Kevin Willer Builds Digital Mass in Chicago
For nearly a century, the Merchandise Mart in downtown Chicago has been a marketplace for store buyers, a design center, and a home to high-end furniture showrooms. In May 2012, the 12th floor of the Mart turned into something else entirely: a place where the city's entrepreneurs can get help launching their digital companies.
Welcome to 1871, where workspaces rent for $250 to $400 a month - less for overnights and weekends only. Teams of workers meet in a series of huddle rooms. A blackboard the length of a city bus lists dozens of events: one-on-one meetings with successful entrepreneurs; visits by venture capitalists, accountants, and business school professors; even Friday-afternoon social hours. An Intelligentsia coffee bar keeps the entrepreneurs caffeinated.
At the center of the sometimes-manic activity is former Google executive and Chicago start-up booster Kevin Willer, '10 (XP-79), who, as CEO of 1871's nonprofit parent, the Chicagoland Entrepreneurial Center (CEC), has emerged as a leader in the city's efforts to stake a claim in the digital economy. He's approached that enterprise with the same kind of commitment and drive that many of the entrepreneurs at 1871 apply to their start-up ventures.
On a recent morning, he is leading a tour for the mayor of Toronto. At other times, he may be catching up with tenants or courting a donor or a venture investor. When he needs to get work done, he grabs his laptop and ducks into a huddle room, keeping his back to the door to avoid interruptions.
"I'm amazed by his work ethic," said Frank Muscarello, CEO of start-up MarkIT Exchange, an online site for used technology equipment. "Every time I'm here, he's here. And I'm the one doing a start-up."
Since the days of the IBM PC, Chicago has stumbled in establishing itself in the digital economy. A hoped-for "Silicon Prairie" never took root. Inventions that originated near the shores of Lake Michigan migrated west almost as soon as they took off, the Netscape browser and the Palm Pilot personal digital assistant among them.
Founders of diverse start-ups such as PayPal, YouTube, and Yelp earned degrees at Illinois institutions including the Illinois Mathematics and Science Academy and the University of Illinois, but left the Midwest for the money, connections, and markets of Silicon Valley. The city's most ambitious flirtation with internet fame, a Rube Goldbergesque mash-up of interlocking start-ups called Divine InterVentures, went public in 2000 and then quickly went bust.
Now there are signs - early but unmistakable - that Chicago has a chance to shrug off more than a quarter-century of frustration. Even before the daily deal site Groupon stormed onto the scene, a string of successful start-ups had quietly begun making a name for Chicago. Orbitz, Click Commerce, Morningstar, GrubHub, Braintree, and Threadless got their starts in Chicago. Even so, Chicago always seemed to lack a critical mass on the order of places such as Boston, New York, and even Austin, Texas. The lack of success left Chicago with a perpetual second-city syndrome, a sense that the flickers of success might never amount to anything greater.
1871 is an exercise in proving doubters wrong and building that critical mass. It isn't an incubator, conference center, or clearinghouse. It isn't run by a venture capital firm. Willer calls it a "shared coworking space," in which companies benefit from the concentration of talent, resources, and experience in a single ZIP code.
"It takes a while to understand that 1871 is not a program. It's not a plan. There's not a start date. There's not an end date. I don't tell entrepreneurs what to do," Willer said in an interview at 1871's colorful office. "What we try to do is provide a great work environment and programming. We've got the capital, the training, and the talent, and we've got it all in one space."
A native of suburban Wilmette, Illinois, Willer, 38, grew up in a close-knit Catholic family and attended Loyola Academy in north suburban Glenview, playing football and lacrosse. His father was an executive in the real estate department for Sears, Roebuck & Co., and his mother taught high school European history. He earned his undergraduate degree from Boston College in 1996.
After graduation, he returned to the Chicago area to work for modem manufacturer USRobotics, best known for its early personal digital assistant, the Palm Pilot. Within a year, the company was bought out by 3Com. For Willer, the 3Com buyout was an early lesson in the lost opportunity for Chicago when a promising technology left town because it could not obtain the capital it needed to reach its potential.
"A California company taking one of our bright stars, going through that experience really changed me," Willer said. "We're talking about a company that really had done some tremendous things, and now they were gone."
He moved to Boston and worked for internet incubator CMGI. In just under two years, Willer saw his stock options in the company rise above $1 million, then dive under water as the dot com bust destroyed the CMGI business model. Willer had received options as part of his compensation at USRobotics, too, although they didn't amount to much. Taken together, the two experiences taught him about the upside potential of options-based compensation, and about how quickly an options fortune can evaporate.
