Growth in jobs and incomes comes most from small innovative start-up firms, and Chicagoland simply has a paucity of them compared to 'peer' metros. This is, in my view, Chicago's most serious problem. I think the next governor needs to make this his/her focus.
Knowledge economy should know no bounds
January 30, 2006
BY MICHAEL KRAUSS Advertisement
Leaders of Chicago's tech community convened recently to debate the direction of Chicago's knowledge economy. The discussion was intense. No obvious solutions resulted, but several key issues and themes emerged.
With the restructuring of the nation's automotive industry and Ford's announcement of 14 plant closings and 30,000 job cuts (though none in Chicago), the debate over Chicago's knowledge economy takes on greater meaning.
According to estimates by McKinsey & Co., Chicago is the nation's sixth largest knowledge economy with $38 billion in annual gross metropolitan product. McKinsey estimates knowledge economy GMP across the top 50 metropolitan areas grew at 4.2 percent annually from 2000 to 2005. Chicago grew at about 2.4 percent. McKinsey anticipates Chicago will grow at 3.5 percent from 2005 to 2020. If Chicago can boost that growth to the expected U.S. average of 5.4 percent, our region will score an incremental $21 billion in annual GMP by 2020. That's the opportunity.
Searching for a roadmap
How to get there is the reason for the debate, which was convened by TiE (The Indus Entrepreneurs) a leading tech entrepreneurship group.
"Entrepreneurship is a critical driver of wealth in this country," says TiE President Adarsh Arora, the debate organizer. "Our key advantage is innovation, which needs continued nourishment."
There was no disagreement on that point from the panel, which included Ellen Carnahan of Wm. Blair Capital Partners; Tom Churchwell, Arch Development Partners; Jerry Mitchell, Midwest Entrepreneurs Forum; David Weinstein, Chicagoland Entrepreneurial Center, and Jack Lavin, director of the Illinois Department of Commerce and Economic Opportunity.
A shortage of early stage investment capital and too few experienced entrepreneurs were recurring themes.
"There are not enough folks with early stage bets," Arch's Churchwell said, suggesting more VC's put money into developing companies. But Carnahan observed it's not just a Chicago phenomenon. The percentage of dollars invested in early stage ventures totaled 43 percent of all private equity investments in 1995, and fell to 22 percent in 2005. It's a national issue, which could harm our global competitiveness.
"We have a venture capital gap," DCEO's Lavin agreed. The Blagojevich administration sought to close the gap with a $200 million Illinois Opportunity Fund that has not passed the General Assembly. Lavin said he came to "listen and learn," and suggested the state's budget situation creates challenges.
Lavin referenced the importance of the state's efforts backing BIO2006 and the new technology park in Skokie.
Talent is a key factor in multiple ways. "I don't see enough serial entrepreneurs," said the CEC's Weinstein, while the MEF's Mitchell lamented, "I don't see enough business plans."
Matt McCall, managing director of Northfield-based Draper Fisher Jurvetson Portage, pointed out that Chicago-based FeedBurner, a local startup "growing at 10 percent a week," is having difficulty finding skilled technology talent.
Weinstein pointed to Chicago's financial exchanges and the successful startups emerging from them. He urged greater focus on the financial services sector as an area of opportunity, and the educational efforts that would transform wealthy exchange traders into angel investors.
The panel agreed it's the responsibility of the private sector to help Chicago organize and capture the growth opportunity. The panel didn't name names or propose structures for organizing private sector initiatives to catalyze the effort.
Harold Lucas, who is president of BronzevilleOnline (www.bron-zevilleonline.com) pointed to the need for African-American representation in the dialogue.
Lucas asked, "What are we going to do collaboratively about the lack of African-American involvement in entrepreneurship in Chicago?"
Entrepreneurial Center
One new proposal gaining momentum is the idea of creating a large scale "Entrepreneur Center of Excellence." While still just a concept, the center would be regional and staffed by successful entrepreneurs providing deeper expertise than the current ITECs. The ITEC model was seen as too diffused and unable to deliver.
TiE's Arora said, "The glass is half-full. It will take major rethinking and commitment by our civic leaders to make a dent in the current situation. A lack of action will result in serious losses for our state."
Michael Krauss is a Chicago area tech writer and consultant.> |
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