One of the top questions for every start-up and entrepreneur is, “Where am I going to get my funding?” After all, having a great product is one thing, but bringing that product to market, attracting a customer base, and growing the company to keep up with demand all require infusion of capital. Of course, there are the traditional routes, from private equity, venture capital and angel investors, as well as loans from banks and credit unions. But as of this year in Illinois, there is another route for emerging companies to get the resources they need to propel themselves toward long-lasting success, and that new avenue is crowdfunding.

Crowdfunding, which involves raising many small amounts of money from a large number of people (typically via an Internet platform) to support a project or venture, has been applied in a non-equity capacity for some time. Sites like Kickstarter and Indiegogo have built their brands on connecting artists and innovators with a public willing to part ways with their money for a non-equity reward, whether that be a version of the product being produced or a t-shirt. Equity crowdfunding, however, takes this proven concept and provides backers with actual equity in the company seeking financial support. The practice of equity crowdfunding has become increasingly appealing to emerging technology companies and for real estate investment.

While technically Illinois has allowed intrastate crowdfunding since January 2016, a number of administrative requirements delayed the actual application of the law until 2017. That said, the Illinois intrastate crowdfunding law is now active.

Illinois Crowdfunding Resources

Anthony Zeoli speaking at 1871

Freeborn Partner Anthony “Tony” Zeoli is a prominent figure in the equity crowdfunding community, particularly in Illinois. Tony is the author of the Illinois Intrastate Crowdfunding Exemption and has built a reputation as a strong advocate for equity crowdfunding in Illinois. Here are some resources Tony has put together about Illinois’ equity crowdfunding law.

While intrastate crowdfunding in Illinois is a viable way to raise capital, growing companies should be aware that there are some limitations. Specifically, Illinois companies are currently capped at raising up to $4 million per year from crowdfunding, whether through debt or equity offerings. That said, this is still a generous allowance compared to other intrastate equity crowdfunding caps, and it far exceeds the $1 million cap set on the federal level.

If you are an employer or other entity that is using the biometric information of your employees, customers or others, such as fingerprint or retina scans, for purposes such as timekeeping, computer login, or customer identification, you could be the target of a class action lawsuit based on Illinois’ Biometric Identification Privacy Act (“BIPA”) unless you have appropriate signed releases and a policy in place governing the storage, retention, and destruction of the biometric information.

What Is BIPA?

Adopted by Illinois in 2008, the BIPA regulates the collection, use, safeguarding, handling, storage, retention, and destruction of biometric identifiers and biometric information by private entities. “Biometric identifiers” are defined as “a retina or iris scan, fingerprint, voiceprint, or scan of hand or face geometry.” Biometric identifiers do not include: writing samples, written signatures, photographs, human biological samples used for scientific testing or screening, demographic data, tattoo descriptions, or physical descriptions such as height, weight, hair color, or eye color. “Biometric information” means any information – regardless of how it is captured, converted, stored, or shared – based on an individual’s biometric identifier used to identify an individual.

The BIPA provides that no entity may collect, capture, purchase, receive through trade, or otherwise obtain a person’s biometric identifier or biometric information unless it first:

  1. Informs the subject in writing that the information is being stored;
  2. Informs the subject about “the specific purpose and length” of the use; and,
  3. Receives express written authorization to use the information. For employers, the release can be conditioned on continued employment.

The BIPA also requires entities storing biometric identifiers or biometric information to have a written policy establishing a retention schedule and guidelines for permanently destroying the identifiers and information when the initial purpose for collecting or obtaining them has been satisfied or within three years of the individual’s last interaction with the entity, whichever occurs first.

Additionally, entities in possession of biometric identifiers or biometric information must store, transmit, and protect them from disclosure using a reasonable standard of care based on the entity’s industry using the same or more protective manner as used by the entity to store, transmit, and protect other confidential and sensitive information. Further, no entity in possession of a biometric identifier or biometric information may sell, lease, trade, or otherwise profit from the identifier or information.

Which States Have Regulated Biometric Privacy?

