Chicago co-working, startup hub 1871 will absorb tech incubator Catapult

Catapult, like 1871, was founded in 2012 in an effort by Chicago entrepreneurs to improve the odds of tech startups succeeding by offering affordable space downtown in proximity to peers. In addition to office space, both organizations provided mentoring, educational and networking events to entrepreneurs.

At their core, however, both 1871 and Catapult are heavily dependent on real estate offered on a short-term basis to unproven companies. The coronavirus has dealt a severe blow to commercial real estate broadly, with most workers in technology doing their jobs from home. Co-working spaces have been bit particularly hard.

1871 is operated by the Chicagoland Entrepreneurial Center, a not-for-profit that also has a fairly large base of corporate tenants and donors.

About half of the 56 private offices at 1871 are rented by non-startups, including corporate tenants such as universities, venture capital funds and companies that have long-term leases.

Of the roughly 1,200 members and tenants who have access to the 125,000 square feet at the Merchandise Mart, only 20 to 30 people come in each day, not unlike vast swaths of office space downtown.

CEO Betsy Ziegler says revenue from tenant rent is down about 35 percent because of COVID-19, but she expects 1871 will break even for the year. It has added more virtual programming and attracted more members from outside Chicago. 

Catapult will vacate 12,500 square feet at 227 W. Monroe St. on March 31. 1871 will adopt Catapult’s program for helping companies that have gotten beyond the earliest stages to grow their sales and begin to scale up. Catapult had a unique peer-driven approach in which existing members voted to accept new companies. Startups formed at 1871 often moved to Catapult as they started to grow.

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Ziegler says the pandemic has pushed the organization to focus even more heavily on educational and mentoring programming. 1871 already had been looking to reduce its reliance on real estate before COVID-19 hit.

Prior to the pandemic, tenant rent accounted for about 40 percent of 1871’s roughly $10 million in annual revenue, with another 30 percent from membership dues and the rest coming from a combination of events, corporate partnerships and fundraising.

“Pre-COVID, we said we were going to go virtual by July of 2020,” Ziegler said. “We have a new member in Nigeria, several from Venezuela, as well as members in Texas and Florida. It’s maybe 5 percent but growing.

“We’re having more conversations with community leaders around the globe and domestically about, how do we ride the tailwind of COVID and our ability to deliver our curriculum, no matter where you are around the world? We’re not there yet. We want it to be that 1871 is an experience, not just a place.” 


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