IVCA Article: Inside Look at the Growth in 2013 of the Chicago Tech Scene

Recently, the reviews for the continuing growth and the start-ups for the Chicago technology industry has been stellar. “Chicago’s Exploding Tech Startup Scene: Second to None” (Rekehah Iliff, Huffington Post), “Chicago tech companies raised more than $265 million in the third quarter of 2013...it was the best quarter – up from $23 million in investment for the same period last year.” (John Carpenter, Blue Sky Innovation) and “Chicago, the traditional center of industrial America, [had] more high-tech jobs than any other metropolis in the United States.” (ABC News). The year 2013 is shaping up to be a transformative period for the burgeoning Windy City tech scene.

In search of the inside scoop on this development, the IVCA visited “1871,” the digital hub located in the historic Merchandise Mart in Chicago. The concept of this imprint within the Mart is to provide space for start-ups and entrepreneurs. The IVCA spoke to six of these “1871” residents, as they answered three questions about tech in Chicago, as the city wrapped up its annual ‘Chicago Ideas Week.’ 

The six participants were Zack Price – Founder & CEO of ‘Blog into Book,’ Aksh Gupta – Founder & CEO of ‘Occasion,’ Lou Morales – Co-Founder & COO of ‘Optyn,’ Jimmy Odom – Founder & CEO of ‘We Deliver,’ Joshua Karp – Founder & CEO of ‘Kumbuya’ and Lindsey Callahan – Chicago City Manager of ‘Handybook.’

IVCA: What is the most significant sign that Chicago is becoming or has become a leader in technology industry development?

Zack Price: The River North area, adjacent to the Merchandise Mart, is just exploding with digital tech. There are incubators, accelerators and co-working spaces popping up everywhere. ‘1871’ opened 15 months ago, and since then it has just been incredible. It’s a meeting place for everyone associated with digital technology comes together, under one roof, in 50.000 square feet. The next thing you know, I’m meeting folks like myself. I use to work at home, the library, Starbucks, just by myself. Here if somebody is interested in my company, we can talk about it, and the next thing you know we’re doing a project together. That happens all the time.

Aksh Gupta: ‘1871.’ Just look around. It’s right here. It’s become the center of gravity. There is attention to this place and the companies coming out of here – we have put ‘1871’ as part of our company signature and automatically have had people paying attention. Along with this address is the reputation that we are legitimate and are part of the community.

Lou Morales: Beyond ‘1871.’ it’s all those 1871-like groups that are budding up. Founder’s Institute, which is an example incubator, is in their second year here. There are several of these types of places out there, and it doesn’t matter what stage of development you are in for a start-up – even an idea stage – there is certainly a group that you can go to for advice, mentorship or further ideas.

Jimmy Odom: When my peers outside of Chicago. who are also involved in start up communities – for example, in San Francisco –  they are saying to me, ‘Jimmy, have you heard about 1871?’ And when I confirm I’m part of it, they are always wondering what we’re doing in Chicago. They ask me for a tour. They tell me we have it lucky. They say we are blessed because there is nothing similar where they are. That’s a huge sign.

Joshua Karp: The signs are there, but I’m going to be less optimistic about it, probably because I’ve been doing this a long time. The tangible signs are the places – like ‘1871’ – that are encouraging people to form start-ups. So when you see an emerging supply, there must be an assumption that there is a demand. 

What I haven’t seen is evidence that there is more overall direct investment occurring, but there is a loosening of the purse strings among people who are more interested in making early stage investments. But in my case, I’m midway through a Series A, and we did our first close last week, and not one penny has come from inside Chicago. I don’t know if that’s an overall indicator, but that the situation. In the 13 years I’ve been doing this, I think this is best time I’ve seen, but I also think the bar is high in Chicago to raise institutional funds.

Lindsey Callahan: I lived in San Francisco previously, which is a completely different start-up community there. What is exciting about Chicago is that it’s just taking off, and everything is fresh, new and exciting. There are other spaces like ‘1871’ here, and I feel there is many resources to put into start-ups. There is potential, demand and enthusiasm.

IVCA: What support system has emerged within Chicago to make this tech growth possible?

Price: Significantly, Mayor Rahm Emanuel has gotten behind this tech movement. Several hours ago I was presenting at the Mayor’s ‘Think Chicago’ at the Cultural Center, and they brought in students from the University of Illinois-Chicago, Northwestern University, the University of Michigan, the University of Notre Dame, institutions from all around. They came here for a job fair and to meet tech companies like my own, for opportunities and connections. There are 250 companies in development in ‘1871,’ and these companies, as they expand, will be hiring. That’s what the city wants.

