Home > General Business, Ramblings, Startups, Strategy > Lessons from the Valley: Value Creation – Chicago vs. Bay Area

Lessons from the Valley: Value Creation – Chicago vs. Bay Area

Entrepreneurship has been in my blood since I was little.  Over the years I’ve graduated from shoveling neighbors’ driveways as a little kid to a college business running a semi-successful entertainment site to numerous other businesses I have started or helped start in the years since.  My results have varied; with some failures and some moderate successes.  But there is one thing I have realized throughout my entrepreneurial life – it is much easier to be successful as an entrepreneur if you focus on delivering real value to customers and focus from day one on how your own business is going to make money.

Although this thought has been with me for a while, it has become increasingly clear in the last couple years.  It all started a couple years ago when I was allured to the Bay Area by grand startup promises and the hype of the Silicon Valley entrepreneurial ecosystem.  In the last few years, I’ve learned a lot about myself and hopefully a thing or two that will help me (and others) build successful businesses in Chicago.  I’m writing this blog post to share my thoughts and opinions of the startup culture in Chicago versus that in the Bay Area, as well as a couple lessons I’ve learned along the way.

After my stint in the Bay Area, I have now been back in Chicago for a few months.  It has been a great summer so far and I am glad to be back in my hometown.  I am working on two companies at the same time which is a little crazy, but I am loving it.  I’ve also met some great entrepreneurs and seen some really great companies in Chicago in the last few months, which has caused me to reflect on the difference between the startup world in the Valley versus right here in Chicago.  Note- I am making broad generalizations, but I think they accurately represent the attitudes of a large number of start-ups in the different ecosystems.

The number one difference between a startup in Chicago and the Valley is that Chicago entrepreneurs look to build a business that delivers value.  Chicago entrepreneurs are much more likely to try to solve an actual business or consumer problem.  A problem that is a pain point.  A problem that consumers or business would be willing to pay for to have it go away or get easier.  In the Valley, many startups are more about developing a cool feature than developing a valuable product or service.

In Chicago, entrepreneurs generally start thinking about making money from day one.  Many businesses in Chicago are bootstrapped.  In Chicago, it is in our DNA to build a viable business that focuses on bringing in revenue.  In the Valley, it is like the Field of Dreams mentality, “Build it and they will come,” except it is “Build a cool feature or product and we’ll figure out how to make money later.”  The problem with this mentality is that it is much harder to inject monetization into your company culture down the road than it is to build it in your DNA from day one.  Once your company has 20, 50, 100 or 1000 employees, it is much harder to shift your employees mindset to making money from making a cool product or increasing users or whatever the company goal has been.

As difficult as it seems to find employees for startups here in Chicago, the quality of employees we do find are significantly better.  In the Valley, the pool is much larger and many more people work in startups.  People make their career in jumping around from start-up to start-up.  The goal for many people is to pick up a little bit of equity from each of them and hope one or more hits it big.  I’d argue that is a bad thing…  I met way too many people who have never worked at a company for more than two or three years.  These are guys in their 40’s whose longest tenure is a few years and have worked for over a dozen companies.  They might have broad experience, but where is the passion and dedication.  When are they going to jump ship from your company and move onto the next startup?  There are some brilliant and smart people in the Valley, but in Chicago you can find people that are smart, hard-working, dedicated and passionate.  People in Chicago care about working for a company that brings them meaning and that they can grow with.  You just don’t see that type of mentality in the Valley.

In Chicago we care much more about delivering a great experience to our customers.  I have met a bunch of great entrepreneurs in Chicago who are building businesses not because the status quo solutions are bad, but because they think they can deliver a better experience to customers.  I am a big believer in building a business around exceeding customer expectations and I look up to companies(people) like Zappos (Tony Hsieh) and Disney (Lee Cockerell).  I think here in Chicago, we are much more in tune with the impacts customer service can have on building value in our businesses.  We build relationships with our customers, our suppliers and our partners based on mutual trust and delivering value to all parties.  In the Valley, you build relationships with your partners based on quick wins and creating value only for yourself.  It is a short-term strategy that backfires in creating long-term value for your organization (but helps small startups get acquired for millions of dollars).

Those are my thoughts and opinions on the attitudes in Chicago versus the Bay Area.  I hope to integrate my own lessons and perceptions into my two companies.

One of my companies, Uncorkd, is a platform for restaurants to create an iPad wine and beverage menu.  I saw high-end restaurants spending close to $100k developing custom apps for their wine menus.  I thought there must be a better way that enables all restaurants to have a cost-effective solution, so I created a platform for any restaurant to instantly have their own iPad wine menu.  For a few hundred dollars a month, a restaurant can customize and manage their own iPad menu in real-time, increasing their wine sales and driving more traffic to their restaurant.  It’s not only economic value we are delivering to restaurants, but also providing a great experience and fantastic service.  We are only successful if our restaurants are successful, so we’ll do whatever we have to do make sure they are satisfied and seeing great results.  I’m happy to say we are now in restaurants across the country from Florida to Alaska and continuing to innovate on our platform.

I’m also working with two talented partners on a web-based solution for green purchasing, called Greencurement.  As governments, schools, hospitals, and businesses look to increase their purchasing of green products, we are building software that will enable them to manage their procurement policies, find products that meet their requirements, ensure compliance, and help them buy greener products.  We will be launching a beta version soon and working with a number of local and national organizations.  As with most Chicago startups, we believe we are building something that delivers real value, that solves a problem and that organizations would be willing to pay for.

So what do you think?

Do you think Chicago startups are more likely to solve actual problems?  Do you think Chicago startups are more focused on building solid business models that generate revenue early?

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