I gave a talk yesterday at the Chicago Startup Forecast. Here’s a rough transcript, with slides.
This is Daniel Burnham. He was a famous Chicago architect, responsible for some of our city’s most beautiful buildings. He’s known for his influential Plan of Chicago, which foresaw modern city planning, and he was a key organizer of the World’s Columbian Exposition, also known as the Chicago World’s Fair of 1893. Chicago beat out New York, DC and St. Louis for the privilege of hosting that World’s Fair.
Back in those days, world’s fairs were more common than they are now. In 1889, a few years before Chicago’s fair, Paris held an Exposition Universelle. It was a big deal — 32 million people visited! — and its main attraction was the brand-new Eiffel Tower, formally introduced at the event. At 984 feet, it was the tallest man-made structure in the world, a position it held for more than 40 years. You might imagine how exciting it was for people to witness something so tall, in an era when the tallest man-made structure in a town was probably a church steeple.
Back in Chicago four years later, Burnham and his team were plotting: how could their World’s Fair showcase something more impressive than the Eiffel Tower — something that would “out-Eiffel Eiffel”?
The obvious answer was to build something taller. If they could build something 1000 feet tall, or 1100 or 1200, surely it would be more impressive than what the French did. But to Burnham’s credit, he refused to play by those rules, pushing his engineers to come up with something genuinely new.
One engineer on Burnham’s team had an idea: instead of a stationary tower, why not build something that moved? Something that people could ride around in, that was still tall but not tall for the sake of being taller than the Eiffel. The engineer’s name was George Ferris; you see where this is going.
So Ferris and team built it: the world’s first Ferris wheel. It was a huge hit, providing great views of the city plus a sense of danger (“This thing can’t possibly be safe, can it?”). People all over the world immediately copied the idea. Even today, there are parts of the world where Ferris wheels are called “Chicago wheels.”
Here’s an important detail about the Ferris wheel. Its height was only 264 feet — just over a quarter of the height of the Eiffel Tower. But it was still a huge success, because of how different it was. Instead of playing by somebody else’s rules — taller equals better — Burnham, Ferris and team dared to change the rules.
Fast-forward to Chicago today, with our nascent tech startup scene. I argue the biggest problem we have is one of branding. What is the Chicago tech identity? What’s our style? Why would somebody move here to start a company, or (if they’re already here) stay here as opposed to moving to the Bay Area?
Let’s try to understand the perspective of such a person. If a startup founder wants to find out what the Chicago tech scene is about, they’d likely stumble upon Built in Chicago, a site devoted to promoting local startups. Last week, Built in Chicago released its 2013 Chicago Startup Report. It starts with this:
“2013 was a good year for Chicago startups,” it says. “The total funding raised in 2013 was 169% higher than 2012 and was distributed across more than 150 different companies. Dollars from exit events were up markedly as well, with an increase of over 300% from 2012.”
It goes on to enumerate the amount of funding raised, the number of exits and the amount of money made from exits.
“78 companies raised $1M or more,” it boasts. “Last year, 18 companies were acquired and one company went public. These exits totaled over $3B.”
This, my friends, is Chicago playing by somebody else’s rules. This is us trying to top the Eiffel Tower by building a taller tower.
You can imagine a startup founder’s reaction to this Startup Report: “OK, so Chicago clearly values the raising of venture capital money. The goal here is to raise a lot of money, then either go public or sell your public for a lot more money.” The Chicago Startup Report says that, loud and clear.
You can imagine the startup founder’s follow-up thoughts, too. “How exactly is this different than Silicon Valley?”
The answer is, by those particular measures, it’s unequivocally worse. I’m sure many of you saw this (admittedly link-baity) blog post back in June, “Chicago Is Not Going to be the Next Silicon Valley.” CB Insights, a company that tracks investment data, ran the numbers and found that Chicago’s VC funding levels have been flat.
Of course, if we’re going to be the next Silicon Valley, we’ll at least have to overtake New York in VC activity before we overtake California, right? Unfortunately, the numbers indicate that’s not happening.
Granted, that blog post is now seven months old. But I don’t think things have changed dramatically since then. Let’s not fool ourselves. We’re not a hotbed for VC activity.
Not only is Chicago playing by somebody else’s rules, it’s failing miserably. We’re not only trying to top the Eiffel Tower by building a taller tower — we’re failing to build something even a quarter as high.