Gupta: In my opinion, it’s the universities that have opened up their pool of talent, to get involved in start-ups. I think that is helping the community. The mayor’s support is important, and he visibly supportive – I’ve seen him twice in the last six months.

Morales: The Chicagoland community is extremely responsible and extremely helpful. For example, I’m struggling with the payment provider for the clients that use my service, reconciling with QuickBooks. So I post out and ask if anybody else had a similar problem. I was thinking I’d maybe get one or two response, but a dozen came in. That is just wonderful, and what I enjoy about the support in Chicago. 

Odom: It’s accessibility. Every time we’ve reached out to a thought leader or a business leader directly, we’ve gotten a response. That accessibility is the first thing you need as an entrepreneur, especially having to do with the question of ‘am I building the right thing?’ I can reach out to these leaders, and not only do they respond, I can also get a meeting. That level of access is really important, and super valuable. In association with that, it’s mentorship and advice. One of the closest things to my entrepreneurial heart is my desire to collect and surround myself with the most amazing mentors. Those people giving their time, that’s another big value, to entrepreneurs looking to build something.

Karp: If you had compared Silicon Valley to Chicago, one of the advantages that they’ve had is the sense that everything was possible. And now, right here, people are beginning to believe those same possibilities. That is a tipping point for more success. It’s not necessarily the availability of money – if you have a good business you can raise the money – it is the sense here that people believe they can create something that has value, and they can get the help they need. It becomes a psychological feeling. Chicago has become more self confident about trying – and when people who have the entrepreneurial spirit start believing in themselves and the possibilities – that’s when we’ll see overall success right here.

Callahan: ‘1871’ has been amazing in providing a support system, because I think it’s the people  who are the support system. The environment in which people can interact is awesome, with speakers coming in and fun events where people can gather, network and become friends. And once people become friends, it becomes a more comfortable and easy environment. We’re bouncing ideas off each other, and it’s a great way to learn a lot in a very short time.

IVCA: What can Chicago city leaders and entrepreneurs do beyond just money, to continue this growth?

Price: I was just talking to the staff of ‘1871,’ about how the ability to trade ideas and services with each other enhances our careers and the trajectory of our careers more than the ‘big contract.’ With the initial big contract, you burn through it and its gone. I make a contact here, then meet a network of people, and it leads to one thing after another. The relationships you form here is what takes you to the future, not just today or next month, but I plan on being friends and business associates with this network for decades to come. 

Gupta: This is something I’m passionate about – I look around in Chicago and see what these new start-ups are doing, and they are mostly supporting other businesses. Success stories are many in Chicago – Groupon, GrubHub, Belly – and all these companies that have made money are selling to small businesses. So Chicago is the place where technology companies are selling to small business. None of the coasts are doing that, and I think that city leaders who are getting behind this concept might help accelerate a lot of adoption challenges that B2B companies have.

Morales: They can continue to make it easier for entrepreneurs to get their businesses started. Governor Pat Quinn was here about a month ago on the anniversary of ‘1871,’ and he spoke about how wonderful this was for small businesses. I was thinking, ‘okay, but now I have a bunch of regulations and taxes I have to figure out.’ At those levels, government needs to figure out a way to make that burden less of a burden. Much as the city helps big companies, the small businesses need help as well. Maybe we need a city department to which an entrepreneur can go, to navigate all the regulations. Secondly, we need clients. Is there some way the city could act as a clearing house to connect potential clients with their potential suppliers? This kind of action could be a godsend for small businesses.

Odom: Celebrate the successes. We should do a better job of celebrating our success stories. We need to push our outlets, our outside networks, and talk about the successes of Chicago with them. In social media or news, we need to amplify the voice of the successful company, and that particular win. This benefits the city and the community as a whole.

Karp: They have to put the interests of the person they are trying to help ahead of their own. I think that more and more people around here are doing that, because of the confidence thing I mentioned earlier. I’m approached by entrepreneurs all the time, and I work hard to give them objective, honest advice with no agenda of my own. I think within this environment we are seeing more people doing that. There are tremendous guides and mentors for companies here.

Callahan: Primarily, it’s about keeping people enthusiastic about the growth, and creating opportunities that have lasting value. It’s also about keeping people engaged, because it’s exciting for Chicago to have a more national presence and reputation, and that emergence itself is also exciting.

To learn more about ‘1871,’ click here.