Is Chicago a Hard Startup Town? Catapult's Galen Mason Weighs In

chicago-shadow

There was a recent post in Built in Chicago on 3 Reasons Chicago's a Hard Startup Town. Catapult co-founder Galen Mason weighs in, and shares his own counterarguments.

I recently caught the post by Jason Henrichs citing 3 reasons why Chicago is a hard startup town. I agree it is a hard(er) town but I disagree with two of the reasons - "elusive follow-on capital" and "lack of a main tree." I do agree "wanna-preneurship" is a problem - but even that's a cool thing to have en vogue (some will get serious) to a point.

In my experience, follow-on capital is DEFINITELY there - IF there is a true venture fundable business. That is, a seed or Series A company that's found an exploitable market. Just to name a few, Drive Capital, Jump Capital Partners, and (lookout after GrubHub's IPO) Origin Ventures will, in my opinion, gladly rush to meaningfully back a business that's got traction. These folks can write big checks and have the network to syndicate even bigger checks. And that doesn't even consider what happens if/when Chicago's gargantuan bench of private equity LBO shops see their market - traditional manufacturing and service businesses - mature and need reinvigoration by guess what? Technology.

So, what more funding do we need? None - not yet.

What we do need is more "no BS" (see wanna-preneurship) founders finding the plethora of new world exploitable opportunities. Two billion (B!) people online and the cost of starting a business that reaches ALL of them is less than the price of a Lakeview condo? Done and done IF we have people that can dream AND operate, not just cheer.

When things aren't working it's really convenient to say "man, if I could only get that Series A or B..." But rarely is it a lack of capital holding a company back. Capital investments are increasing here by the way - see 2013 Chicago Startup Report.  The more likely reason is the lower density of fat investment targets (Series A company with crazy traction) - but the pipeline of prospects there is increasing too - see again 2013 Chicago Startup Report. Markets are efficient. Ours is just getting started.

I believe our greatest problem is cultural. This explains a lot about why we're simmering and not exploding - yet.

Chicago's deepest resources - resources as deep as any place on earth - are American businesses and their business infrastructure itself; deep in house and external insights on problems with existing businesses. Our "main tree" is the earth itself. We have more of what software is dissolving (or turning up the fidelity on - depending on how you look at it) than a thousand serious startups could even begin to capitalize on. Huge consumer, finance, healthcare and manufacturing businesses as well as armies of service providers (lawyers, accountants, etc) that could - if they too dream a bit - increase the frequency and depth of connections to the innovation world all call Chicago home.

Yet there's that cultural barrier... Chicago business executives and its service providers don't know startups because they've never been here before en mass (Divine doesn't count) and staffed by real brains working hard solving real problems. To a Chicagoan, be they an employee in need of a new software tool or a potentially brilliant angel investor loaded with insight and connections, a Chicago startup is a F-up because that's what - on the whole - they have always been. That is no more. Those serious few (and growing) are closing deals - sales and investment.

I agree with Henrich's third criticism - Wanna-preneurship. Wanna-preneurs risk scaring the corporate groundhog back underground for another decade. The fanfare is awesome but there must be meat - profits, efficiency, ROI - to attract the deep local resources and eventually the investment capital wherever it originates from.

So for those of you that will take a risk and pass up that good paying steady gig to take a shot - be real, be serious, and just put your heads down and solve a problem you're relentlessly passionate about. The money will come.

Galen Mason is a co-founder of Catapult Chicago and an attorney at Catapult sponsor Foley & Lardner.