Illinois’ BIPA was the first statute regulating the use of biometric information. Texas has a similar statute regulating biometric privacy, and other states – namely, Alaska, Connecticut, Montana, New Hampshire, and Washington – are considering similar legislation. Illinois’ BIPA, however, is the only statute allowing private citizens to bring suits for violations of the act. Under the BIPA, an individual can recover $1,000 for each unintentional violation and $5,000 for each intentional or reckless violation, or actual damages, whichever are greater. Attorneys’ fees are also recoverable.

While Illinois’ BIPA has been in effect since 2008, not many cases were brought based on the act until recently when it garnered attention from plaintiff’s class action attorneys. In the past couple of years, class action cases have been filed against grocery store Mariano’s related to employee timeclocks, against education/daycare provider Crème de la Crème related to authorizations to pick up children, and against tech company behemoths such as Facebook, Google, Snapchat, and Shutterfly regarding facial recognition technologies.

The first reported settlement under a BIPA case was reached at the end of 2016 when L.A. Tan agreed to a $1.5 million payment. This class action alleged that L.A. Tan used fingerprint scans to identify its customers in a membership database without obtaining their consent.

How Have Courts Ruled on the BIPA?

Courts have reached opposite results as to whether a plaintiff must show damages in order to have standing to bring a claim under Illinois’ BIPA.

McCullough v. Smarte Carte, Inc. was a class action suit filed in Illinois federal court alleging that Smarte Carte violated Illinois’ BIPA by collecting fingerprints of consumers for rental electronic lockers, luggage carts, and the like without consent. Smarte Carte argued that the plaintiffs lacked standing to bring the claims based on a mere procedural violation of the BIPA without the plaintiffs suffering any actual damages. The court agreed and dismissed the case asking, “How can there be an injury from the lack of advance consent to retain the fingerprint data beyond the rental period if there is no allegation that the information was disclosed or at risk of disclosure?”

In January 2017, a New York federal court reached a similar holding in Vigil v. Take-Two Interactive Software, Inc., a class action suit under Illinois’ BIPA, which alleged that videogame distributor Take-Two did not get consent from players of a video game that allowed players to create avatars from a scan of their face. In dismissing the case, the New York court held that the plaintiff only alleged a bare procedural violation of the Illinois act without demonstrating any harm.

An Illinois state court reached a different result, however, in Sekura v Krishna Schaumberg Tan, Inc. Like the L.A. Tan case, the defendant operated a tanning salon and collected fingerprints of members for identification purposes. As opposed to the courts in the Take-Two and Smarte Carte cases, the Illinois state court held in February 2017 that actual damages need not be shown and  refused to dismiss the case, which is still pending.

Complying with BIPA

As the use of biometric identifiers expands, more and more states are likely to enact statutes similar to Illinois’ BIPA regulating the use of biometric information. It is clear that, if you collect fingerprints or other biometric information from your employees, customers, or others, you need to comply with Illinois’ BIPA and other similar laws by obtaining appropriate consents and by creating and adhering to policies regarding the storage, retention, and destruction of such information.

If you require assistance in creating an appropriate consent form and/or a policy compliant with biometric privacy laws, contact Andrew L. Goldstein, at

A cryptocurrency is a digital asset designed to work as a medium of exchange. Cryptocurrencies use techniques of cryptography – or code-breaking – to generate units of currency and then to secure transactions. Cryptocurrencies are created and managed entirely separate from the central banking system, raising questions about regulation, legality, and the potential for fraud and other abuses.

The first decentralized cryptocurrency – and still the most well-known today – is Bitcoin. Many others have sprung up as well, including Ethereum (known as the first viable alternative to BitCoin), XRP (a cryptocurrency aimed at enabling real-time global payments among traditional financial institutions such as banks and payment providers), and PotCoin (a cryptocurrency to service the legalized cannabis industry).

For most businesses, the difficulty with cryptocurrency is the inability to use it. Under most circumstances, you still have to convert it into an established currency to complete a transaction. For investors and those interested in creating their own cryptocurrencies, they’re interested in understanding whether cryptocurrency is treated as a security and compliance with the Securities Act. They’re also interested in knowing how to use it for traditional transactions such as using it as collateral for loans, and they want to understand how to perfect taking a security interest in the cryptocurrency so that it can be accessed in, for instance, a default.

