Catapulting to success

<em>Entrepreneurs Vishal Shah (left) and Ryan Leavitt co-founded Catapult Chicago, a community and co-working space for digital startups, alongside Foley & Lardner partners Galen Mason and Chris Cain. They are pictured here at the Catapult offices, which are housed in the same building as Foley.</em> <em>Rena Naltsas</em>
Entrepreneurs Vishal Shah (left) and Ryan Leavitt co-founded Catapult Chicago, a community and co-working space for digital startups, alongside Foley & Lardner partners Galen Mason and Chris Cain. They are pictured here at the Catapult offices, which are housed in the same building as Foley. —Photo by Rena Naltsas
By Kerrie Kennedy
Chicago Lawyer correspondent

It all came together over a Cubs game back in 2010. The tech startup community in Chicago was young and full of momentum, and Ryan Leavitt’s company, LearnCore, was no exception. But with this being the Windy City, not Silicon Valley, there was little in the way of support for later-stage startups like his. Leavitt wanted to do something about that.

“There were so many incredible companies and entrepreneurs out there, my thought was ‘let’s get a place where we can all share ideas and best practices,’” he says.

At the Cubs game, a mutual friend introduced Leavitt to Galen Mason, an attorney who represents emerging companies at Foley & Lardner. Fast forward nine innings and a couple of beers later, and the pair had hatched a plan to launch Catapult Chicago, a collaborative community of digital startups that calls itself “a unique cross between an incubator and a co-working space with a peer- selected community of talented, ambitious, like-minded entrepreneurs.”

Right on the heels of the Great Recession, the timing was perfect for Leavitt, chief revenue officer at LearnCore, to launch Catapult alongside Vishal Shah, co-founder and CEO at LearnCore, and Foley & Lardner partners Mason and Chris Cain.

“Every law firm in Chicago had long-term leases of these huge spaces with 10 to 15 floors,” Leavitt says. “Foley had a half a floor vacant. It was super innovative of them to take that risk (by bringing Catapult in). Galen (Mason) and Chris (Cain) had a real entrepreneurial mindset from the onset.”

The plan was strikingly simple: Foley would supply a furnished workspace complete with WiFi — for a mere $1,100 to $2,200 a month in rent — in addition to a variety of resources so that tech startups already on their way could focus on the task of growing their businesses. In exchange, Foley would, theoretically, be building its client base with what could eventually be one of Chicago’s most attractive markets — young, dynamic technology firms.

For Catapult alum Brian Cody, who co-founded a platform called Scholastica that enables scholarly journals to find and review articles, the opportunity was life-changing.

“We had been looking for an office so we could focus on our customer base and our product, but it’s hard to find small spaces and short leases,” he says, noting most startups don’t want to take on the risk of a long lease.

After finding out about Catapult through a Google search of co-working spaces in Chicago, Cody and his colleagues — former grad students at the University of Chicago — successfully went through the peer review process and spent 16 months at Catapult, starting in October 2013.

“From Day 1, you have your own offices, with furniture and internet, not to mention service providers who essentially offer discounted services,” Cody says. “Everything’s set up so you can focus on scaling your business and not have to deal with administrative issues. Catapult is a really important space to have in Chicago.”

In fact, four years after its official launch, Catapult Chicago says it is still the only nonprofit working space for Chicago startups that has demonstrated business traction.

“As Galen (Mason) and I were working together to build up this practice, it became clear there was a need for startups that were further down the road than just two guys and a laptop,” says Cain, who helps clients at Foley with tech transactions and venture capital financing.

And unlike 1871, a Chicago tech incubator that focuses on young businesses, Catapult is more like an incubator grad school. “Since we only have 12 to 15 companies at one time, it’s more likely that these companies are going to see each other, talk to each other and be more productive,” Cain says, noting Catapult resident companies on average triple their team size by the time they graduate.

To date, 90 percent of Catapult grads are still in business, and 85 percent have raised capital, according to statistics from Catapult’s recent anniversary report. Some of Catapult’s success stories so far include BucketFeet, which makes affordable artist-designed footwear; Shiftgig, which connects hourly workers and businesses; Rithmio, a “wearables” company that makes motion software products; Procured Health, a medical product information system for providers; Rent Like a Champion, which enables college football fans to rent housing during game weekends; Packback, which provides 24-hour e-textbook rentals; and LearnCore, a coaching and training platform designed to help sales reps improve outcomes.

The final three companies have all appeared on the ABC television show “Shark Tank.”

For Jeffrey Eschbach, a current Catapult resident, it is the quality of startups and the minds behind them that makes being at Catapult so attractive.

“These are curated companies — everyone here has passed the ‘idea on the napkin stage,’” says Eschbach, CEO of Page Vault, a technology that allows companies and individuals to capture web pages in way that’s admissible in a court of law. “One of the things I love about Catapult is it now has strong brand recognition in the tech startup world, and they’re very selective about who they let into the space.”

Not all the startup founders at Catapult are geeky millennials fresh out of college or grad school. Cain notes that many of the them “skew older than you’d think.” And not all of the founders are men, either. There’s Amanda Bohl, founder of Supply Vision, which enables supply chain collaboration through on-demand software and technology service. And there’s Joanne Frogge, founder of BidMed, which buys and sells used medical equipment, hospital equipment and hospital supplies.

