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Wednesday
Mar152006

Chicago and entrepreneurial technology culture

Matt McCall posts Sweet Home Chicago in his 'blog VC Confidential. As a part-time resident of Chicago for the past two years, while putting a technology startup in place, I've had occasion to hear the same jokes, the incredulity of my colleagues in SIlicon Valley, and have also faced the reality of the situation -- it's different here.

Matt refers to Shannon Clark's open letter to Ron May, which raises a couple of points for comparison. Shannon first points to the "think big" mentality of entrepreneurs in the Bay Area. He then refers to the bootstrap companies -- those that launch without benefit of significant investment. Perhaps one of the most telling issues he raises is the "network effect" and how personal contacts are generous with their time, their willingness to share ideas, and the follow through when making appropriate introductions.

My take is that it's harder to start an entrepreneurial technology company here in Chicago for two reasons (among others), and these two are about the people or, perhaps, the local culture.

First is what I would call the "risk profile." The rank and file employee of a technology startup is an optimist and a risk taker. He or she is willing to take a cut in salary, or at least an increased level of risk in job security. In exchange, this person gets the excitement and comraderie of a startup, the reward of having a bigger relative role in the outcome of the company, and potentially an economic reward from equity in the company when it becomes liquid. But it all seems to come down to the pleasure of seeing something built. It's the pride of repeatedly succeeding at tasks that others considered impossible. There's a joy involved in tech startups that's truly recognizable.

I've personally experienced the booms as well as the busts that are endemic to Silicon Valley. (Notice the plural... I can remember three really BIG boom-bust cycles, as well as several of boomlet-speedbump variety.) In each case, after the "fluff" got blown out of the area, the folks who remained were undaunted. As long as there were sufficient supplies of caffeine, inexpensive takeout food, reasonably reliable internet service, and a workstation, they lived off their credit cards, telling anyone who asked that "... there's no BETTER time to start a company. I've been able to round up incredible talent. They're willing to work nights and off-hours, or just throw in with me until their gas guage or bank balance hits the red zone near 'E'."

Many of the people with whom I've spoken during employment interviews over the past two years in Chicagoland have a story relating to an entrepreneurial startup during the last boom along the Route 80 corridor. They're still traumatized by the stunning failure of so many high fliers. When it comes to the job offer, discussions of stock options are met with the rolling of eyes, and a quick change of subject. Are there people with the right risk profile in Chicagoland? Absolutely!! But, far fewer than in the Gold Rush country. And they're MUCH harder to find or seek out. That gets to my second observation.

The norm in Chicago seems rarely to include the networking I know in Silicon Valley. There aren't the same venues where folks meet or can count on running into someone interesting with whom to strike up a conversation. I applaud the efforts of organizations like the Illinois I.T. Association. I consider the leadership and the members to be doing a tremendous job. But, it's still a venue for the CxOs, the bankers and the investors. Entrepreneurial technology companies live and die on the experienced managers and the younger, adventurous employees. I don't know where in Chicago these groups gather to reinforce one another, swap ideas, and let one another know about the new company that's looking to change the world.

Chicago has some first rate technology venture capital firms. I know many of them. We've been lucky enough to have them participate in our company. They're up-to-date, interested and ready to participate in entrepreneurial ventures. Yet, if you look at their portfolios, they've been unsuccessful as a group in finding (and funding) very many local firms. These are numbers that reflect the reality of the situation in Chicago.


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    telematica - Telematique, Water & Fire - Chicago and entrepreneurial technology culture

Reader Comments (3)

Rich,Great way to frame the issue. Two of the topics I plan to write about will be about networking (let a thousand flowers bloom) and why VC/starting a business is harder here (to your point...lack of connectivity/visibility). Of course, if you happen to be the #1 player in a hot space (say grid computing), the world will eventually beat down your doors!
Mar 16, 2006 at 1:49PM | Unregistered CommenterMatthew McCall
I agree that there does seem to be a lack of sartups in Chicagoland. I will be looking for a new starup to call my own after my present position at the current startup I am at is eliminated in one form or another. I am starting my search now and besides 37Signals and Feedburner I am at a loss of where to look. I think that startups are overlooking the financial benefit of Chicago. The main financial benfit being housing costs. I can still get a small older house for a resonable price and there are a lot of Condo conversions that are not bad either. I am not ready to go back to a large company, which starup will I go to next?



Mar 23, 2006 at 10:01AM | Unregistered CommenterTom
This was an interesting read, Rich. In the brief time that I lived in Chicago, I worked at an ad agency. I knew very few people that made more than 60-70k annually there -- yet they had all been there for 10 or more years. It was also clear that promotions were almost entirely based on seniority.

In my last 7 years in San Francisco, most of the people I know make 2-3x more ... yet most of them have also held at least 3-4 different jobs in the time that I've known them. And I've seen that promotions are pretty consistently based on talent and output, with age regarded as an arbitrary # (and sometimes even a negative quality).

I don't know enough about Chicago to say anything conclusively ... but interesting.
Apr 7, 2006 at 12:29AM | Unregistered CommenterTravis Van

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