The State of Chicago Tech
Collectively in our tech community we get excited about new things – from a new incubator to recognition for an individual to a large exit. As a youthful technology community, we haven’t become blasé about the next big thing. This also means we are still formulating our identity. Every week I’m asked to comment on various aspects of the industry and to provide an overview of the ecosystem. Some weeks articles like this one question where we are going as a community.
So where are we going? Here’s my view on Chicago’s technology scene and what our goals should be to truly be considered a tech powerhouse: the content, current status and metrics that will define success for Chicago technology.
The Market
Each community has its own attributes. From Silicon Valley to Austin to Boston to Taipei, success was determined by unique factors that made up that community – with replication impossible. We should stop comparing ourselves to Silicon Valley. Does Derrick Rose try to be Michael Jordan? No, that would be a fool’s errand. He strives to be the best basketball player he can be. He’s still an All Star - but different. So too is Chicago.
As a B2B technology capital, Chicago has five points to the “star” and four fuels that feed that star.
They are as follows:
The Points
Startups: Less than $2M in revenue, less than 3 years old, less than 10 employees. Risk is across the board – product, marketing, business, etc.
Growth-Stage Companies: Product developed, customers – key aspect is scaling and growth – generally $2M to as high as $250M, growing at over 20% year.
Industry Leaders: Over $250M in revenue. Growing at less than 20% year – strong and steady.
Corporations: A broad based set of companies where tech is an enabler not the core business.
Universities: The breeding ground of ideas, talent and the future of tech.
The Fuels
Talent: The personnel fuel that makes companies go.
Capital: The financial fuel that feeds the companies.
Infrastructure: The physical tenants and spiritual ecosystem that bolster a community.
Government: Unlike other cities, Chicago’s government is a key element of the industry.
Chicago owns these fuels – a powerful and unique blend – unlike any other community.
The Current State ... So where are we today?
Startups: The last few years have seen a tremendous increase and great exposure for startups through infrastructure from ITA, TechNexus, 1871, TechStars and Built in Chicago among others. While we’ve had a quantity increase, we are now seeing a focus on quality. How many startups are going to get to the $2M in revenue milestone? How many should be folded into other enterprises? We need to do all we can to help promising startups succeed along with others to fail fast. It’s time to get real.
Growth Stage: Chicago continues to lead the nation with the strongest collection of growth stage companies (1000+). These organizations make money, drive revenue and increase business. They are not always ‘sexy’– or the next big thing – but they are the backbone of Chicago tech. As collaboration and partnership grows locally for selfish and collective reasons, the stronger we’re becoming. As these companies take on more talent and capital, they are beginning to shape Chicago’s national identity.
Industry leaders: A host of companies (Orbitz, Motorola, GroupOn, etc.) have had a leading impact on the national industry. Yet Chicago is missing a true platform company spawning startups built on their technology and redefining the industry. There are several potential contenders right now, but we fall short with success stories.
Corporate Leaders: Chicago has MASSIVE resources in this realm. We have tremendous corporate leaders across a variety of vertical markets including financial services, logistics, advertising/marketing, healthcare, etc. They will not remain leaders if they do not embrace technological reinvention. Can we build on our domain expertise and drive the digitization of business across the entire nation? If we do, we will leapfrog across the industry.
Universities: Bursting with potential. Our universities are demanding and driving deeper connections with the industry. Now with ideas such as UI Labs, the future looks bright for such collaboration. We need a re-investment in the connections between universities and industry. Our success depends on breaking down these barriers.
Talent: Companies continue to clamor for and fall short of people. That is changing with the ITA Fall Challenge, the growing number of tech schools and the Mayor’s efforts through programs such as ThinkChicago. It’s getting easier to add talent on the tech and commercial side at all levels but we need to do much more to attract and breed talent.
Capital: Growing. But a lot more is required. We have been unable to tap completely into the vast store of wealth from 100 years of industrialization that litter the offices of Chicago. That, plus an infusion from outside of Chicago, would be tremendous for our success. More quality startups will lead to deeper capital.
Infrastructure: Chicago is a growing tech hub. From co-working to associations (such as ITA) to community organizations to bike lanes, more and more is coming online. It’s time to foster deeper collaboration with companies and avoid repetitive efforts that increase the signal - but not the noise.
Government: There is no public team in the world more committed to driving technology in the public sector than Chicago’s tech team. It is, for all intents and purposes, the biggest growth-stage tech company in Chicago. We need to support their efforts as that will impact the entire system and community but also help them to make sure they are doing work that drives dough not just show.
Success in the Chicago Technology Community? Make No Small Plans.
How do we build on those attributes? In order for Chicago to be a global tech All Star, we must make no small plans. We must strive for the following goals:
500 Chicago startups a year being created with 100+ moving on to the growth-phase every year.
Over 100 companies acquired every year in Chicago with an additional 20 companies becoming active acquirers from inside and outside Chicago.
Establishment of two platform companies that spawn a dozen startups each.
Chicago becomes the most technological and data advanced government business in the United States.
At least 10 Fortune 5000 companies become full-fledged technology-enabled business service companies.
$3B+ a year in capital going to companies for 5 years running in Illinois.
Over 12M square feet of office space engaged by technology companies and eight buildings downtown with the logos of tech companies shining bright.
Well over 400,000 individuals engaged in the local technology industry
Five $50M+ companies coming out of local universities and staying in Chicago.
Short of the above, we will continue to be, at best, a second city in tech. That is not going to happen if we are smart, collaborative and determined.
Can we get there – absolutely! Will it take work, Yes. Do we have the resources? Yes.
Over the next few months, we will going deeper into each of these and provide data and our view on the screws that need to be turned. I hope it draws ongoing dialogue in the community.
Overall, ITA is committed and determined to accomplishing the above goals and creating the partnerships needed to make that happen. I hope others are too because the opportunity is enormous.