What they all have in common — besides a good idea and some level of early success — is the desire to interact and form a community with other startups. According to Cain, Catapult’s peer review process ensures the right people come on board, empowering current in-house founders to decide which companies will make innovative additions to the community.

“It’s a little like ‘Survivor,’ except you have to get voted onto the island,” he says.

Once it’s determined a startup meets Catapult’s baseline eligibility requirements, they are invited in to pitch themselves to existing Catapult startups, “Shark Tank”-style.

“We figured who better to pick who might be a good fit for the community?” Cain says.

And fit is an important element, Eschbach says. “When new companies apply to get space to come in, they have to explain why they’d be a good fit for the culture here,” he says. “It’s not just about how a business can benefit, it’s about how they can add something.”

The idea that everyone has something to offer is central to Catapult’s vision. According to Eschbach, this fraternity-like system creates tight bonds between members who count on each other for advice and encouragement — oftentimes over happy hour.

“It is a huge advantage to be able to leverage each other’s experiences and share issues and difficulties,” he says. “We have friendly rivalries. We encourage each other to push hard and succeed. Anytime someone knocks on our doors, we’re there to help.”

The same can be said for Foley, although Cain’s and Mason’s roles are mostly hands-off. Because Catapult is a nonprofit, Foley doesn’t operate it, and Cain says they are careful to maintain that distinction. While Catapult essentially runs itself, someone from Foley is there to check in on a day-to-day basis.

“I basically take them to lunch,” Mason says. “Otherwise, if I go down there, I’m there for three hours.”

Not that he minds.

“When I’m giving advice that’s helping others, I feel it’s the highest and best use of my time,” he says. “I have a slew of kindred notes on my wall from founders thanking me, and that’s the whole point.”

Besides Foley, there are a host of service providers — Wintrust Commercial Banking, Walker Sands Communications, Cognos HR, Plante Moran, Jones Lang LaSalle and Arthur J. Gallagher & Co., to name a few — on hand to offer their expertise to Catapult startups, who likely represent a future stream of business for them.

“It’s not just the co-founders who are backing us up — it’s the providers in HR, commercial banking, IP software, accounting, finance and real estate,” Eschbach says. “These people are experts in the startup world who come in and offer relevant, timely help.”

For Cody, whose startup serves the legal profession, among others, it was especially helpful to have an attorney on hand to consult with.

“These providers really want to help you grow,” he says.

While there’s never an obligation to work with sponsors, it inevitably occurs, and that’s a win-win for everyone, including Foley.

“First and foremost, Catapult helps Foley,” Cain says. “It has undeniably increased our profile and credibility in the Chicago market. On the financial side, it’s certainly resulted in a large uptick of the inbound number of clients we get.”

But the quality of those clients is what makes it so exciting for the Foley attorneys.

“We are all ultimately looking to build relationships with some of the new economy entrepreneurs,” Mason says. “Success begets success, and Catapult becomes kind of a platform.”

A deliberate part of the design of Catapult is its limited duration. After a period of about one to two years, startups are deemed strong enough to leave the nest, and, in fact, often outgrow it.

“Companies come in, take advantage of what we have to offer and then ‘catapult’ out to their own larger spaces,” Cain says.

Like Page Vault, set to “graduate” soon. Eschbach says the company has been with Catapult for a year and a half and will “definitely” be moving out in early 2017. While he will miss the day-to-day camaraderie, Eschbach has no intention of leaving Catapult behind entirely.

“We’ve seen a good cycle of others who leave, and they stay very connected to the community,” he says.

It makes sense that these startups want to stay involved with each other. After all, being able to collaborate with people at the same stage of the startup game is a key ingredient in Catapult’s secret sauce.

“That’s something most lawyers take for granted — the idea that I can just walk next door on a legal issue I’m not entirely sure about and get an answer quickly,” Mason says. “Foley’s unused space was able to give these startups that same kind of power.”

Ultimately, Cain and Mason hope their efforts will help keep tech startups here in Chicago.

“Often, they end up relocating to a market considered more favorable for tech startups, like the West Coast or Boston, so it’s exciting to see people willing to take the risk to stay here and flourish,” Cain says. “Our hope is that some of that wealth stays here, creating sort of a virtuous cycle, an ecosystem of people who have made it repeatedly and stay around to mentor and network. We need that fold over of exits and reinvestments.”

So far, that seems to be happening, at least at Catapult. According to its annual report, 50 percent of Catapult companies have repeat startup founders.

“Everything we’re doing is premised on the idea that tech businesses will be an increasingly important part of business in the Midwest,” Mason says. “I’d say 70 percent of the work we do now at Foley is coming from someone who’s gone out and made it and is now becoming what would be a traditional big law firm client. We are literally building relationships with the future leaders of Chicago.”

While LearnCore graduated from Catapult some time ago, Leavitt remains an active board member, attending meetings there several times a week.

“There are amazing entrepreneurs who have come through Catapult and are now advisers,” he says. “These are the people who are going to be building the largest companies in Chicago, and this is their network.”