Silicon Prairie Redux: Will Chicago’s Tech Boom Last?

After years of hype and hope, is the city finally building a tech sector to be reckoned with?

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1871
Inside 1871, ground zero for Chicago’s burgeoning tech “ecosystem”
 

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On a late-July afternoon, a 50,000-square-foot space on the 12th floor of the Merchandise Mart buzzes with activity. Just past the reception area, baristas whip up frothy lattes at a sleek Intelligentsia coffee bar. At tables scattered about the main room, knots of people lean into intense conversations and tap away at laptops. Scruffy-chinned, T-shirt-wearing 20-somethings zip across the concrete floor on Razor scooters.

This place, with its whiff of freewheeling Silicon Valley, is a digital entrepreneur’s fever dream. Shared office space for as little as $250 a month? Check. Deep-pocketed venture capitalists strolling the halls? Done. Sessions with seasoned advisers—lawyers, marketers, academics—right onsite? Got that too. Toss in a programmers’ academy and the kind of cheek-by-jowl proximity to fellow entrepreneurs that can foster serendipitous collaboration and you’ve got just about everything a promising tech startup could need to succeed.

That’s the plan, says former Google executive Kevin Willer. He heads the nonprofit Chicagoland Entrepreneurial Center, which runs the five-month-old space, called 1871 (the year the city started rebuilding after the Great Chicago Fire). When Willer talks about 1871—home to more than 160 startups and backed by the likes of venture capitalist J. B. Pritzker and the State of Illinois—his urgency is palpable. “We’re competing with New York, we’re competing with Silicon Valley, we’re competing with everyone,” he says of Chicago, “and we’re behind.”

Why this matters so much to so many people here right now is clear when you look at the numbers. A record 193 tech companies were launched in the area last year, five times as many as in 2008, according to Built in Chicago, a networking site for tech pros. This boomlet is happening against a sobering backdrop. Since 2000, the Loop has lost 18 percent of its jobs. The city’s 9.8 percent unemployment rate, while improved from last year, still exceeds the national average by 1.5 points. And let’s not get into the massive government deficits piling up in the city and the state.

A thriving tech sector could add thousands of jobs and millions in tax revenue, helping to turn those numbers around. And there is still considerable room for growth. Chicago-based tech companies attracted $488 million in venture capital in 2011, according to Dow Jones VentureSource (see chart at right). That’s scarcely a fifth of what flowed to New York City ($1.8 billion) and a fl yspeck compared with what got invested in Silicon Valley ($8.2 billion).

No wonder Mayor Emanuel told a crowd gathered at the Techweek conference in June that he intends to make Chicago “the digital mecca of the Midwest”—sounding remarkably like his predecessor, who once declared that he would make the city “the nation’s high-tech hub in the 21st century.”

Since Emanuel uttered those words, however, much of the tech news has been less than rosy. In mid-August, Google announced plans to cut 4,000 jobs worldwide at recently acquired Motorola Mobility, which is preparing to move its headquarters from Libertyville to River North. A week later, Groupon, Chicago’s great digital success story, saw its stock price scrape $4.65, less than a quarter of its November 2011 IPO price. All of which has Chicagoans wondering: Is our city capable of building a sustainable and dynamic tech sector, or is Silicon Prairie just an eternally distant fantasy?

 

Photography: Anna Knott

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