One of the reasons we started Hyde Park Angels was to change the culture in the entrepreneurial community in Chicago. Chicago had what a real estate developer would call “good bones”.
- Top schools (Northwestern, Chicago, Illinois)
- Top entrepreneurial programs (Northwestern, Chicago, DePaul)
- Density (9M people live in the area) and strong underpinnings of industries that were going to be remade by tech (Financial Services, Logistics, Agriculture, Medicine)
- Great culture in the city that attracts people.
But, there were things that stopped the culture from growing. One was the general conservatism of wealthy Midwest investors. They had gotten burned in 2001, and they were (and many still are) extremely hesitant to dip their toe in the startup water. They understood private equity and real estate. Venture was something other people did other places. It’s still very hard to raise money in Chicago if you are unproven.
Another huge problem was that Chicago was filled with brokers. They charged entrepreneurs for introductions, for fund raising. They also charged the people they made introductions to, and the people they raised money from-and they never put any of their own skin in the game.
If you want to understand Chicago, you need to read the book by my friend Professor Don Miller closely. His book, City of the Century, shows how Chicago culture came about.
Two things really shaped this culture. One was the political environment. Alderman generated “boodle” for themselves. They always had a hand out. Today, it’s really not any different. Chicago probably leads the country in elected or appointed political officials that spend some time in the pokey. Initially, Chicago was a Republican town. For the last 70-80 years, it’s been run exclusively by Democrats.
The notion of “public-private partnership” was invented here. The first mayor was also the top businessman. The I-M canal was dug with public-private money and the business community was the driving force behind the politics to get it done.
The other thing that shaped Chicago culture is the Chicago Board of Trade, and then the Chicago Mercantile Exchange. The CBOT made the city along with the I-M canal. It was started in 1848. The CME was started in 1918, with underpinnings in 1898.
Traders are some of the most competitive people on earth. They intuitively understand risk. They are sneaky smart. They also have a “winner take all” culture. Instead of sharing, they try to encircle opportunity and keep it all to themselves. Monopoly is good in a traders eyes. Nothing makes them happier than being the biggest market maker, and controlling the order flow. It’s a human instinct, and one that is necessary for survival in one of the most brutal marketplaces in the world.
But, neither of those things lend themselves to a startup culture.
Chicago is getting better. We are on the right track. The community here has grown. It’s attracting some unbelievable talent. There are some really cool companies being built here. But, it still has some remnants of the past.
I meet with entrepreneurs all the time. Some come from other ecosystems and some are passing through the Chicago ecosystem. It’s interesting the hear their feedback, and their opinion on what makes other places tick. Unfortunately, their feedback is that it’s easier to navigate and get people to help in places like Silicon Valley than it is here.
Free introductions, free connections to customers, free advice, free mentorship, and free services are often performed there. That may or may not be the case in Chicago. It’s changed a lot from where it was, and that is for the better. “Give Before You Get” has a base, but it’s not everywhere.
I think that if you actually make a sale for a startup to a company, you ought to get a commission for your effort. This means more than a simple introduction but being an active participant in making the sale. You shouldn’t get paid anything unless a check is written. If you are an investor in the firm, it is awful hard to square getting paid for something like that. Your equity investment benefits from your effort. It’s a part of being an investor.
When they form investor groups in the Valley, they are more likely to share and try and get many people to invest rather than dominate the cap table. Interestingly, my friend JB Pritzker adopted this strategy several years ago. I recall a presentation he gave back in 2010 and he was very obvious about it and that was pretty cool.
When people ask for help, give it to them. Do it for free. Don’t hesitate. Don’t qualify it. Don’t tit for tat it or keep score. Don’t help only certain people, or certain political persuasions and ostracize others. This isn’t about climbing a corporate ladder, it’s about growing a community. Be transparent. Or, if you aren’t going to do it, be straight and tell them you can’t. Much better to know that not know.