28 Nov Chicago's OCA Ventures raises $50.1 million for new technology
Chicago, Ill. – While things are tough all over, recessions are not necessarily bad times to start or fund technology companies.
Microsoft, Apple, and Oracle were all founded during dicey economic times in the 1970s. Still, inflation and volatile energy prices didn’t prevent those pioneering companies from eventually cashing in on their innovations.
As tomorrow’s breakthrough companies struggle to obtain bank loans today, there become more opportunities for venture capital firms to buy into their development.
“The constrained credit market is making available to us good, early-stage entrepreneurial companies that otherwise would be financed via working capital from the banks,” said OCA Ventures CEO and managing partner Jim Dugan.
Early-stage targets
The Chicago-based OCA Ventures recently had a final close of $50.1 million for its second venture capital fund. The firm, which invests between $500,000 and $2 million in initial deals and up to $5 million throughout the life of its portfolio companies, raised money from several individual and institutional investors, including the Illinois Technology Development Fund and the Iowa Capital Investment Corp.
While OCA has a national investment focus, nearly a third of its companies are based in the Chicago area. Dugan said OCA will continue to focus on companies in the technology, financial services, and for-profit education industries. Among the firm’s local portfolio companies are Chicago-based data storage provider Cleversafe; Lisle, Ill.-based grid computing company Univa UD; and financial technology company Cohesive Flexible Technologies, which is based in downtown Chicago.
OCA was founded a decade ago by partners from derivatives trading firm O’Connor & Associates. Accordingly, “financial tech” companies developing technologies that make financial trading faster and more efficient represent a particular sweet spot for the firm.
A byproduct of the subprime crises will be the emergence of new electronic exchange platforms such as the credit default clearinghouse proposed by the CME Group and Citadel Investment Group. Dugan says OCA is well positioned to identify and back early-stage companies that develop innovative applications in this growing space.
“We have an increase in deal flow with respect to financial technology and financial trading companies that are focusing on over-the-counter products, fair market value accounting, dark pools of liquidity, and membership-oriented trading products,” Dugan said.
Perhaps Chicago’s cratered financial markets will offer opportunity and wealth for stakeholders who innovate ways out of the ditch.
More options with trading quotient
It may be “game over” for some retail investors that don’t have the stomach or savings to continue to play the markets. More entrepreneurial individual investors, however, could just ditch their high-fee brokers and roll the dice on their own transactions online.
In an effort to capture this new market, Chicago-based retail broker optionsXpress in Oct. 2008 launched its Trading Quotient online quiz and social networking competition. Added optionsXpress CEO David Fisher: “We’re going for complete newbies who have not invested at all or only through brokerages.”
The quiz, which can be taken online, measures one’s speed, interest, and aptitude in financial trading. The entertainment-driven educational tool provides performance feedback and allows players to compare their scores with others via blogs and online networks including Facebook and MySpace.
“You can send scores to your friends and make it fun and engaging,” Fisher said. “The purpose is to whet people’s appetite.”
OptionsXpress, which was founded in Feb. 2000, pioneered the practice of trading options and other brokerage products online for retail investors. The majority of the company’s 300 employees are based at its 311 W. Monroe headquarters. Fisher, who previously served as CFO of optionsXpress and before that Potbelly Sandwich Works, in 2007 replaced company co-founder David Kalt as CEO.
This article previously appeared in MidwestBusiness.com, and was reprinted with its permission. Content from this article, which first appeared on Monday in the weekly Tech Matterscolumn by Brad Spirrison in the Chicago Sun-Times, is being published with permission.
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