Reboot 2.0: Innovating in Illinois and the Midwest

opportunity

Illinois and the Midwest find themselves at a unique intersection as the 21st-century economy takes hold. The region has the assets and the willpower to forge a thriving future. But social structures born in our past challenge the structures the region needs to seize its potential.

There is much to suggest things will work out. From the ashes of the dot-com implosion, Chicago’s civic leaders banded together to create a thriving — and sensible — entrepreneurial ecosystem with remarkable legs. When things blew up, the digital economy was the interest of a few anointed experts. That had to change, and still does.

Hypothetically, for my home state to reach the future it wants, Illinois’ innovation network would need the attention of political leaders, university tech transfer offices, financial backers, corporate citizens, civic and social institutions, and many, many energized, enthusiastic entrepreneurs.

We have all those things.

But our 15-year reboot deserves another upgrade: Reboot 2.0 must build on the collaborative success of our last push, and reach into new corners of the economy to broaden the skills and energy necessary to build the future.

After years of writing about social networks and innovation in Illinois, exploring it among startups and venture capitalists, and listening during scores of interviews and dozens of candid conversations with funders, founders, incubators, entrepreneurs, officials and hopefuls, here are six areas I think Illinois needs to consider:

Cooperation

Where personal relationships exist now, more formal structures need to grow. There needs to be more connection between Chicago and Champaign, Chicago’s downtown and its neighborhoods, Illinois and our neighbors, the Midwest and the Coasts, hardware and software, among incubators and co-working spaces, and among the parallel efforts in everything from clean tech to corporate venturing.

There’s a role government could foster in convening conversations. So too, market players can identify and act on common interests that lead to mutual benefit. I can think of a few of those interests, and a few instances where it’s already started to happen. It needs to happen more.

Chicago’s power-broker past can lead to sharp elbows and zero-sum thinking. That doesn’t have any place here, now. With the kinds of opportunity and array of assets that Illinois and our neighbors share, a rising tide won’t just lift all boats — it can let in new sources of water.

Corporate venturing and partnership

What the Midwest lacks in growth-stage private investors, it makes up for in locally-based corporations hungry for partnerships and external innovation. Corporate venturing and mentorship like that highlighted by the Illinois Startup Challenge or at places like Chicago’s TechNexus offer an intriguing model for big-business-to-growth-business investment. “B-2-b,” if you will. Capital-case and lower-case.

Scaling that premise will require more than state-fostered pilot programs: It will require more engaged corporations and better-prepared startups, and the web of services each will need to reduce uncertainty.

Promote business fundamentals, not just growth and profitability

Illinois’ innovation model needs a moment of sober reflection about what a successful company is. And it may be that success isn’t defined by the hockey stick growth requirements of West Coast venture capital funds.

Part of the reason is that Illinois can’t replicate it.

At least for now, Illinois and the Midwest must foster a deeper connection to venture funders in other time zones. But we should also cast a wider net for follow-on funding sources that include corporate partners, banks, private equity or crowdfunding.

Here’s why:

Illinois has proven adept at creating a startup funding environment of angel investors and, more recently, a growing base to rally crowdfunding resources. But because follow-on investors don’t exist here in sufficient numbers, a function of Illinois funding has affected form:

Without sufficient local investors to fuel growth-stage companies, Illinois funders have been forced to put seed money into companies that look more like the software startups chasing Series B and C rounds on the East and West Coasts. In other words, companies that aren’t like Chicago companies, which in our case happen to build stuff, move stuff, and hire people.

Chicago is the natural home of successful bootstrapping, big-and-steady private equity funding, and a diverse economy. We shouldn’t fear an entrepreneurial ecosystem that feels like that, too.

Examine intellectual property laws

Silicon Valley grew out of Fairchild Semiconductors, thanks in part to a relatively permissive California legal environment that allowed former employees to start business-to-business startups to solve pain points at their former mothership — without running askance of non-compete clauses. Illinois does not have the same legal structure, and what structure it has is deeply conflicted after several recent court rulings. Other states are trying to make those laws clearer.

Should change happen? Maybe or maybe not, but clarity could be considered. And if Illinois wished to follow the most important lessons of the Valley’s success, it wouldn’t have to rely on an industry cluster built around technology. It would have a creditable shot at clusters in medical devices, biopharma, finance, and insurance.

Data analytics

Illinois’ government could benefit from a more systematic look at its data architecture, possible ways to organize it in the future, and pathways to make itself more efficient, productive and helpful to its citizens.

And it’s not just a public-sector opportunity. There are benefits to be had at our cultural institutions, and at many of Illinois’ 33 Fortune 500 companies, to say nothing of other regional economic engines.

Not only could all of those players do better at what they do now, they have the chance to position themselves and their workforces for a future being envisioned in, among other places, Illinois’ Digital Manufacturing and Design Innovation Institute on Chicago’s Goose Island. The future — the near future — will be one in which sensors and connected devices send ever-larger streams of data into the ether, creating the opportunity for more diverse business models.

Prepare our workers

Innovation is neither good nor bad of itself. It will create new opportunities, but destroy others. The future of work is digital, technical, and will involve abstract problem solving on one hand and precise execution on the other.

As our economy changes in lumps, fits and starts, there is an opportunity to turn the nation’s former industrial center to a new footing that embraces the industries of the future. Digital manufacturing, the internet of things, and software-enabled hardware are only the beginning. That growing future will require support infrastructure, new business models — and new education models.

There’s a chance for visionaries to close the gap between current society’s have’s and have-nots — or else, through inaction, to allow it to explode.

With innovation, there always will be opportunity. What remains for Illinois to decide — ideally collectively — is whether that opportunity will inspire everyone, or be a countertrend.

– James Janega

@JamesJanega

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2 thoughts on “Reboot 2.0: Innovating in Illinois and the Midwest

  1. Thanks for putting a lot of related thoughts into a single post about what Illinois needs. I would argue that our opportunity is to position Illinois not as the “next Silicon Valley” but as the antidote to Silicon Valley – especially as it relates to building real, useful companies and creating an inclusive environment. Our ecosystem is still new enough that we have the opportunity to shape it with paths to connect entrepreneurs beyond the usual suspects with funding and support networks, where employees find themselves valued and promoted for their diverse perspectives stemming from very different life experiences (and I don’t mean Stanford vs. Harvard). How exciting would it be to make inclusion and diversity a strategic advantage for Illinois?

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