Thursday, March 27, 2014

How Chicago's elite clubs court entrepreneurs -- or not.

How Chicago's elite clubs court entrepreneurs -- or not.

While clubs have given a nod to the startup juggernaut with programs on technology, innovation and entrepreneurship, membership is a thornier subject. 
First, it’s costly: There are annual dues, event fees and dress codes, sometimes formalwear. Status and connections are needed, as clubs usually require sponsorship by several current members. And the culture can be awkward, especially for tech founders, even if their companies have moved beyond the humble startup stage.
“Five to 10 years ago, we wouldn’t be having this conversation,” said Kevin Willer, co-founder and partner of Chicago Ventures. But with GrubHub on the IPO road, PayPal acquiring Braintree and Groupon going public, “these aren’t little startups anymore,” he said. “You have a pipeline of what I’d like to think are the next generation of leaders here, so the networking clubs need to pay attention.”
Club leaders acknowledge that if they want to fully represent Chicago’s business interests, more entrepreneurs need to be in their membership pipelines. For now, the clubs see events as a way to connect with emerging leaders who don’t yet meet criteria for membership.
 “The reason we’re targeting events is because we want to be high impact while being really respectful of our resources, which include manpower,” said Kate Bensen, president and CEO of the Chicago Network, the city’s leading club for female executives. “Our members, to get in, have to have civic and philanthropic involvement, and many of them mentor in their own lives. So it really wouldn’t be feasible to create a cottage industry of separate mentorship programs.”
Howard Tullman, CEO of 1871, said younger startup founders are often very internally focused or not yet mature enough to realize the networking potential of clubs, where they well might find powerful buyers of their products and services. Moreover, some clubs frown on doing business at the dinner table, which frustrates him.
“I’m like, ‘The whole reason you’re existing is because we’re trying to do business at these places,’” he said.
But clubs also may risk alienating existing members if they alter too much their programming and admission rules.
“They’re going to have to re-envision how they approach this if they really want to reach this marketplace,” said Tullman. “I definitely think they are going to have to change some of those bizarre rules of what can be done. I think they have to decide how to be a real resource, particularly if they want to attract a lot of the younger people.”
Some groups have created small business or junior membership categories. Others said they have no plans to change their requirements.
“It’s something we need to think about,” said Willer, who is on the board of the Economic Club, where speakers have included Elon Musk of Tesla, Eric Schmidt of Google and Sheryl Sandberg of Facebook. “They are aware of the importance of it, but they also want to keep their high standards of membership.”
He noted that the Economic Club brought in Matt Maloney, founder of Grub Hub, as a member, but may have missed others. “The reality is these things [success stories] sometimes happen overnight or entrepreneurs are behind the scenes and clubs have a hard time identifying them,” he said. “So they try and bring in folks that will help them do that and I’d like to think I played that role a little bit for them.”
Traditional executives also have long memories of the dot-com bust from 2000.
“I’ve gotten pushback that this is a dot-com bubble and will be over soon,” Willer said. “There’s a lot of deep-seated perspective or opinions on this world, so we have to continue to prove … that we can build great companies here that are valuable, that investors will put money into, and that will hire lots of people and create profits.”
Tullman admits that despite his role as a panelist and speaker with the clubs, he’s not a member of them. “I’ve never survived the nomination process,” he said with a laugh. Nor does he want the obligations. “My problem is, I love to be able to pick and choose the few things relevant to me at the clubs. I don’t want to feel like I have to attend all these events. … It’s a waste of my time and the club’s time if they could have a more viable member.”

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