As the popularity of cryptocurrency grows, legislation will be changing to cover specific legal questions, and litigation will sort out many ambiguities.  In some instances, related technologies also will be applied to solve problems such as Bitcoin’s use of blockchain technology to create a secure public ledger potentially authenticating transactions. In the meantime, companies that are looking to use cryptocurrency as a means of accepting or making payments, investors who are looking to invest in cryptocurrency as a digital asset, and entrepreneurs looking to make their own cryptocurrencies would be wise to work with forward-thinking attorneys who can partner with them to navigate this nebulous area of law.

For entrepreneurs and start-ups, it seems the search for capital is never finished, whether that means turning to friends and family for money or leveraging technology for crowdfunding. In Illinois, there is a significant amount of capital – about $220 million – that is available solely to Illinois businesses, particularly those in the high-tech space. As a way to promote business innovation, the Illinois government formed the Illinois Growth and Innovation Fund (ILGIF), which in essence serves as a pool of money that is invested in such a way as to “attract, assist and retain quality technology businesses in Illinois,” according to the ILGIF website.

How Does the ILGIF Work? 

As stated by ILGIF, the program’s goals are to:

  • Deliver a strong investment performance for Illinois
  • Drive economic development for Illinois
  • Foster a more connected, inclusive and engaged entrepreneurial community in Illinois

That said, start-up companies cannot access funds directly from the state. Rather the state, in a public bidding process, selected 50 South Capital Advisors to serve as the ILGIF’s program administrator. 50 South Capital is tasked with doling out funds to various managers, who will then make the critical decision of which entities to invest in.

“[T]his is a $220 million mandate that’s coming from the state treasurer’s investment portfolio that we’re investing over three years in a diversified portfolio of about 25 to 30 different managers that are based here in Illinois,” said Chris McCrory, vice president of 50 South Capital. His remarks were made at the 2017 Incubate Illinois Conference. “And so our job is to select those managers, identify which ones are the best ones to ultimately create jobs and generate innovation and technology here in Illinois.”




McCrory added that, for private equity and venture capital companies, getting access to ILGIF funds is not an easy task. The investment company must be based in Illinois, meaning it must have an office as well as a senior investment professional based in the state. They also must have a track record of investing in Illinois-based companies.

In total, the ILGIF anticipate investing in 25 to 30 funds, with commitments ranging between $2.5 and $15 million per fund. The minimum fund size should be $10 million at the time of final closing. Investment managers must be committed to diversity among their own staff as well as their portfolio companies. No more than 15 percent of the ILGIF’s total investment capital will be given to a single fund. It will seek to invest in Small Business Investment Companies, which is defined as a privately owned investment company licensed by the Small Business Administration.

What Is the ILGIF’s Investment Strategy?    

Not all money earmarked for the ILGIF will go to venture capital companies for investment. A significant portion has been allocated for other purposes.

“From a portfolio construction standpoint, about 50 percent of the capital, up to 60 percent, will be invested in true venture capital firms doing seeds, series A- and series B-type investments. The remainder will be…middle market buyout and credit firms,” McCrory said.

According to the ILGIF website, the fund’s investment diversification strategy includes 50 venture capital firms, 30 growth/buyout firms, 10 turnaround firms and 10 private credit firms.

“There’s a lot of growth going on in the middle market and by all; it’s not just venture capital. And actually, this is the second iteration of the ILGIF program; the first one was back in 2002…The number of jobs created through that, which was invested in both venture capital and buyout firms, was outstanding. And so, we’re not about just cutting costs and tracking value that way; this is about investing in companies, growing those companies, and making them more efficient,” McCrory said.

For more information about the ILGIF, visit

“When’s the last time you were in a bank? Do you want to go to a bank?”

This question was posed by George Vukotich, co-founder of FinTank, a fintech-focused organization that serves Chicago’s technology and start-up communities. His remarks were part of a broader panel conversation on Chicago’s booming fintech scene that took place at the 2017 Incubate Illinois Conference.

“People don’t want to [go to a bank] anymore. Lifestyle has changed, and technology has allowed us to do things differently,” Vukotich continued. His comments reflect a broader trend that affects not just the relationship between financial institutions and consumers but interactions within the B2B community as well. As technology continues to enable companies to conduct business in new and more efficient ways, fintech (which is the abbreviated term used to describe innovations under the umbrella of financial technology) is a fast-growing area for forward-thinking entrepreneurs as well as established companies that prioritize investment in in-house research and development.

