Hindsight : April 2017

Thursday, April 27, 2017

CHICAGO BECOMES A HUB OF STARTUP ACTION

An entrepreneurial ecosystem takes root in the Windy City

Re: Lakshmi Shenoy (MBA 2010)

by Julia Hanna

Topics:

Silicon Valley’s name is dominant in the history of entrepreneurship. So where does that leave other cities that want to get in on the action?

On April 13 in Spangler Auditorium, Chicago Mayor Rahm Emanuel and a panel of area business leaders discussed what differentiates their city as a swiftly developing “ecosystem” for starting new ventures. HBS professor Lynda Applegatemoderated the event, which was inspired by a case she coauthored with Alexander Meyer (MBA 2005), SAP vice president of global business development. “Rising From the Ashes: The Emergence of Chicago’s Entrepreneurial Ecosystem” details the city’s evolution as a growing hub for startup activity.

“Chicago has been called the most American of American cities,” Emanuel commented. “It’s a very big city but a small town.” He cited its diverse economy (no single sector represents more than 13 percent of employment), its position as “capital of the heartland” (making it a magnet for graduates of the Midwest’s top universities), its relatively low cost of living (number 10 in the nation), and its position as a central aviation hub as just a few of the qualities that make the city an ideal site for entrepreneurship—not as a clone of Silicon Valley, but as a unique, networked support system with its own identity.

Positioning Chicago as a city conducive to entrepreneurship required ongoing, deliberate efforts on the part of Emanuel (who was sworn in as mayor in 2011) and the other panelists, each of whom brought their own perspective on the city’s evolution as an entrepreneurial ecosystem. Emanuel, for example, cited an historic event that fostered the city’s resilient, civic-minded culture: the Great Chicago Fire of 1871. Having the can-do attitude required to pick up the pieces after surviving a disaster that destroyed several square miles of the city feeds directly into the energy and vision required to start a new business, he said. (A hub for early-stage ventures located in the city’s Merchandise Mart is named 1871 for just that reason.)

“We try to link universities, entrepreneurs, and innovation space,” Emanuel said. An effort to make Chicago the capital of cybersecurity that involved a city-funded training program, for example, ultimately led to KPMG making Chicago its cybersecurity headquarters—a move that has created 500 new jobs, with 500 more to come by 2020.

“That’s platform thinking,” Applegate said.

Steve Collens, CEO of MATTER, a health care startup incubator, and Kevin Willer, a partner at Chicago Ventures, agreed that entrepreneurial activity in Chicago really started to take off in 2010 and 2011, when a critical mass of companies that had made successful exits began looking for ways to reinvest in the area.

“The announcement of 1871 made me start to think about moving back to Chicago from New York,” said Lakshmi Shenoy (MBA 2010), who last year became the organization’s vice president of strategy and business development. “Entrepreneurs need a sense of network that’s intimate and immediate,” she said, noting that 1871 is home to 500 early-stage tech startups.

“We’re a place to bring together all of the stakeholders—venture capital, universities, and corporate partners,” she said.

Mark Tebbe, who founded the technology consulting firm Lante Corporation in 1984, noted that entrepreneurship has been happening in Chicago for a while, “but we were missing an opportunity where we could talk.” As chairman of ChicagoNEXT, a group of business leaders working with city government and other stakeholders to shape the city’s economic agenda and raise its profile in technology, Tebbe is a chief organizer of the third annual Chicago Venture Summit this September. “We have capital returning from both coasts,” he said.

Efforts are in place to ensure job growth and economic activity are available to all, Emanuel added, citing entrepreneurship courses offered on the city’s South Side through 1871, BLUE1647 (a technology skills center), and a $30 million startup fund for neighborhood businesses, among other efforts.

“I have one goal,” he said. “If a child walking out of his house looks at the city skyline and thinks, ‘This is my home,’ nothing can stop us. If we can do that—game on.”

“Chicago is a relevant story because it came from a point of relatively little entrepreneurial activity after the fallout from the dot-com crash and managed to develop a vibrant ecosystem,” Meyer said in a post-event interview. “I think there’s a momentum here right now that can be self-sustaining. In that sense, I hope the case will be useful to leaders in other regions working to develop an ecosystem for entrepreneurship.”

Don’t Slow Down Your Startup

Too many young businesses don't get to become old businesses because they get sidetracked by tangents of technology, markets and competitors. Why build yourself a bigger mountain to climb?

