Founders who start companies in  Chicago can enjoy both the benefits of a big city and the warmth of a Midwestern town. The Windy City's startup scene--which launched  RxBar, Groupon, and GrubHub--is boosted by a strong talent pipeline from local MBA and engineering programs. Female founders in particular are drawn to Chicago: a solid third of the city's startups are run by women.

Startup Neighborhoods

Legendary incubator 1871 is in the historic Merchandise Mart building in the River North nabe; around it is clustered the city's "biggest concentration of startup activity," says Julie Roth Novack. She co-founded event-planner platform PartySlate, which is based there, as are personalized clothier Trunk Club, Groupon, and parking app SpotHero.

The West Loop--famed for world-class restaurants such as Avec--is "really hot," says Jennifer Fried, co-founder of medtech firm ExplORer Surgical. Google opened offices here in 2015. Also here: food data company Food Genius and workplace caterer Crafty.

Medical device company Attune Medical, agtech firm Hazel Technologies, and battery-tech startup SiNode Systems call the up-and-coming Bronzeville home. 1871 CEO Betsy Ziegler says the area is a hotbed for "aspiring entrepreneurs on the South Side."

Who to Know

Shaniqua Davis, founder of the minority job portal Noirefy, is a fan  of Cayla Weisberg, co-founder (with Gerri Kahnweiler) of InvestHer. Weisberg is "just a very big resource," Davis says. Even if "she's not necessarily going to invest in you"--and InvestHer hasn't invested in Noirefy--Davis still praises Weisberg for "the advice she can offer you, in terms of shaping your pitch" and helping Davis understand "how to talk to investors."  With InvestHer, Weisberg and Kahnweiler have invested in Codeverse, PartySlate, and 11 other women-led ventures, and they continue to solidify their rep as the It Girls of Chicago tech. 

Roughly 3,000 startups are located in Chicago. Nearly 34 percent are run by women­--the most of any major U.S. city.Source: Startup Genome

Genevieve Thiers was one of the first women in Chicago tech to score a notable exit: She sold a majority stake in her nanny platform, Sittercity, in 2009. Now she writes $25,000 checks to invest in promising women-led companies, and also hosts well-attended monthly "tech salons" at her Lincoln Park home. "Genevieve was our first early success," says PartySlate's Novack. "It has been really helpful for women to have a role model like that."

When Penny Pritzker, billionaire entrepreneur and Obama's secretary of commerce, wrapped up in D.C., she knew she'd come back home. "I saw this explosion at the intersection of technology, innovation, and established companies in Chicago," says Pritzker, a Microsoft board member and chairwoman of her investment firm, PSP Partners. She hosts regular networking dinners for local founders at her home, and co-leads an initiative to help Chicago remain a top tech destination.

Red Flags

Illinois has billions in unpaid debt and nearly saw its credit rating lowered to junk status. "It hampers our ability to create more incentives" to bring firms to the state," says 1871's Ziegler. "It's the only drawback to starting a company here," echoes Melissa Kaufman, executive director of Northwestern University's incubator, The Garage. "It's a conversation stopper."

"Chicago has a reputation for not having early-stage capital," says Thiers, "which is not unfounded. There is a conservatism to investing in companies here." ExplORer's Fried agrees, but sees hopeful signs that some players who've scored big in recent exits are now starting to cut checks to local up-and-comers.

Recently Funded Startups

$117 million: Uptake (predictive data analytics)

$80 million: Tempus (clinical data analytics)

$80 million: VillageMD (logistics tech)

More than 480 businesses are growing at famed incubator 1871. More than 400 of its alumni companies are still thriving or were sold.Source: 1871

Recent Big Exits

$800 million: Payments platform Braintree, to PayPal (2013)

$600 million: Healthy snack bar company RxBar, to Kellogg's (2017)

$192.5 million: Restaurant delivery service GrubHub, in its IPO (2014)

Companies to Watch

Monica Royer--sister of Bonobos founder Andy Dunn--runs baby-clothing company Monica + Andy. She's raised more than $2 million, and borrowed from her brother (and others) by opening stores for her e-commerce company in Chicago, Atlanta, and New York City.

Thiers's top company to watch is Codeverse, a coding boot camp for kids ages 6 through 12. Co-founder Katy Lynch launched the business with her husband just last year; this summer, they raised $10 million.

Katlin Smith launched Simple Mills in 2013. It quickly became a leading natural baked goods brand. Its products have only healthy ingredients, like almond flour and coconut sugar. Says Fried, Smith's friend and fellow founder and food enthusiast: "If any company is headed for a big exit in Chicago, it's Simple Mills."

Talent Pipeline

Chicago churns out highly skilled grads. The University of Chicago and Northwestern graduate around 1,700 and 2,600 respectively--figures that do not include graduates from their highly regarded business schools. And, says 1871's CEO Ziegler, "look at the business school statistics--over a third of graduates stay in Chicago." DePaul University, University of Illinois Chicago, Loyola, and Columbia College also turn out engineers. Helping the city attract and hold onto talent, says The Garage's Kaufman, is how it "blends what I love about New York--that big-city vibe with lots of culture, bars, and restaurants--with a more approachable feel."

In 2017, Chicago-area tech investments topped $1.5 billion.Source: Dow Jones VentureSource

Where to Talk Shop

Trendy River North's Chicago Cut Steakhouse, a block from Merchandise Mart, is a techie favorite. "Lots of investors dine there," says Fiona McEntee, co-founder of her eponymous law firm.

Another key haunt: The West Loop's Bar Takito, close to Google, says Brenda Darden Wilkerson, CEO of AnitaB.org, which seeks to bring women and minority founders into tech. Find her and others there chatting over tacos and margaritas.

Thiers holds court at Celeste, a swanky restaurant and bar just around the corner from 1871, where investors, founders, and food nerds enjoy American fare: grilled cheese, fried chicken, and popcorn sweetbreads.

This article has been updated. 

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From the October 2018 issue of Inc. Magazine