New CEO Tullman sees 1871 as boot camp for Internet startups
Online companies should focus on generating revenue – it's 'up-or-out,' says veteran Chicago entrepreneur
Veteran Chicago entrepreneur Howard Tullman says starting an online company at 1871 should be like joining the Marines.
And this hard-charging style, Tullman said, will define how he runs the city's marquee hub and co-working space for Internet startups as its new chief executive, starting Jan. 6.
"One of the focuses now is going to have to be up-or-out," Tullman said. "We're not just a hobby. We're not a place for people to go to feel good about attempting to be an entrepreneur. We're about people committed to building businesses."
Within two years of 1871's founding at the Merchandise Mart, the 50,000-square-foot facility has become home to more than 240 small companies. When these companies grow to between five and 12 employees, they graduate and move on to a larger space. About 15 companies have graduated thus far, according to an 1871 spokeswoman.
Leading 1871 is akin to serving as the public face of Chicago's technology community. And Tullman said he's through with hearing boasts about how much money member companies have raised from investors.
"It should be about: How many revenue-generating businesses have we created?" Tullman said. "How much money have we generated for those investors? That's a much more important metric as we mature."
It has been 10 months since outgoing CEO Kevin Willer announced his departure for a venture capital firm. Round one of the search for a successor ended unsatisfactorily. Executive search firm Spencer Stuart was brought in and approached Tullman for input.
At 68, he is something of a godfather of the city's tech scene. The businesses he has launched, led, invested in or turned around are too numerous to list.
He started his career as a lawyer, retiring from that profession in 1980 to become an entrepreneur.
He sold his first startup, CCC Information Services, for about $100 million in 1987. He also turned around Kendall College, moving it to downtown Chicago from Evanston and converting it from a nonprofit to a for-profit college. Another company, the Cobalt Group, where he served as a longtime board chair and was an early investor, sold in 2010 for more than $300 million.
Tullman has been in the startup world so long he once founded and led a company that made CD-ROM games. The New York Times predicted one of them would become "the big (Christmas) gift in 1994."
He most recently stepped away from another business he founded, the Tribeca Flashpoint Media Arts Academy, and started his own venture capital firm, G2T3V. Tullman said he will be open about his conflicts of interest, disclosing G2T3V's investments to the board of 1871's parent entity, the Chicagoland Entrepreneurial Center (CEC), and on G2T3V's website.
At Chicago Ideas Week, Tullman was running around showing off an app called MagicTags that recognized a logo on a package of sweetener and then played a video about it, a seamless transition from a physical product to a digital pitch. MagicTags is one of G2T3V's portfolio companies.
"You and I could have talked four months ago, we wouldn't have said, 'Everybody, hey, let's call Howard Tullman,'" said J.B. Pritzker, a billionaire investor whose money, influence and ideas got 1871 off the ground. "We would have imagined Howard Tullman is busy and has other commitments and that 1871 …" Pritzker paused. "You know, it just didn't dawn on me. And when he raised his hand, you know, it's terrific. But he still went through a process."
That included a presentation to the search committee.
The center faces competition — it's no longer the only option for new companies. Just a few days ago, Chicago venture capital firm Lightbank announced a new co-working space for startups in its River North offices, called The Warehouse.
Among the ideas Tullman proposed for 1871 was working with Zach Kaplan, the CEO of Inventables, to bring a rapid prototyping lab (which includes 3-D printers and other equipment) to 1871 and building office suites to accommodate bigger companies.
"We want to be able to get a better understanding of who's really a member and who's really a hanger-on," Tullman said. "Are they paying what they're supposed to be paying? Are they participating in a way they're supposed to be participating? Right now there isn't a provision for expanding beyond four to five desks. The next iteration may be suites. If you're a company of five to 15 people, we can offer spaces that are a little more private."
The position was not easy to fill, largely because of the requirement that it be an entrepreneur. Parent entity CEC is a nonprofit — that means 1871's leader gets no stock options, equity or the potential for a multimillion payout upon a sale or public offering.
"I happened to be old enough that I'm not looking for my next three jobs," Tullman said.
And the job requires an enormous amount of glad-handing with local and state politicians and prominent visitors. Pritzker, Willer, CEC board Co-chairman James O'Connor Jr. and 1871 staff have all served repeatedly as tour guides. Tullman is accustomed to playing host. His office/art gallery on the West Side is itself a de facto VIP party venue.
"People may think (1871) is a sleepy nonprofit, but our vision of it already is that it's going to be a big (expletive) deal," Tullman said. "It's going to have a national presence. A hub for people to come from all over the country. And it's not going to be a real estate play: 'Oh, gee, here's where I rented some space.' We want it to be like, 'Here's where I went to boot camp, where I joined the Marines.' It'll be a place you'll be from and (will be) a credential."