By Howard Tullman

CEO, 1871@tullman

CREDIT: Getty Images

In case it's not abundantly clear to just about everyone, starting a business from scratch and then growing it into something with some decent traction, modest momentum, and a real reason for being is plenty tough. And, of course, that's just the beginning of a long, often painful, and assuredly bumpy ride. But here's the deal: you don't have to make things even harder on your business or build yourself a bigger mountain to climb than you absolutely must.

Don't try to be or to own everything-- no one can afford that approach today. Don't be too proud or stupid to ask for help, find smart partners, ride the rails that someone else already built at great cost, or use a platform that's already reaching the markets you're aiming for instead of trying to build your own. The latest and greatest case of not reinventing the wheel is Instagram, whose Snapchat clone already has more daily users after only 8 months than Snapchat did at the end of 2016. And Snapchat is 6 years old. The message is simple. Take the path of least resistance as long as it moves you forward; plan to fill in the missing pieces down the line (if needed) when you can actually afford them.

Do what you absolutely have to do right now and do whatever can wait when you get a chance. It turns out that a lot of things-- equipment, investments, marketing campaigns, etc.-- that were absolutely vital and mission-critical in the moment turn out to be unnecessary, outmoded, or just wrong if you give yourself a little time and space to see what happens in the meantime. (See The Beauty of Backing into a Business .) As you develop and build out, you should take every chance you have to shed the stuff that doesn't matter or simply makes the struggle tougher or more expensive. Every marginal cost and capital investment that's avoidable needs to go. Spending money is easy; making money is hard. Here's the basic rule: dump the dumb stuff and double down on what can make a real difference in your destiny. (See Five Keys to Effective Outsourcing .)

And when the world is sending you a message or giving you a golden opportunity, you need to go with the flow. That's why The Lone Ranger used to say: it's so much easier to ride the horse in the direction it's headed. Find the fastest bandwagon out there and jump aboard. Inertia is very tough to redirect or overcome-- but it's a real blessing when it's working for you.

Habits are hard to break for a good reason-- they're based in what has worked well for us in the past and we're reluctant to part with them. But we're happy to expand and enhance our ongoing experiences if you can give us a solid reason and a convincing argument for why we should. The closer you can align your "asks" of the consumer/customer to existing actions and behaviors, the happier everyone will be and the quicker people will adopt your solution and incorporate it into their day-to-day lives. Why try to hurdle the fence when the gate's wide open.

On the other hand, if it's student body left and you're the only one headed in another direction, you can scream all day at the top of your lungs, but it won't make much difference or move the crowd your way. And if the technology has already advanced to the point where no one needs your help or your product or service, you might just as well pack it in and try something else. No company can produce, pivot or innovate fast enough to outrun a future that's already miles ahead of them and preordained. Our smart phones (and eventually our smart watches although it won't be any time soon, see Five Reasons the Apple Watch Failed) are already comprehensive trackers and capable of any measurements critical enough to matter to us and in our lives on a regular basis. We just don't need another dedicated device.

I wrote a piece here recently (See Where Will Your Business Be When the Music Stops.) about how Fitbit doesn't have much of a future and how it really wasn't anyone's fault other than the guys who failed to realize that we need another rechargeable pain-in-the-ass device on our wrists (or tacked to our t-shirts) about as much as we need a third elbow. In fact, there are already activity-tracking t-shirts on the market. So, a product with a very, very short remaining shelf life and really no next act isn't much of a business and it's not even a novelty for much longer.

But there are smart examples of companies going with the flow. One, for sure, is the Chronos Disk which is a thin, smart device that attaches to the back of your watch and instantly adds Bluetooth-enabled fitness tracking, music controls, and a "find my phone" function. Takes a couple of minutes to attach (or remove and switch to another watch) and you're good to go. An hour into the process and you completely forget that it's even there. So, for you folks who love your fancy watches (yes, I know you're all over 30), you can have the best of both worlds in a minute. Habit? Check. Existing behavior? Check. Barriers to adoption? None.

It's pretty straightforward. Build your business to capitalize on someone else's capital investments-- such as TV monitors already installed in every venue imaginable. Plan your product or service so that it rides right along with existing activities: no new learning curves, no new apps to download (even if you could find them in the clutter), no hurdles to overcome. And then it's off to the races.

Warren Buffett said it all: "I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over."

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.