Hi Everyone:
If you don’t see me as often on DNotes and CryptoMoms forum the following article may give you a clue. I am on a mission to take DNotes to the next level.
For those of you who are unloading DNotes at 10,000 DNotes for around $100 let me share one of my bigger investment regrets; “I could have, and should have bought a bunch of Google shares when it was trading at less than $100 per share.
Google price has gone up by over 1,000% since its IPO on August 19, 2004.
Enjoy reading.
J.B. Pritzker on the City's Growth, Tech Bubbles,
& If Chicago Needs 'Sexy Startups'
Part 1 of Chicago Inno's 2-part interview with tech leader J.B. Pritzker
Growing a tech community takes exactly that: entrepreneurs, engineers, investors, government leaders, and others to build an environment where a tech ecosystem can thrive.
But when you ask people in Chicago who's been influential in raising the city's image as a tech hub, one name comes up more than others: J.B. Pritzker.
It would be difficult to find a more influential tech figure in Chicago than, Pritzker, the co-founder and managing partner of the Pritzker Group. Pritzker Group Venture Capital, founded in 1996 as New World Ventures, is the largest technology venture investor in the Midwest and has invested more than $300 million in more than 100 Chicago companies.
Pritzker chairs ChicagoNEXT--the mayor’s council on innovation and technology, and helped found 1871. He also helped create Illinois Venture Capital Association, the nation’s top regional private equity association, co-founded Chicago Ventures, and put money behind Techstars Chicago and Built in Chicago.
J.B., an heir to the Hyatt Hotel fortune who's worth about $3.4 billion according to Forbes, sat down with Chicago Inno to talk about the rise Chicago's tech scene, the need for "sexy startups," and if he's worried about a tech bubble.
How would you describe the growth of the Chicago tech ecosystem over the past 5-10 years?
Let's differentiate between, let's say 7 years ago and anything before 7 years ago. So we’ll use that as a mark. First, I would say that the growth has been phenomenal. If you showed up in 2011 or 2012, it was like you were on a different planet than you were in 2008.
It's hard to imagine the nuclear Winter--how bad it was in 2003. But it was bad. So first we should all rejoice that this is so much different than it once was. Second, from 2009-2012, the rate of ascent of Chicago hasn’t just been upward or at the same rate of ascent. It’s been an accelerating ascent. So I think one consequence of that is, if you’re an investor and you’re thinking about a community to engage in because you’re looking for investment opportunities, I can think of very few technology ecosystems around the world that have the angle of ascent that Chicago has today.
I don’t want to overstate here. If you took it in absolute numbers, Silicon Valley is in a whole 'nother bracket. But the angle of ascent in Silicon Valley is much shallower. Much shallower. If the angle is upwards and to the right by 20 or 30 degrees, the upward trajectory of Chicago looks like an increasing angle going from 30 and as you move forward in the years, to 40 and 50 percent.
Will Chicago ever be Silicon Valley? Is it even trying to? Or is that just a dumb question all together?
Let's start with, we’re not Silicon Valley. That's the statement of the obvious. And I don’t mean we're not Silicon Valley because were not as big as Silicon Valley. The environment of businesses that already exist here is different vs. the business that already existed in California at the time Silicon Valley got its legs. I don’t think we should say, 'can we be Silicon Valley?' Because it can never happen. It can’t happen. But now, with those words, I don’t want anybody to foist upon them their own view of, 'what does he mean by we can’t be Silicon Valley? We can’t be big? Can’t be successful? Can’t be deep technology?' No, I don’t mean any of those things. I mean what we develop here is our own flavor of a technology ecosystem. It's based on different technologies and different people.
I think people on the outside point to, where is Chicago's sexy startup? Where is Chicago's Snapchat, or something equivalent to that? Does Chicago need a Snapchat to make waves, or can it make its own waves with pragmatic tech that a lot of current Chicago companies have?
If you’re asking, can we have these highly successful companies that nobody pays any attention to, and have Chicago turn into a massive tech ecosystem that everybody wants to participate in? No. First of all, we should be yelling from the rooftops when we have success here. And you want the Wall Street Journal and Techcrunch to cover the success of GrubHub. And they do, by the way. So no I don’t think we can just sit and say, well it will just happen, people will quietly recognize that Chicago is successful.
Do we need, when you say the 'sexy startup like Snapchat,' well remember, Snapchat in some ways puts LA on the map, right? And just like Groupon. People said, 'oh that's in Chicago?' Nobody thought anything could come out of Chicago. So whether you love Groupon, and some people don’t. But Groupon no doubt made Chicago a town that people thought about for tech investing.
I can think of very few technology ecosystems around the world that have the angle of ascent that Chicago has today
Having said all of that, Chicago is also a town that has a certain characteristic that is kind of rooted in fundamentals. We build businesses here, generally speaking, that are focused on profitability. Revenue and profitability. Crazy notions, I know. But rather than build a technology that you’re not sure what the market will be, I think many of the entrepreneurs in Chicago, my observation, actually focus on what the market is, and the size of the market, and how they’re going to go after winning that market, how much of it they need to win, and focusing on whether their service or product will yield profit.
So maybe someone wants to scoff at that. I don’t know. But I don’t scoff at that. And I think, like it or not, that's a characteristic of Chicago-based companies. The tech companies that get started in Chicago tend to have their feet on the ground. They can be skyrockets. But they start with their feet on the ground about building something real. And think if you talk to (GrubHub CEO) Matt Maloney, he wasn’t building something that he had no idea whether they could possibly make a business out of it. He had a very definite idea of how that business should develop and what it would develop into and how it would become profitable. And it did.
Are you in the camp that is at all concerned about a tech bubble?
Well, sure. Valuations seem high. But when you say concerned about a tech bubble, I just want to be clear, there are different reasons for different people to be concerned. For investors, a concern is, am I paying up in an environment where everything is going up and then the day after I put my money down, like musical chairs the music stops and there aren’t enough chairs.
So that's an investor concern about an overheated market. A civic concern is are companies getting started that won’t be able to survive because everybody got excited about the valuations all going up and the minute they stop going up they say, I’m going to close up my pocket book and they’re not investing anymore. And then, when those A round companies go out for their B round, there's no money.
What's nice I think, is even if you contemplate that we might be in a bubble, of all the environments in which companies get started around the country, if in fact we're in a bubble and the bubble is going to deflate at some point, because the character of these businesses, I said it before, tend to be focused on revenue and profitability, we will tend to have fewer problems here. Cycles are inevitable. Things do not go straight up. And unfortunately you have to get to 50 years old and see 2 or 3 cycles to really have that beaten into your head. And you start to have pattern recognition. And you say this is what happens when valuations get high. This is what happens when valuations begin to fall. This is what an environment looks like when valuations have bottomed out. So there's a lot of concern for people who’ve never been through a cycle.
In part 2, Pritzker talks about Chicago's turning points in tech, how 1871 can evolve, and what he thinks about the Apple Watch. This interview has been edited for length and clarity.
http://chicagoinno.streetwise.co/2015/04/13/j-b-pritzker-on-the-state-of-chicago-tech-tech-bubbles-and-silicon-valley/?utm_source=newsletter&utm_medium=dd&utm_campaign=2015_04_14&ak=60b850f382f9ac6e30f0340f72814830ed072b65
