Is Chicago's tech talent leaving for Silicon Valley?

Chicago used to be a major tech startup hub. Are things changing?

Melanie Stetson Freeman/The Christian Science Monitor
Tourists ride tour boats down the Chicago River through downtown, on August 20, 2013 in Chicago, Illinois. Chicago is the nation's third largest city and the biggest in the midwest. Its skyline is among the world's tallest and most dense.

Chicago is a breeding ground for a lot of things: bad baseball teams, all-beef hotdogs, icy winters, and tech start-ups.

But according to a recent article by Mark Caro for the Chicago Tribune, “Chicago breeds tech stars, but can’t get them to stay.” The bigger issue, Caro writes, is that “cities like San Francisco, New York, Boston, and Los Angeles serve as even more powerful magnets to Chicagoans who conclude that greener pastures await them on the coasts.” 

Chicago was once a flourishing hub for digital start-ups, with over 40,000 employed in digital technology companies in 2013 (a 21 percent boost from 2012). It’s been home to some of the fastest growing start-ups in the States: Raise, ContextMedia, GrubHub, and Groupon.

Yet while some startups are thriving in Chicago, the city doesn’t have the sort of money that startups in Silicon Valley have. As Mr. Caro cites, Perfect Audience, a Chicago social/online advertising startup sold its company to San Fancisco’s Marin Software for $25.5 million.

This isn’t the first time Chicago has seen an industry leave. In the early 1920s, Chicago was the “Hollywood” of the country – home to “Essanay Studios” box-office stars like Charlie Chaplin and Gloria Swanson. (A depressed economy and cold weather shipped the film industry out to sunny Los Angeles.)

Still, the Chicago tech startup scene is is still healthy – for now.

A report by Crain’s Business in April found Chicago to be “one of the fast-growing cities for tech jobs coming out of the recession,” beating out New York, D.C. and Boston. Another Crain’s report found that numbers were rising for University of Illinois engineering students to flock to Silicon Valley – but the majority move to the Chicagoland area.

A number of groups like ChicagoNEXT, the Chicago Innovation Exchange (CIE), and ThinkChicago have become major portals for budding young entrepreneurs looking for opportunities to “collaborate” and “innovate” – two buzz words frequently circulated in the tech world that often mean teaming up in shared office spaces to work. A key initiative of ChicagoNEXT is to “recognize Chicago’s creative makers as brand ambassadors to help raise the city’s profile as an innovation hub and destination for business and tourism.”

But despite this, whether Chicago can ever become Silicon Valley is still in question.

As J.B. Pritzker, managing partner of the investment firm Pritzker Group and a major Chicago businessesman, told Caro, “We have a natural talent drain. We develop a lot of talent in Illinois, and the question is how much do you have available to that talent to absorb them into your economy, and how much of that talent needs to get up and leave because opportunity exists elsewhere?”

"Chicago's tech ecosystem is a lot younger than you'd see in Silicon Valley or Boston," John Flavin, Executive Director of the Chicago Innovation Exchange told Christian Science Monitor by phone. "It's changing now. The culture is shifting. It's not a competition with Silicon Valley. It's just different. Silicon Valley is purely digital. If you're focusing on digital alone, it's a great place to be. If you're purely biotech, Boston is great. But Chicago is a hybrid. It's the applied data sciences, like healthcare systems using data analytics. Our goal is to create an ecosystem for the best and the brightest."

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