Monday, August 18, 2008
VCs talk about funding Chicago at Technology Insiders Summit
The Chicago Technology Insiders Summit was held at the Illinois Technology Association (ITA) facility on Thursday, August 14, 2008.
There were three panels:
1. Raising Equity -- Venture Capital firms talk about funding Chicago entreprenuerial companies.
2. Maximizing Equity -- Successful CEO's of funded Chicago firms.
3. Sweat Equity -- Leaders of Chicago startups in various stages of development.
Ultimately, this was a lot of what we already know -- VCs are primarily looking situations where money will enable a proven team to scale up a proven concept into a national or international marketplace quickly. If you are a guy (or a gal) with an big idea, VCs probably aren't your first stop. But if you have a great team with some initial success under your belt, and money will make the difference, can you make it in Chicago?
Ed Chandler of DFJ Portage has been in VC since the 1980's. Traditionally, capital flowed out of Chicago to the coasts. He has seen significant changes. The Tech Bubble fueled inerest around the country in what entreprenuership could produce in terms of yield. At the same time, the Internet created inforamtion flows that let startup companies gain insight and go beyond constraints or need for the Silicon Valley infrastructures.
The problem he percieves with Chicago has been a lack of [experienced] people willing to stake their careers on startup companies. The tech boom put people intot the entreprenuerial environment. The success of initial companies begets more similar companies. This leads to a much more prepared and better informed community.
Kapil Choudhary of Illinois Innovation Accelerator's Fund (I2F) says there is significant buying power in the large corporations based in Chicago. The ITA and CEC provide resources for connecting.
On the consumer side, he hasn't seen people or companies spin out in Chicago. This is despite the fact that large companies target Chicago when they go to market with new consumer goods. Chicago is seen as a great advertising market and a bellweather for consumer marketing.
He agreed with Chandler that you don't see as many people taking startup risks, but that is increasing now.
Brett Maxwell of MK Capital says "we do business on the coasts, but we aren't just on the two coasts. We like Midwest values." He sees Chicago as being the second or third target for expansion offices. But he says that it's hardest finding talent to run the companies, noting proven sales and marketing talent. He closed with these damning words: "there probably is not enough of that DNA in these communities to drive companies to success in the market."
Chandler replied to that last comment, saying that there is a cycle. Management talent leads to good engineering talent and marketing talent. These teams are required for successful exits. More successful exits drives more capital into the community.
When moderator Paul Catalano asked "What are our biggest gaps?", Mark Glennon from Leo Capital also countered with many of Chicago's strengths. We are ahead of the curve, especially in consumer-oriented businesses. Chicago had historically strong retail presence with Sears and Wards, now Walgreens. The West Coast doesn't like direct consumer plays. Chicago is strong in wireless radio, with talent from Motorola and Lucent. Chicago has been successful in Financial Services markets. He sees many talented 2nd and 3rd generation entreprenuers. The gaps between Chicago and the coasts are closing.
Catlano asked the panel their opinons of Chicago's local entreprenuerial talent.
Chandler said that Chicago is the center of a larger and more diverse economy, with a mix of old and new businesses. "If we have a compelling opportunity set, we will be able to attract the needed talent. We have brought two or three CEOs back to chicago to build." Increasingly you will have strong, proven local talent to run companies.
Choudhary pointed out that the University of Illinois is producing top engineers. Paypal, You Tube were created at U of I. They achieve success and leave. However, for the most part, as you achieve success, you get more successes. He sees companies coming up with "Orbitz DNA". The recent Feedburner exit will produce more new ventures.
There were three panels:
1. Raising Equity -- Venture Capital firms talk about funding Chicago entreprenuerial companies.
2. Maximizing Equity -- Successful CEO's of funded Chicago firms.
3. Sweat Equity -- Leaders of Chicago startups in various stages of development.
What the investment bankers said about venture capital investing in Chicago:
Ultimately, this was a lot of what we already know -- VCs are primarily looking situations where money will enable a proven team to scale up a proven concept into a national or international marketplace quickly. If you are a guy (or a gal) with an big idea, VCs probably aren't your first stop. But if you have a great team with some initial success under your belt, and money will make the difference, can you make it in Chicago?
Ed Chandler of DFJ Portage has been in VC since the 1980's. Traditionally, capital flowed out of Chicago to the coasts. He has seen significant changes. The Tech Bubble fueled inerest around the country in what entreprenuership could produce in terms of yield. At the same time, the Internet created inforamtion flows that let startup companies gain insight and go beyond constraints or need for the Silicon Valley infrastructures.
The problem he percieves with Chicago has been a lack of [experienced] people willing to stake their careers on startup companies. The tech boom put people intot the entreprenuerial environment. The success of initial companies begets more similar companies. This leads to a much more prepared and better informed community.
Kapil Choudhary of Illinois Innovation Accelerator's Fund (I2F) says there is significant buying power in the large corporations based in Chicago. The ITA and CEC provide resources for connecting.
On the consumer side, he hasn't seen people or companies spin out in Chicago. This is despite the fact that large companies target Chicago when they go to market with new consumer goods. Chicago is seen as a great advertising market and a bellweather for consumer marketing.
He agreed with Chandler that you don't see as many people taking startup risks, but that is increasing now.
Brett Maxwell of MK Capital says "we do business on the coasts, but we aren't just on the two coasts. We like Midwest values." He sees Chicago as being the second or third target for expansion offices. But he says that it's hardest finding talent to run the companies, noting proven sales and marketing talent. He closed with these damning words: "there probably is not enough of that DNA in these communities to drive companies to success in the market."
Chandler replied to that last comment, saying that there is a cycle. Management talent leads to good engineering talent and marketing talent. These teams are required for successful exits. More successful exits drives more capital into the community.
When moderator Paul Catalano asked "What are our biggest gaps?", Mark Glennon from Leo Capital also countered with many of Chicago's strengths. We are ahead of the curve, especially in consumer-oriented businesses. Chicago had historically strong retail presence with Sears and Wards, now Walgreens. The West Coast doesn't like direct consumer plays. Chicago is strong in wireless radio, with talent from Motorola and Lucent. Chicago has been successful in Financial Services markets. He sees many talented 2nd and 3rd generation entreprenuers. The gaps between Chicago and the coasts are closing.
Catlano asked the panel their opinons of Chicago's local entreprenuerial talent.
Chandler said that Chicago is the center of a larger and more diverse economy, with a mix of old and new businesses. "If we have a compelling opportunity set, we will be able to attract the needed talent. We have brought two or three CEOs back to chicago to build." Increasingly you will have strong, proven local talent to run companies.
Choudhary pointed out that the University of Illinois is producing top engineers. Paypal, You Tube were created at U of I. They achieve success and leave. However, for the most part, as you achieve success, you get more successes. He sees companies coming up with "Orbitz DNA". The recent Feedburner exit will produce more new ventures.
