Technology-based start-ups are doing a subtle but swift takeover of the Chicago entrepreneurial scene. New companies are popping up every week—128 launched just last year. Venture capitalists and angel investors seem to be flinging money around like confetti—nearly $1.5 billion was raised last year, according to online start-up community BuiltinChicago.org. Chicago has even been nicknamed “Silicon City” by the business publication Crain’s Chicago Business.
Marquee company names such as Groupon, Braintree, and GrubHub have direct ties to Chicago Booth, and dozens more founded by Booth students or alumni are gaining traction. This success is why more than 230 students, alumni, and members of the local business community packed Gleacher Center for Chicago Conversations: Tech Start-ups, on April 25. The event, part of the Chicago Conversations series, featured a panel of four alumni who explored the culture of entrepreneurship in Chicago and shared what aspiring start-up founders should know.
Panelist Kevin Willer, ’10 (XP-79), described it as an “entrepreneurial renaissance.” Willer is president and CEO of the Chicagoland Entrepreneurial Center (CEC), which offers mentorship and other services to help start-ups get off the ground. The CEC debuted its new Merchandise Mart start-up incubator, called 1871, on May 2. More than 400 companies applied for space at 1871, “and we can’t take all of them, ”Willer said. “There is more going on in Chicago than in the past 10 years.”
A strong culture of collegiality is one factor fueling this renaissance, said Seyi Fabode, ’10, CEO of Power2Switch. Fabode joined with fellow Booth alumnus Phil Nevels, ’10, to launch the now three-year-old company, which enables consumers to compareprices from electricity providers and switch to a better deal. The company has expanded to Texas and added additional employees, thanks to the free flow of help from business advisors. “Mentorship is huge,” Fabode saidof the willingness of community members to give of their time.“Most of the guys who are funding businesses built their own businesses and have successfully exited businesses. They have so much to teach.”
“What helps us a lot today is the bottom-up ecosystem out there,” said AshishRangnekar, ’11, cofounder of BenchPrep, a company that provides online and mobile learning courses for college admissions, higher ed, and professional certification. “A lot of start-ups are exactly in the right spot in terms of their stage in the life cycle. There’s a lot of information exchange.”
The key to keeping this informational ecosystem sustainable is to ensure that entrepreneurs are driving it, said Steve Sanger, ’05, vice president of business development at GrubHub. The company has expanded its online food ordering services from eight markets to 300 in the past 18 months. With the proliferation of start-up incubators and mentorship programs, “the community is really involved,” Sanger added. “Everyone’s got to be willing to commit their time and energy tooffer ideas and hear people’s ideas.”
Each of the tech start-ups on the panel got started in theChicago Booth New Venture Challenge, a nationally-known competition that has launched more than 75 companies since 1996. Each went on to raise funds from venture capitalists and angel investors; GrubHub, for example, raised $81 million.
But that success has not come without its challenges. Willer recalled that in the 10 years he spent building Google’s Chicago office, his biggest challenge was hiring. The young company concluded that hiring seasoned professionals would make up for its own lack of experience, but “sometimes the younger, ambitious but less-experienced person might be the better fit,” he said. “Hiring is the most important thing.”
The panelists also discussed the importance of traits such as persistence, flexibility, knowing how to hustle, and building the right team. Willer said building a newstart-up incubatorcomes with no manual, so he and his team are figuring out what works as they go. The founders of GrubHub were in a similarly uncertain situation when they first approached restaurants, so they walked aroundwith how-to guides like Selling for Dummies. Then, there are days like the one at Power2Switch, when record numbers of visitors came to the website—and the site crashed for a few minutes.
“If you need structure, ”Sanger cautioned, “then this is not for you.”
The advice resonated with Niket Desai, a Weekend MBA Program student. Desai is participating in the New Venture Challenge to win the competition’s $30,000 in seed funding for his start-up, PrimeLink Health. “Trust is important because it’s important to have the right people on the team, and hustle is key because there is a lot of help out there; you just have to go get it,” said Desai, an advisor at PricewaterhouseCoopers. “It’s good to hear how these companies went through the NVC process. Booth is a safe environment to practice in before the real world.”
Photo by Anne Ryan