Why Isn't Chicago a Start-Up Hub? (Champaign, Urbana: movers, lawyer, tech jobs)

[Frank the Tank]

I'm a lawyer as opposed to a techie, but I've worked for or with some high-tech companies (both large and small) and it's always baffled me as to why the Chicago area doesn't have a strong start-up culture with respect to technology in the manner of Silicon Valley, Seattle, Boston or even smaller cities such as Austin. I came across this essay by a Silicon Valley entrepreneur that provides a list of ingredients of what he believes creates an environment for tech startups:

How to Be Silicon Valley

This is obviously one person's opinion and I don't necessarily agree with everything he says, but it made me wonder why Chicago has lagged behind in terms of creating new high tech companies, especially when considering the metro area's size and the wealth here. While the presence of the Merc and Board of Trade spawned off tons of start-up financial trading firms to make Chicago a hub in that industry comparable to New York and London, having Motorola, Argonne National Laboratory and Fermilab here hasn't resulted in a similar atmosphere for high tech. It's not as if though we don't have great university communities that produce a lot of computer scientists with Northwestern and the University of Chicago. Plus, the University of Illinois at Urbana-Champaign (Go Illini!) is just down the road and has produced as many founders of high tech successes as any school outside of Stanford (i.e. Netscape, PayPal and YouTube), yet they all went to Silicon Valley as opposed to Chicago. At the same time, there are a lot of wealthy people here who could easily fund start-ups coupled with a lot of young educated college graduates who provide a ready supply of talent.

The reason why I worry about this in a macro sense is that the growth potential of any region's economy in this day and age is highly correlated with how plugged in it is to the high-tech industry. Chicago has done a relatively good job of attracting and retaining the mega-headquarters, such as Boeing, but it doesn't seem to have the infrastructure in place to CREATE such companies anymore. There's always an anecdote of a company starting up here or there in the area, but that's not the same as having a real culture where companies are constantly being created (which leads to job growth for all down the line). Any thoughts as to why this is?

[DonkeyTeeth]

Even though there is plenty of money here, there really isnt the VC / incubator culture you have in Silicon Valley.

The cities you list above have different reasons why they've attracted startups. Silicon Valley and Boston are driven by the universities in their communities - MIT and Stanford actively encourage entrepeneurship and foster relationships with VC firms that offer mutual rewards. Do Northwestern and U of C really do the same thing? They're more interested in being recognized as leading research schools or as feeders to blue-chip consulting and financial firms.

You could argue that Seattle and Austin only have their reputation because of Microsoft and Dell. Other than being a sun-belt city where startup costs are low, I don't see that Austin really compares to Silicon Valley in terms of incubating new tech companies.

Chicago really doesn't have a vibrant tech VC community, its schools don't channel new talent into tech entrepenuership, most new arrivals to the community have corporate jobs in their sights, and there's no focal-point tech company to act as a 'beacon' for techies. That doesn't mean Chicago isn't a good place to come look for tech jobs - there are tons of corporate IT departments, big and small consulting practices, and even dot-com companies providing employment in that sector.

[UnderTheLiveOaks]

Shot in the dark here, but perhaps it's because we are what they refer to in the tech industry as a "brownfield" rather than a "greenfield". (These are originally land development terms, but the hi-tech guys have co-opted them...) Chicago is one of the major centers for enterprise in the world. The economy is huge and there are plenty of jobs to be had for the brash young movers and shakers who might opt for starting their own shop in a different environment. I work in telecom, and know that telecom companies and trade shows come here because it's one of the richest enterprise environments in the nation. That means a lot of the low-hanging fruit is plucked, and innovation can be tackled from within companies rather than from without. Perhaps that's why NYC, London, LA, etc aren't on your list of hot start-up areas, as well?

Having said all that, I would love to take a look at some stats on start-up volume in Chicago. I'd be interested to see some hard numbers.

[Chicago60614]

I guess it depends on where you get your information. I did a quick google search and Chicago actually came up over and over as a top city for technology start up and especially investment/employment levels.

I was going to list a bunch, but if you just google Chicago and start-ups/technology, etc. you can get a good feel of it all..

[Lookout Kid]

There are a ton of startups in Chicago. But the two biggest VC-fueled internet firms in Chicago, iXL and MarchFirst, both went belly-up after the tech crash of 2001 (though parts of iXL still go on as "Razorfish"). But VC is still flowing into Chicago quite rapidly, and many major high-tech companies are building up a larger presence here. Both Microsoft and Google are increasing their Chicago presence.

Daley made a big effort to bill Chicago as "Silicon Prairie" in the late 1990s and early 2000s, but I agree that more needs to be done today.

[Lookout Kid]

Here's a link to a great article about Chicago's Tech Center potential from Investor's Business Daily:

Chicago's High Tech Prospects - Investors Business Daily - December 18, 2003

[via chicago]

Regarding Argonne and Fermi, those are two irreplacable resources that our federal government have decided arent worth funding. And that hurts the tech sector big time, not just for Chicago, but for the U.S.

[aragx6]

yeah, the budget bill passed by congress completely screwed those two over!

[Drover]

I think Carolina was trying to get at this... but IMO part of the issue is that there's already a well-established tech market here, albeit by major corporations. They have the financial means and recruiting resources to snatch up area talent that might otherwise parlay into a startup environment. They simply dominate the market here and don't leave a lot of talent left for startups to recruit from.

Take my ex for instance. She applied at Motorola almost as a lark and to possibly use an offer from them to bid up her asking price at other startups that had made overtures toward her. When it was all over, she ended up taking the job at Motorola. Good thing too -- that was in 1999. After the tech bubble burst a couple years later, she still had a job and the startup that was Motorola's main competition for her attention went belly-up.

[Lookout Kid]

Originally Posted by Drover

I think Carolina was trying to get at this... but IMO part of the issue is that there's already a well-established tech market here, albeit by major corporations. They have the financial means and recruiting resources to snatch up area talent that might otherwise parlay into a startup environment. They simply dominate the market here and don't leave a lot of talent left for startups to recruit from.

Take my ex for instance. She applied at Motorola almost as a lark and to possibly use an offer from them to bid up her asking price at other startups that had made overtures toward her. When it was all over, she ended up taking the job at Motorola. Good thing too -- that was in 1999. After the tech bubble burst a couple years later, she still had a job and the startup that was Motorola's main competition for her attention went belly-up.

And now Motorola may go belly-up... Sad. It would be a blow to Chicago to lose Motorola and Sears, but most economic analysts say the Chicago economy would still be going strong without them.