Through a head hunter, Willer learned about an opportunity in Chicago: the increasingly popular internet search firm Google was planning to open a Midwestern office to handle sales in the emerging market for search-based advertising. "The first couple of years were tough," Willer recalled. "We were representing a dot com, in Chicago, selling a company with a funny name and selling something nobody had ever bought."
It took a couple years to determine that the traditional method of advertising sales - cost per thousand viewers - was not the best way to profitably sell search engine advertising. Online auctions of keywords worked far better. Business went well, and after a decade, Willer was part of the leadership team for the Chicago office, which had grown to 400 employees. With Google's 2007 purchase of web feed management provider FeedBurner, the Chicago office had a cadre of engineers as well as account executives.
Along the way, Willer had met just about everyone who mattered in Chicago's technology community - from executives at the nascent e-commerce units of Walgreen Co. and United Airlines to entrepreneurs at user measurement firms such as Performics and DoubleClick.
He also got to know J.B. Pritzker, a scion of Chicago's famed Pritzker family, whose holdings include Hyatt Hotels, credit reporting firm TransUnion, and other companies. A venture capitalist and founder of the Illinois Venture Capital Association, Pritzker had become a mentor to Willer, who, after a decade at Google, mentioned he was exploring career opportunities outside Chicago. "We need you in Chicago," Willer recalls Pritzker saying. "Support the community here. We're on the precipice of great things."
Pritzker wanted Willer to run the CEC, the arm of the Chicagoland Chamber of Commerce charged with nurturing start-ups. The center, under Willer's leadership, could expedite the city's emergence as a technology hub. (CEC is now an independent nonprofit managing 1871, no longer a unit of the chamber).
During his decade at Google, Willer had acquired another asset: his Booth MBA. He enrolled in the Executive MBA Program and found the connections he made at the Polsky Center for Entrepreneurship particularly valuable. The classroom lessons, put into practice in the Edward L. Kaplan, '71, New Venture Challenge (NVC), influenced his thinking about Chicago's potential to nurture tech start-ups. And working with other students - successful business executives and entrepreneurs in their own right - expanded his understanding of how his peers responded to business challenges.
By the time Willer landed at Booth in 2008, the Polsky Center had become a hub for Chicago-area entrepreneurial activity. Since its launch in 1996, the NVC has encouraged students to take their classroom learning and launch start-ups, and it has helped provide start-up funding for more than 85 companies that have gone on to raise more than $275 million in capital and create 1,300 jobs.
Willer serves on the Polsky Center Advisory Board. He also is a member of Hyde Park Angels, the group formed by Booth MBA students in 2006 that has helped fill the gap in seed and early-stage funding for Chicago-area startups.
A UNIFYING FORCE
In many ways, 1871 represents a logical next step for the entrepreneurial stirrings that had started at Chicago Booth in the mid-1990s. The name 1871 is a reference to the year of the Great Chicago Fire, an inflection point in the city's history. The 1871 fire destroyed the heart of downtown Chicago, but led to a wave of urban redevelopment that helped turn Chicago into one of the nation's great cities.
Pritzker got the project started by recruiting Willer and a small cohort of Chicago's tech denizens to fly around the country surveying best practices in urban start-up initiatives. At the Cambridge Innovation Center, which boasts 450 start-ups at any given time, the group saw how the center's across-the-street proximity to the Massachusetts Institute of Technology supplied momentum.
At the Plug and Play Tech Center in Silicon Valley, they gained an appreciation for how a central location could accelerate success. At General Assembly in New York, the group saw the advantages of tech talks and mentorship programs.
Willer said the research led the team to believe Chicago's new tech center needed to be constructed as an "open source" community in which any university, any venture capitalist, any consultant or lawyer or entrepreneur would be welcome. "If you bring a lot of players together, a lot of capital together, and a lot of entrepreneurs together, then you have the opportunity to build a community," Willer said. "We wanted to make this not about making money but about building a community."
The not-for-profit approach also helped the group persuade the State of Illinois to kick in a $2.3 million grant to build out the 12th floor of the Merchandise Mart - the landmark structure built by Marshall Field & Co. in 1931 that for decades was the world's largest commercial building.
The CEC, led by Willer, emerged as the obvious leader of 1871. His position at the center connected him to people across Chicago's tech community. In taking the helm, Willer has worked an entrepreneur's long hours, and found - as leaders of start-ups often do - that no job is too small for him.