“[I] think the technology’s become an enabler for individuals, changing lifestyles and demands of people,” Vukotich said. “Things like peer-to-peer lending, alternative currencies. You hear about Bitcoin…[B]ut I think the key is that the technology has become an enabler to change things.”



The Growth of Fintech  

From peer-to-peer lending to online banking, the fintech industry is a rapidly growing area for technology investment. In the first quarter of 2017 alone, U.S. venture capital-backed fintech start-ups raised $1.1 billion across 90 deals, according to CBInsights Global Fintech Report. The only region to outdo the U.S. during this same period was Asia, which reported for the same group investment of $2.7 billion across 226 deals.

While incumbent financial institutions are certainly part of the fintech mix, the industry appears to believe that the major disruptions will likely come from enterprising outsiders. According  to PricewaterhouseCoopers 2017 Global Fintech Report, respondents felt the industry is most likely to be disrupted by start-ups, with 75 percent predicting start-ups will be the most disruptive players over the next five years. This realization is one that is picking up steam, with 82 percent of North American respondents to the aforementioned report citing that “standalone fintech companies” pose a risk to part of their business within the next five years. That is an increase of 13 percentage points from when the same question was asked in 2016.

Fintech Technologies  

There exists a wide range of technologies that fall under the definition of fintech, and each is seeing significant growth. One such technology is artificial intelligence, which, according to the PricewaterhouseCoopers 2017 Global Fintech Report, 30 percent of large financial institutions are investing in. For example, another factoid from a separate PricewaterhouseCoopers report, projects that, by 2020, AI will automate a considerable amount of underwriting. Note that because the sector is still new, exact parameters for what falls within the confines of fintech remain blurred with other technology areas, specifically regulation technology (regtech) and insurance technology (insuretech).

Mobile payments are another rapidly growing area of fintech, with TechCrunch reporting that there will be an estimated $60 billion worth of payments made on mobile platforms in 2017. The site also predicts that, by 2020, 90 percent of smartphone users will have made a mobile payment, which serves to underscore just how commonplace this fintech will be within a very short time.

Blockchain is another technology that often comes into play in the fintech space. Blockchain is a continuously growing list of records that are linked and secured using cryptography. It is an established technology employed in the use of cryptocurrency, though it is not exclusive to that area. According to the PricewaterhouseCoopers 2017 Global Fintech Report, 77 percent of financial services incumbents surveyed expect to adopt blockchain technology as part of an in-production system or process by 2020.

Fintech in Chicago

With access to incumbent financial institutions, large volumes of critical data, excellent universities and start-up resources, Chicago is poised to become a significant player in the fintech space. According to a report published by Deloitte in April 2017, Chicago is the epicenter for fintech activity in the Midwest, representing more than 20,000 financial institutions. Over six percent of the Chicago workforce is focused on the financial ecosystem.

“[W]hat’s interesting about the fintech space…in Chicago is there are so many great incumbent players from the financial services industry here who know they have a mandate to grow and innovate,” said Colleen Wilson, founder and CEO of Collaborate Chicago and co-chair of FinTEx Women in Fintech Group. “What worked to get those companies to the point that they were at in the last five to 10 years is not what’s going to take them for the next to 50 to 100 years. The marketplace has changed, the consumer has also changed, and the regulations have changed dramatically.”

When it comes to venture capital investment internationally, Chicago just barely misses the top 10, coming in at number 11 according to statistics compiled by the Martin Prosperity Institute, an economic think tank that operates out of the University of Toronto’s Rotman School of Management. (The report was published in January 2016 and used data from 2012, the most recent data available on global venture capital investment at that time.) As to be expected, San Francisco took the top spot, claiming 15.4 percent of the total share of global venture capital investment, followed by San Jose, Boston and New York. Chicago’s total percentage of global venture capital investment was a respectable 1.6 percent, putting it on par with Seattle, Toronto and Austin.

