Yesterday Chicago tech got some good news. Foursquare is going to build out their engineering team here. It’s good they are recognizing that there is talent here. They didn’t mention it in their Medium post, but the University of Illinois in Champaign graduates more computer science people than anyone else in the country. A lot of the class is from the Midwest, so Chicago is a natural draw for them.
The community in Chicago continues to build. We did get a black eye from Outcome Health. We will see how that situation develops. I don’t really know anything more than what I read in the newspapers so I can’t comment. However, it’s not good. Despite the House and Senate in Springfield’s attempts to torpedo the ecosystem, and the city council’s war on tech, Chicago is still a front-runner for Amazon’s second headquarters.
Exits were up last year and with the run-up in the stock market, I expect corporates to be hungry to buy startups. Funding was up too. As investors get exits, they will reinvest in new companies. As exits happen if founders were smart, they will have allocated stock to employees so that the next generation of startup founders can get going. Wealth creates more wealth. It’s a virtuous cycle.
What does Chicago need to reach the next level?
- More mentors that have been through the startup journey. There are some, but we can always use a lot more. They are indispensable.
- More capital. A lot more capital. That would change how Midwestern startups and investors approach businesses. More ready risk capital would mean more blowout moonshots would happen because instead of focusing on cash-flow and being independently sustainable, they could reinvest more of their cash flow back into the business for growth.
Last year was the best year for VC investment into Chicago firms since 2000. Bear in mind, the typical holding period for a startup has been extended to around 10 years so it’s going to be a while before the 2017 investments bear fruit and money flows back into the ecosystem. Money that comes in this year will be fresh capital or capital that was invested back in 2007-09 during the peak of the financial crisis. To put this in perspective, the San Francisco Bay Area had 44% of total tech investment in the US and it was $32,1 Billion. Investment isn’t a fixed pie, but Chicago has a lot of room to grow.
The base is built. I think we have another ten years to build because it takes 20 to build out a huge ecosystem. However, we are on the way.