So let’s think back to that fictional startup founder. “OK, Chicago doesn’t have quite as much VC activity as the Bay Area, or even New York. Is there something otherwise unique about Chicago? Perhaps certain types of industries work particularly well there?”
Cities have reputations in the startup world. The Bay Area is great for consumer-facing Internet (among other things, of course). If you’re building an entertainment company, you’d do well to move to Los Angeles. New York is a mecca for finance, fashion and media. Boston has carved out a niche in biotech.
What’s Chicago’s industry? And please don’t say “group coupons.”
The answer is, there is no single industry. Our mayor even said as much at 1871 recently:
You can’t argue with Rahm. (In more ways than one.) We are diverse here, and that’s great for our economy — but not so great for marketing our city. “We’re pretty good at a lot of things” makes people’s eyes glaze over.
So what can we do to differentiate ourselves? There are many options, but here’s one I think is particularly strong.
Chicago is great for bootstrappers. Let’s take advantage of that.
“Bootstrapping” has a few different connotations, but what I specifically mean is: small companies with a couple of people, likely developers, who take no outside investment money. They build products because they love the work, the craftsmanship, the pride in building and creating.
They want to make a good living, but, just as important, they want freedom — financial freedom, of course, but equally importantly freedom from people telling them what to do (bosses, investors, etc.).
They want to build solid, revenue-generating businesses without the need for an exit. It may be a hard concept for Bay Area types to understand, but for these types of people, building things, and serving customers, are themselves the reward. If you love building, why wouldn’t you want to do it sustainably, for the long term?
They don’t necessarily want to “change the world,” as the cliche goes. Let’s recognize Silicon Valley ambition for what it is, 95 percent of the time: exaggerated BS. Maybe this BS is designed to persuade investors, maybe it’s designed to persuade potential employees, maybe it’s for persuading users of your product. Either way, for an Internet startup to say “we’re going to change the world” is likely phony. Odds are your company will improve a small number of people’s lives. We’re Chicago, we’re honest people — why are we falling for this?
Why is Chicago the best place in America for these people? Because the bootstrapper’s mentality is precisely aligned with the temperament and style of Chicagoans (and, more generally, Midwesterners). We appreciate the satisfaction of a job well done, we eschew BS, we’re realists.
Combine that cultural norm with Chicago’s supportive community, its wealth of food/music/theater/comedy/architecture, and its low cost of living compared to SF/NYC/DC/Boston, and you’ve got a prime environment for bootstrappers.
And the thing is, it’s already happening. Chicago is already home to fantastic companies that are doing their own thing, refusing to play by Silicon Valley rules.
The best example is 37signals. Not only is it a successful company, with great products and a team that’s devoted to these ideals of craftsmanship — I’d argue it’s the most well-regarded Internet company from Chicago among startup types. And they’re unabashed proponents of bootstrapping, even going as far as maintaining a series of interviews called Bootstrapped, Profitable and Proud.
A less conventional example is Cards Against Humanity, a wildly successful card game made by a group of friends who took no outside investment. Their game has consistently hovered at the top of the Amazon best-selling toys and games list, and their freedom from investors and refusal to play the VC “game” has let them do incredible things. I highly recommend Max Temkin’s XOXO talk about company values; it fits the Chicago/bootstrapping philosophy perfectly.
Lots of other bootstrapped, one-or-two-person companies are cropping up here, including:
Draft, a web-based tool for writers — made by one person, Nate Kontny.
StatHat, a great way for companies to track time-series stats such as server performance — made by one person, Patrick Crosby.
Wizard, a Mac app that makes data analysis super easy — made by one person, Evan Miller.
Soundslice, a modern approach to guitar tabs and sheet music — made by me and PJ Macklin.
My friend Evan Miller jokingly made a great slogan for this new Chicago bootstrapper scene: “Chicago: Be your own Boss.” (That’s a tongue-in-cheek reference to our tradition of political bosses.) Evan also wrote a wonderful essay called Marketing Your Startup Hub that inspired me to write this talk.
I challenge you to consider how we should be defining our city in the Internet startup world. The Eiffel Tower has been built — it’s in Silicon Valley, and it’s quite tall. Should we be playing by their rules, or changing the game?
POSTSCRIPT: I’ve been amazed at the positive reaction to this talk, both in person and after the accompanying Trib article. The main objectors are VCs and people running companies that have raised VC money — which is not surprising.
It takes courage for a city to rally around one particular theme, and we’re bound to alienate people who don’t have the same view. Do we have the courage?