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OPINION: Why it's time for Chicago's tech scene to get serious

Fred Hoch, CEO of the Illinois Technology Association, analyzes Chicago’s tech community and lays out his plan for making it better.

In our tech community, we tend to get excited about the new stuff – the new incubator, the new startup, the large exit. Because we’re young, we haven’t become blasé about the next big thing.

Our relative youth also means we still have the chance to shape our identity. And as promising as the big score is, it’s important to look past the app of the moment to those areas that play off of our strengths. Chicago will be stronger if our talent is focused on transforming industries — not delivering cupcakes faster.

Over the next several weeks, I’m going to provide an overview of Chicago’s tech scene, describing where we stand vis-à-vis the Silicon Valleys and Alleys of the world. I’ll detail our current status, what our goals need to be if we truly want to be considered a tech powerhouse, and the metrics that are most important for evaluating our success. To start, a view from 30,000 feet.

The Market

Each community has its own attributes. From Silicon Valley to Austin to Boston to Taipei, success has largely been determined by unique factors that make up those communities.

Replication of those factors is impossible. Do we have Silicon Valley’s history or Boston’s biomedical resources? No, but we have our own history and our own research hospitals. Does Derrick Rose try to be Michael Jordan? No, that would be a fool’s errand. He strives to be the best basketball player he can be. He’s still an All Star — just different. So too is Chicago.

Today’s thinking has focused on building a consumer technology industry, ignoring the plain fact that we are a B2B technology capital. If we are to build the kind of tech community that creates jobs and prosperity, we must direct our talent and resources towards the area where we have the greatest opportunity: transforming industries.

In verticals such as financial services, marketing/advertising, manufacturing, real estate, travel and healthcare, Illinois is home to the companies that are leading the digital business revolution. These companies provide technology solutions that impact the entire nation. Just because they’re not always coded by kids in T-shirts doesn’t mean they aren’t valuable contributions.

The Current State

So where do we stand today? Chicago has five essential assets and four resources we need to make the most of those. They are as follows:

Startups: It’s time to get real. We need to do all we can to help promising startups succeed, and we need to make it easier for the others to fail fast. The last few years have seen a tremendous increase and great exposure for startups through infrastructure from ITA, TechNexus, 1871, TechStars and Built in Chicago among others. While we’ve had a quantity increase, we are just now seeing a focus on quality. How many startups are going to get to the $2M in revenue milestone? How many should be folded into other enterprises?

Growth Stage: The backbone of Chicago tech, we continue to lead the nation with more than a thousand such companies. These organizations make money, drive revenue and increase business. They are not always ‘sexy’ or the next big thing, but as these companies take on more talent and capital, their growth will lead to thousands of job — not hundreds — and billions in revenue. They are shaping Chicago’s national tech identity at a time when the industry is looking to these technologies to “eat the world.” With proven revenue streams and customer bases, we can expect a majority to succeed — not just a lucky handful.

Industry leaders: A host of local companies from Orbitz to Groupon have had a leading impact on the national industry. Still, Chicago is missing a true platform company that spawns startups built on their technology and redefines the industry. There are several potential contenders right now, but we fall short of legitimate success stories.

Corporate Leaders: Chicago has MASSIVE resources in this realm, owing to a strong history of corporate growth. But these companies won’t remain leaders if they don’t embrace technological reinvention. Can we build on our domain expertise and drive the digitization of business across the nation? If we do, we will leapfrog the industry.

Universities: Bursting with potential. Our universities are demanding and driving deeper connections with the industry. Now with ideas such as UI Labs and the University of Chicago’s CIE incubator, the future looks bright for such collaboration. We need a re-investment in the connections between universities and industry. Our success depends on breaking down these barriers.

And now for the four resources that feed these assets:

Talent: Companies continue to clamor for people. Most of them are falling short. That is changing with the ITA Fall Challenge, the growing number of tech schools and the mayor’s efforts through programs such as ThinkChicago. It’s getting easier to add talent on the tech and commercial side at all levels but we need to do much more not just to attract talent, but to breed and retain it. The winter’s not getting any warmer (hopefully), so those who already know about Chicago’s world-class qualities will be most likely to stick around.

Capital: It’s growing, but a lot more is required. We have been unable to tap deeply into the vast stores of wealth that 100 years of industrialization has littered across the offices of Chicago. An infusion from outside of Chicago would be tremendous for our success. But we also have to do our part — the better the startups, the deeper the capital investments.

Infrastructure: Chicago is a growing tech hub. From co-working to associations to community organizations to bike lanes, more and more is coming online. It’s time to foster deeper collaboration with companies and avoid repetitive efforts that increase the noise but not the signal.

Government: There is no public team in the world more committed to driving technology in the public sector than Chicago’s tech team. It is, for all intents and purposes, the biggest growth-stage tech company in Chicago. We need to support their efforts as that will impact the entire system and community but also help them to make sure they are doing work that drives dough, not just show.

Success in the Chicago Technology Community? Make No Small Plans.

How do we build on those attributes? In order for Chicago to be a global tech All Star, we must make no small plans. Here’s when I’ll know we’ve succeeded:

– 500 Chicago startups a year being created with 100+ moving on to the growth-phase every year.

– Over 100 companies acquired every year in Chicago with an additional 20 companies becoming active acquirers from inside and outside Chicago.

– Establishment of two platform companies that spawn a dozen startups each.

– Chicago becomes the most technological and data advanced government business in the United States.

– At least 10 Fortune 5000 companies become full-fledged technology-enabled business service companies.

– $3B+ a year in capital going to companies for five years running in Illinois.

– More than 12 million square feet of office space engaged by technology companies and eight buildings downtown with the logos of tech companies shining bright.

– Well over 400,000 individuals engaged in the local technology industry.

– Five $50M+ companies coming out of local universities and staying in Chicago.

Short of the above, we will continue to be, at best, a second city in tech. That is not going to happen if we are smart, collaborative and determined.

Can we get there? Absolutely! Will it take work? Yes. Do we have the resources? Yes.

Over the next few months, we will be going deeper into each of these and provide data and our view on the screws that need to be turned. I hope it draws ongoing dialogue in the community.

Overall, ITA is committed and determined to accomplishing the above goals and creating the partnerships needed to make that happen.