Thoughts on being a startup in Chicago: 3 tips for entrepreneurs Mike | January 25th, 2010
In March, Ross and I will be hosting a talk at South by Southwest; it’s called “Third Coast: How to be a Startup Outside of Silicon Valley.” We have been thinking a lot about this lately and discussing the challenges we have faced on our own path. When we first conceived of the idea that would ultimately become crowdSPRING, we never even discussed the possibility of starting the company anywhere but Chicago – it never occurred to us that we might have an easier go of it elsewhere, or that we might be able to tap into resources not available to us here. We live in the Chicago area. Our families live in the Chicago area. Our friends live in the Chicago area. Why go elsewhere? This is a question that all entrepreneurs should ask themselves as they are moving their idea towards a reality. Are you better off staying where you are, or could you benefit by moving it to Mountain View or Palo Alto?
In our thinking, it boiled down to 3 tips we’d give to entrepreneurs considering whether to locate somewhere outside of Silicon Valley:
- Make sure that the business itself is a viable idea and that there is a market for your product or service.Research, research, research.
- Be sure that your location will provide the resources and knowledge you will need to launch and sustain your startup.
- Surround yourself with smart people to help you execute. Find them wherever you choose to locate – track them down, sign them up, and put them to work!
Many of the challenges startups face are common no matter where the company chooses to locate. Three important factors that founders have to consider (no matter their location) are networks, funding, and talent. Here’s how we viewed each of these:
- Networking was critical to us. Neither of us had ever started a company before and neither of us came out of the tech industries. So we made a great effort to introduce ourselves to those who had the experience and knowledge we lacked. Fortunately Chicago has a reasonable pool of these types and we found that most were very generous of their time and willing to share their knowledge.
- Funding, too, was a challenge. The number of VC firms located here and funding Chicago companies was tiny compared to the number in Silicon Valley (or New York and Boston for that matter). Nor was there a widely established network of Angels with a track record of supporting local companies. Our hurdle was to develop our own network of investors and we did this the old-fashioned way: one degree of separation at a time.
- Finally, recruiting talented workers has been an ongoing concern. For instance, the pool of software developers is not as deep here as it is in Silicon Valley, and finding the right people, with the right skill-set can be daunting.
We did adjust our own funding strategy to accommodate our location and decided early on that VC money was not for us in the seed round and that we would pursue high net-worth individuals to join us (see my post from last year “Thoughts for small businesses and startups on raising capital “). So, we started out with a simple strategy: we opened our own address books and started scanning for people who we thought might be interested and have the resources to invest. We knew that it was critical to get one or two early-birds on board and leverage these people to broaden the network of folks who fit our criteria and could afford the investment and the inherent risk.
We were very fortunate to get a couple of early “adapters” committed to investing and these folks became cheerleaders for us and for the venture. They introduced us to others in their own networks; they set up meetings for us to make our pitch; they gave us invaluable feedback on our ideas and our business plan. And most importantly, they lent us their own credibility when we were trying to get others to commit.
In the end we did our raise with 16 wonderful, value-adding investors, all of whom live in Chicago and all of whom bring a wealth of experience and knowledge which they share with us generously.
So, once again, the top 3 tips we’d give to entrepreneurs considering whether to locate somewhere outside of Silicon Valley? First: Make sure that the business itself is a viable idea and that there is a market for your product or service. Research, research, research. Second: Be sure that your location will provide the resources and knowledge you will need to launch and sustain your startup. Third: Surround yourself with smart people to help you execute. Find them wherever you choose to locate – track them down, sign them up, and put them to work!
And… if you plan to be in Austin this year for SXSW, please be sure to come and participate in the talk!