This attitude has had an impact on the entrepreneurs who have set up shop at 1871. "He's not touting his most recent accomplishment or puffing up his chest about what he has done," said Phillip Leslie, '09, founder of ProOnGo, a firm that enables business travelers to file their expense forms via their smartphones and a 2008 NVC finalist. "He's about rolling up his sleeves and getting his work done."
Matt Moog, founder of the online tech community Built in Chicago and a member of Pritzker's 1871 reconnaissance team, said Willer embodies an open-minded approach that made him the right pick to lead 1871. "He's an entirely articulate, persuasive, open, and friendly person who has brought a lot of credibility to the effort," Moog said. "One of the single most important words associated with the project from the start was that we needed it to be inclusive. We felt like Kevin was a unifying force who could make that happen."
A NEW HUB
At 1871, Willer has applied the best of what he and the other originators learned during their travels to Boston, New York, and Silicon Valley. The events and resources available to tenants - listed on a massive blackboard along one hallway - make 1871 more than just an office. Blue chalk designates workshops about such essential topics as sales tools, public relations, and capital. Orange denotes times when local technology luminaries are available to participate in 30-minute one-on-one conversations. Green is reserved for larger events, such as "Founders Stories," in which successful entrepreneurs return to tell the newbies how it's done. GrubHub's cofounders, Matt Maloney, SM '00, MBA '10, and Mike Evans, kicked off the series in May.
The presence of professors from Chicago Booth and Kellogg Graduate School of Management, along with design experts from the Illinois Institute of Technology, and computer engineering faculty from the University of Illinois, adds academic depth. There is local venture money present, too, led by Pritzker's New World Ventures, Sandbox Industries, and the 12A Fund, along with a host of others, including Lightbank and OCA Ventures. Angel investors pay regular visits. So do public officials looking to grow digital start-ups in their communities, such as Toronto mayor Rob Ford. Illinois governor Pat Quinn has visited, and British prime minister David Cameron stopped by during the NATO Summit in May 2012.
Ellen Rudnick, '73, clinical professor of entrepreneurship and executive director of the Polsky Center, said early returns are promising. "They've done a fine job of creating a new hub for the entrepreneurial movement in Chicago," Rudnick said. "In the past, investors would fly from coast to coast and never stop in the middle. Now we're becoming a destination." Through 1871 and many other efforts, capital has started making its way to Chicago. For the period between January 2011 and September 2012, 110 Chicago tech companies raised a record $1.17 billion, according to The MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association, based on data from Thomson Reuters. The $700 million raised by Groupon in its IPO accounted for a significant part of the total.
Chicago still ranks lower than its size might suggest, ninth among US cities, according to the The MoneyTree Report. Chicago-based companies raised about 6.5 percent of the $17.82 billion raised in Silicon Valley last year (San Francisco and San Jose), and less than half the amount raised by companies in either Boston or New York. Groupon had a fast rise and successful IPO, but has been dogged by questions about the long-term viability of its business model.
1871 is designed to help Chicago improve that track record, and Willer points out that one advantage is its central location in Chicago's trendy River North neighborhood. Razorfish, the digital marketing firm, has office space within steps of 1871, and Google decided last summer to move at least 3,000 jobs to the Mart, as part of its continuing absorption of Motorola Mobility, the cell phone maker it acquired in May. Braintree, the online payments firm founded by Bryan Johnson, '07, decided in July to add 150 jobs at a new West Loop headquarters, while at the same time expanding its engineering operations in Silicon Valley.
Muscarello of MarkIT Exchange said the desk at 1871 has helped him build a leadership team, focus the company's strategy, and raise money. In a conversation at 1871 with Food Genius' founder Justin Massa, Muscarello mentioned his fundraising needs - and obtained leads from Massa that helped him set up 17 meetings in five days' time. Muscarello ended up raising more than $1 million in a seed round. "I never could have gotten all those meetings strictly on my own," he said.
Matt Thacker, '08, CEO of Aesop LLC, a firm that develops mobile apps for parents of young children, suggested that Chicago's relatively small presence in digital entrepreneurship may be an advantage for 1871: "Here's the secret: they've created the center of the universe for tech in Chicago. In San Francisco, you couldn't do that, because you'd be competing against dozens of incubators." He particularly values a small-group meeting he had with Facebook's global director of brands, and credits Willer for organizing such sessions.
Prior to moving to 1871, Thacker was working from home, dealing with coders in China and Ukraine, and feeling isolated from the kind of creative community that can assist start-ups. His desk at 1871 changed that.
At home, "you could sit at your desk all day and night with your headphones on and never have a meaningful conversation," he said. "Here you have people with vision. They have the flash of ideas that can change the course of your company."