Chicago is known for its cultural exports. Deep dish. Hot dogs. Improv. House music.
In startupland, Chicago is America’s marketplace factory — home to companies that have built robust two-sided businesses that have defined the city’s innovation economy. Companies like Orbitz, Sittercity, Groupon and Grubhub pioneered marketplaces in their respective industries, and set the stage for a wave of marketplace startups to follow.
But what’s interesting about Chicago’s new-wave marketplace upstarts isn’t just that they’re connecting buyers and sellers. It’s the niche, untapped, dare I say weird industries they’re operating in.
Let’s take Cameo, for example. One of Chicago’s breakout startup successes that rode the Covid rocketship, Cameo invented an entirely new marketplace category: celebrity shoutouts. An industry previously non-existent was suddenly valued at $1 billion and tapped into the cultural zeitgeist.
SpotHero is another. Founded in 2011, SpotHero made it possible to book parking reservations in advance. The pre-booked, price-transparent parking process we all take for granted today was previously a gamble for anyone who showed up to the ballpark, concert, or your suburban office commute without knowing the price of parking. You paid whatever the sign told you to pay, and went on your way.
SpotHero earns its spot on the Chicago marketplace Mount Rushmore for its 15 years of innovation and grit — surviving the Covid pandemic that saw revenue nearly go to zero — before getting acquired by Uber for $600 million.
Tackling Niche and Under-the-Radar Industries
Today, there are plenty of examples of Chicago startups tackling under-the-radar industries — in some cases inventing entirely new markets that connect buyers and sellers.
- DubClub — a marketplace connecting sports bettors with expert handicappers. DubClub has facilitated tens of millions in payments for sports betting creators and processed over 18 million purchases between bettors and handicappers.
- Unicorn Auctions — a marketplace for rare wine and spirits. It expects to do $100 million in revenue this year.
- Raise — created the largest gift card marketplace. It’s raised over $200 million in venture funding.
- The Players Trunk — a marketplace connecting athletes directly with their fans to purchase certified authentic game worn gear.
- ReloShare — the first hotel live-booking and live-sourcing marketplace for social services. Working to help people in need find safe shelter, the startup ranked No. 2 on last year’s Inc. 5000 with 28,000% three-year growth.
- PartySlate — a marketplace connecting event professionals — venues, caterers, planners — with the people planning to hire them. It has raised around $15 million.
- Rheaply — a marketplace for businesses to share physical assets like furniture, fixtures, equipment, and building materials. It’s raised over $36 million.
- APFusion — a marketplace for salvage yards to sell recycled auto parts that’s raised $13 million.
- Fuel.me — a marketplace for fuel distribution that raised an $18 million Series A.
What is it about Chicago that creates fertile ground for these types of marketplace startups building in untraditional or nascent industries? For one, it’s in our DNA. The city invented the modern marketplace, matching businesses since 1898 when the Chicago Mercantile Exchange started as the Butter and Egg Board. It was a room built for one purpose: bring buyers and sellers together and let the market set a fair price. The Chicago Board of Trade did the same for grain.
Chicago’s VC Culture and Capital DNA
It’s part of the city’s VC DNA, too. Chicago has a capital culture that funds revenue-focused business models. Many Chicago VCs are, by reputation and by what gets funded, business-model-first rather than growth-first. Clear revenue and a path to profitability. A marketplace has more straightforward unit economics than any startup category. It's the kind of company Chicago investors know how to underwrite.
In the age of AI, the humble marketplace doesn’t get the shine compared to their AI-native counterparts. But these marketplaces are more resilient and less impacted by AI because their network effects, and proprietary data are durable moats, according toSonia Nagar, the founder of SNAK Venture Partners, a Chicago VC firm that invests in digital marketplaces.
I asked Nagar what makes the city a home for these types of businesses, and how AI plays a role in two-sided marketplaces today.
"Chicago invented the modern marketplace," she said. "The CME and CBOT were matching buyers and sellers long before anyone called it a platform, and that instinct for liquidity is still in the city's DNA. What's different now is where founders point it: industries that coastal investors overlook, but where there's real money moving and nobody has built the rails."
Chicago’s marketplace dominance is also about the character that shows up in Chicago’s founders. Chicago is a city that solves problems by building the rooms needed to solve them. That instinct, matching people who have something with people who need it, running the numbers until the price is fair, is as Chicago as the stockyards or the grain pits. It’s a combination of ingenuity, creativity and pragmatism, attacking problems everybody else walked past.
Jim Dallke is Director of Communications at TechNexus Venture Collaborative in Chicago. A journalist for more than 15 years, Jim joined TechNexus from the American City Business Journals where he was National Editor of American Inno.
