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New funding sources emerge for Chicago-area tech startups

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State of Illinois, group of industry leaders unveil separate investment initiatives

The local technology sector gained two new sources of high-profile funding on Tuesday, with both the state of Illinois and a group of industry leaders unveiling investment initiatives for early-stage companies.

The two announcements were unrelated but speak to the growing amount of entrepreneurial activity in the Chicago area. According to data collected by BuiltInChicago.org, an online community for members of the local startup scene, 124 digital startups were launched in the area in 2011, compared with 82 in 2010. Funding is also on the rise when measured by money raised and the number of companies attracting investment.

The state is joining an increasing pool of local investors eager to tap into young companies. On Tuesday, Gov. Pat Quinn announced a $575,000 investment in two local startups from the Invest Illinois Venture Fund, a new program that is, in turn, part of a $78 million initiative called Advantage Illinois. The recipients were Chicago-based Buzz Referrals, which helps companies use social media to reach friends of existing customers, and Evanston-based biopharmaceutical firm AuraSense Therapeutics.

The funding for Advantage Illinois, which seeks to help small businesses, came from an initiative within the federal Small Business Jobs Act signed into law in September 2010.

“They’re very young companies, and that’s why it’s so important for job creation,” Quinn said at a press conference.

The second investment announcement came from Matt Moog, chief executive of Viewpoints Network and the founder of BuiltInChicago.org. Moog has launched the FireStarter Fund, a $5.7 million pool composed of contributions from more than 40 founders and CEOs of digital technology companies.

Brian Hand, co-founder of Timelines, is also a co-founder of the FireStarter Fund. Moog and Hand will manage the fund along with Troy Henikoff and Sam Yagan, the founders of Chicago-based incubator Excelerate Labs.

The investors involved in FireStarter are a veritable who’s who of the Chicago tech scene and include Morningstar CEO Joe Mansueto, venture capitalist J.B. Pritzker and Kevin Willer of the Chicagoland Entrepreneurial Center. The fund will make investments between $25,000 and $500,000, with the typical amount between $150,000 and $300,000.

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