and avoiding the eyes of exhibitors. Or maybe it’s just me. Shortlist is designed to help each person at a conference: the attendee, the exhibitor, and the organizer.
For the attendee, Shortlist is a recommendation engine, helping that person to find people who interest them. For the exhibitor, it provides a way to reach out (through a variety of methods) to attendees using the application. And for the organizer, the app is free, and it gets a cut of revenue that it derives.
So then who pays for it? The exhibitors, when it generates leads for them, and so forth. Shortlist is betting on its ability to connect exhibitors and attendees. The company is working with events in the city of Chicago, and organizations that run events across the country.
Shortlist is looking to raise $700,000, which will allow them to develop the third version of its application, and to provide it with enough runway to service 100 events with its current version.
TNW thinks that conferences could use a digital boost. Shortlist has a compelling idea, and its price tag should allow it to land enough trial events to prove its model, assuming that the model works.
That’s the 10 companies! Now let’s read a very short take on mayor Rahm Emmanuel’s speech:
Mayor: Rahm Emanuel
The mayor (not someone who I’d call a great public speaker) did manage a functional joke about how he was only tech savvy in the sense that he has a 14-year-old child in his house to boss around and execute technology-related tasks (“fix that, turn that on…”).
The Mayor made two larger points: The city of Chicago has a funding (read: deficit) issue, and that he wants the city to be a hub for technology. He called Chicago and the surrounding area ‘the third coast.’ He listed off a half-dozen companies that were hiring by the hundred in Chicago as testament to the fact that Chicago was a compelling place to build a business. And as he had to, he noted Groupon’s growth.
Emanuel pointed to Chicago’s deep roster of universities (of which he highlighted DePaul’s CS program) as an engine that would fuel future growth, and provide talent to local technology companies.
The mayor went on to say that the city would not be a ‘robot,’ but instead a partner for companies that were looking to grow in the area. “Watch out New York and Silicon Valley,” he said, “Chicago is coming.” Sadly, Rahm did not take questions or make himself available to the press. We tried to snag him for a few minutes to no avail.
All told, the day was an excellent look at a growing sector of Chicago’s economy. It was also something of a spectacle, as a large slice of the angel community, and the highest levels of city government took part. All told, I’m looking forward to next year.