Chicago Tech Companies

A solid second-tier tech region, the Chicagoland area has more than 6,500 tech companies comprising almost 275,000 workers, if you count the combined head count of technology companies and IT departments of corporations. Moving Chicago up that list is top priority for much of the local tech community, according to Fred Hoch, executive chairman of the Illinois Technology Association and founder and general partner of TechNexus. He and other prominent members of Chicago’s technology community are working hard to connect the city’s resources – including entrepreneurs, incubators, capital sources, corporations and universities – to transform the Windy City into a top tech contender.

One way Hoch believes Chicago can move up the list of top start-up cities is by focusing on its greatest assets and differentiators. For example, whereas Silicon Valley is known for producing consumer-oriented offerings, Chicago is much more of a B2B city. Sectors such as healthcare, logistics, advertising, real estate and finance all represent major opportunities for enterprising start-ups. As Hoch said in his opening keynote at this year’s Incubate Illinois conference, there are 36 Fortune 500 companies in and around Illinois, and there are approximately 1,000 corporations that have $100 million to $1.5 billion in revenue. While not all these companies are technology related, they are all susceptible to technological disruption. For tech start-ups seeking initial customers, this represents a significant opportunity.



Connecting Technology Education with Start-Up Companies 

Another avenue to propelling Chicago forward is its access top university programs, including the business programs at Northwestern University and the prestigious University of Chicago Booth School of Business, which houses the Polsky Center for Entrepreneurship and Innovation. In addition, the University of Illinois, located downstate in Urbana-Champagne, boasts one of the top computer science programs in the country. In fact, according to Hoch, there are 29 computer science programs in the Chicagoland area alone. While the university community was initially slow to participate in the local technology scene, that has changed. Over the last several years alone, more than 800 university-led start-ups were created locally.



How fast and how big Chicago’s high-tech start-up community will grow remains to be seen. But given the community’s access to corporate customers and top-level university talent and support, it would appear that moving on up is just a matter of time.

First, for those in attendance at the second annual Incubate Illinois Conference, held on July 12, thank you. You made the event a tremendous success. We set out to develop a forum where the greatest thought leaders in Chicago’s start-up and technology communities could come together to share information, present ideas and network in order to build a brighter future for all involved, as well as the community at large. As introductory keynote speaker Fred Hoch, executive chairman of the Illinois Technology Association and founder and general partner of TechNexus said, Chicago is currently at the top of the second tier of the tech industry globally. Our goal is to push us up to the top of the first tier, and we believe events like Incubate Illinois, and the generous exchange of knowledge that it facilitates, will help get us there.

Of course, you technologists, entrepreneurs and investors are busy people, so it’s reasonable to say that taking time out of your schedules to attend these kinds of events is not always possible. The good thing is that we live in a perpetually connected society, so accessing information and resources on the go is easier than ever. That is why we are pleased to announce that we intend to regularly update this site, Incubate Illinois, with posts covering tech news and best practices related to the Chicago, Illinois and greater Midwest technology communities. We plan to enhance much of this content with video from this year’s Incubate Illinois Conference because we think there is incredible value in hearing information directly from a variety of innovators and disruptors in the technology field.

Finally, there were some very impressive and motivating speakers at this year’s conference who shared with us a number of great resources technologists and entrepreneurs can consider at varying stages of their start-up journeys. The following are a few of the resources mentioned at the conference.

Freeborn & Peters LLP is pleased to announce the Second Annual Incubate Illinois Conference, which will be held July 12 in the mezzanine conference space at the firm’s Chicago office at 311 South Wacker Drive. While the conference will address the needs of entrepreneurs, investors and incubators across many different sectors, this year’s event will have a particular focus on financial technology – or “FinTech.”

Scheduled speakers at the 2017 Incubate Illinois Conference include the leaders of three leading Chicago area incubators:

  • Jason Henrichs, Co-Founder of Currency, and Co-Founder of FinTEx Chicago, a FinTech industry association
  • E.J. Reedy, Director of the Polsky Center for Entrepreneurship and Innovation, The University of Chicago Booth School of Business
  • George Vukotich, Co-Founder of FinTank

The conference will also share details of key resources available to entrepreneurs in Chicago and across Illinois, including incubation space and access to venture capital, including crowdfunding.

Click here to view the conference schedule and to register.