Local VCs too quick to pack it in; Chicago is at a disadvantage to both coasts, where entrepreneurs don't fear failure as some locals do
BYLINE: Brad Spirrison, Special to The Chicago Sun-Times
You do not have to be a rocket scientist to understand that it is easier to fund emerging technology businesses on the coasts than in the Windy City. But at least one area astrophysicist believes this imbalance does not revolve around a shortage of available capital or tech talent. Rather, the one key ingredient lacking in the formula for local tech-sector acceleration is seasoned entrepreneurs.
"There is a lot of venture capital money in the Chicago area," said Robert Rosner, director of the Argonne National Laboratory and aforementioned astrophysicist. "What we do not have enough of are the serial entrepreneurs."
Located approximately 25 miles southwest of the Loop within a DuPage County Forest Preserve, Argonne is a government-funded research institution with a $475 million annual budget and approximately 750 Ph.D.s on its payroll. The Lab was conceived in the 1940s at the University of Chicago as part of the Manhattan Project. Argonne exists today, Rosner says, to oversee and advance acutely technical applications no longer supported by industry and universities.
"A national lab provides the venue where applied [technology] people and industry people intermix," he said.
While companies, including Abbott Labs and General Motors, have hit commercial home runs collaborating with Argonne researchers to develop anti-HIV drugs and cleaner diesel engines, the lab's Office of Technology Transfer helps fledgling companies obtain quality at bats. Artificial intelligence software developer SmartSignal, grid computing pioneer Univa (both of Lisle) and hot nanotech company Advanced Diamond Technologies of Romeoville have collectively raised tens of millions of dollars over the past decade to fund technologies licensed from Argonne research.
Successful stories, sure, but compared with the coasts, there appears to be significant entrepreneurial development left on the table.
Rosner believes the infrastructure to create more game-changing homegrown companies based on Argonne technology already exists. The limiting factors are more sociological than financial or technical.
"It has to do with how folks who want to be serial entrepreneurs are treated," he said. In Silicon Valley and other hyper-tech centers, if you are not failing as an entrepreneur, in many cases you are not trying hard enough. Whereas in the Midwest, one business failure for an entrepreneur is usually all it takes to dust off the ol' resume.
"There is a real negative associated with failure," he said. "People tend not to look at the overall picture of what has happened."
United States Secretary of Energy Samuel Bodman and U.S. Rep. Judy Biggert (D-Ill.) last week visited Advanced Diamond Technologies in Romeoville.
The DOE, which bases its Chicago operations at Argonne, was on tour to highlight innovations in energy and economic security. Advanced Diamond, founded in 2003, develops ultra-thin diamonds for industrial applications. The company is funded by Illinois Ventures, LaSalle Investments (the investment firm run by local angel investor Bob Geras) and a number of state and national grants.
Chief Executive Neil Kane, who has worked for Microsoft and IBM in addition to starting a number of ventures, agrees with Rosner that there aren't enough serial entrepreneurs in the region.
Kane believes the challenge, at least locally, lies in recruiting individuals willing to forgo a salary in exchange for the upside of hitting it big with a new venture.
He wrote in an e-mail that there are exceptions to this rule, and, I believe sarcastically, noted that those people "are not rational and may in fact be insane."
UIC HOSTS MICROSOFT
The University of Illinois at Chicago hosts the Microsoft Education K20 Innovation Tour on Tuesday.
The event, which is designed to showcase ways to bridge the gap in math and science learning between K-12 and higher education institutions, will include a screening of the Philadelphia School of the Future documentary as well as a panel discussion.
More information can be found at www.k20innovationtour.com.
STATE EXTENDS DEADLINE
Revenue-generating companies with marketable innovations have an extra week to apply for a state program that could yield a $10,000 grant and a six-month training program.
Innovate Illinois, a program administered by the Illinois Department of Commerce and Economic Opportunity, has extended its application deadline to April 30. More information can be found at www.innovateillinois.org.
Brad Spirrison is a local technology journalist and president of MidwestBusiness.com.