Chicago becomes a big hitter

Is Chicago the new Silicon Valley? Jenny Southan investigates why tech start-ups are striking it rich in the Windy City "Salt peanuts! Crackerjacks! Cold Buds, anybody?" shout the vendors as they walk up and down the steps between the stalls. Overhead, an organist breaks into a cheery rendition of The Doors’ Light My Fire, while the aroma of hotdogs and mustard drifts past in the breeze. “Nice hair, Kershaw!” yells a spectator from behind me, in a dig at the opposing team’s star pitcher, Clayton Kershaw of the LA Dodgers. There is no more quintessential American experience than a live baseball game, and seeing the Cubs play at Chicago’s Wrigley Field is something special – not because the home team is particularly good (they are renowned for losing, in fact) but as the stadium is so iconic. This year marks its 100th anniversary, and it is one of the only ones in the country that still has a hand-turned scoreboard. Beyond the outer perimeter, the owners of apartment blocks facing the field have installed bleachers on their rooftops, and they’re packed with onlookers. I’m lucky enough to be sat in a prime spot behind the dugout, so I get a good view of every strike, hit and home run. Having been in the city for less than 24 hours, it is an unexpected surprise to find myself here, and I confess to feeling a little out of place in my work attire. The reason I am graced with the privilege is thanks to a certain JB Pritzker, who I was interviewing earlier in the day. He’s friends with Cubs chairman Tom Ricketts and insists on giving me a ticket. Needless to say, Pritzker is a big hitter, although in business rather than in baseball terms. I meet him at his office, which is on the 40th floor of the Deloitte building in the West Loop and has original paintings by Damien Hirst in the reception area. A venture capitalist, entrepreneur and philanthropist worth US$3.3 billion, he set up private investment firm the Pritzker Group with his brother Anthony in 1996. The pair come from good stock, too – his father built the Hyatt Hotel group from the ground up, and the Forbes 400 list of US billionaires features more Pritzkers than any other family. Also in the meeting is Michael Higgins, chief executive of Entertainment Cruises, which was bought by the Pritzker Group in 2012. He says: “The Pritzker name is synonymous with Chicago – you’ll notice it at Millennium Park [where the Frank Gehry-designed Pritzker Pavilion concert hall is located], and at many of the hospitals and universities. His name is everywhere.” Entertainment Cruises is the largest dining-cum-sightseeing company in the country, Higgins tells me, with 32 vessels serving nine cities. In Chicago, trips depart from Navy Pier, with about half a million people (mostly corporates) enjoying the skyline from the water each year. The Pritzker Group’s investments spread far and wide, from medical device manufacturer Clinical Innovations to rental company PECO Palet, but it’s digital tech that has really captured JB’s interest. With more than 120 tech investments to his name so far, including Facebook, Sitter City, SMS Assist and Signal, he’s personally responsible for enabling much of the start-up success taking place in Chicago. “In the past two years we had tech job growth just behind Silicon Valley,” he says. “That is a lot of progress in a short space of time.” Funnily enough, JB was born in Silicon Valley, and he says 20 years ago people wouldn’t have believed anyone could build a venture capital firm in Chicago because it wasn’t considered a centre of technological innovation. “In the past five years there has been an acceleration in the amount of talent, company creation and capital that has come in – Chicago has been transformed into a terrific environment for entrepreneurs,” he says. “There are a dozen examples in just the past couple of years of multibillion-dollar tech companies coming out of the city. We have Groupon, GrubHub – a food delivery service now worth US$3.5 billion – Orbitz and online brokerage OptionsXpress, which was recently acquired by Charles Schwab for US$1 billion.” Dubbed one of the “founding fathers” of the city’s start-up scene, Matt Moog, a serial entrepreneur, launched digital tech job board builtinchicago.org in 2010, investor group Firestarter Fund in 2012 and start-up incubator Wavetable Labs in 2013. He also bought San Francisco-based Power Reviews – a competitor to his consumer review site, Viewpoints – in April. In a Chicago Tribune article last year, he was reported as saying: “If you can’t make it here, it has nothing to do with the lack of resources. It’s probably your idea or execution. There’s an entire ecosystem of universities, city government and non-profits just waiting to celebrate the next technology success.” Before heading to the baseball game, I visit 1871, a tech incubator that popped up two and a half years ago in the Merchandise Mart, one of the world’s biggest commercial complexes, encompassing two city blocks and 25 floors. Motorola Mobility opened its new global HQ here in April, taking over the top four levels. In August, it was announced that San Francisco-based review site Yelp would move in in January, hiring 300 new employees over the coming year. Dedicated to helping the brightest entrepreneurs launch their start-ups, that 1871 exists at all is down to a US$1 million investment from Pritzker and his calls for support from the business community. Walking around the open-plan space, I notice many of the walls are painted with murals, and caffeinated hipsters sit tapping away at laptops. “Chicago is a small pond in many ways, but we use that to our advantage,” says 1871’s programming co-ordinator, Jasmine Slivka, walking and speaking at such a pace I can barely keep up. “We have 500-600 members, 105 desks, 26 conference rooms and a 300-person auditorium for ‘hackathons’ and networking events. It’s a huge non-profit ecosystem with 1,000 people a day walking in and out, 24/7.” She also highlights the presence of the Techstars accelerator programme – “That’s harder to get into than Stanford” – and 1871’s 200 or so mentors, whose names are chalked up on a huge blackboard. They come in regularly to provide free “fireside chats”, giving guidance in areas such as accounting, law and marketing. In May last year, it was reported that 800 jobs were created by the 225 start-ups working out of 1871 in the first year – this autumn sees the unveiling of a US$2.5 million expansion, increasing its size by 50 per cent. Howard Tullman, chief executive of 1871 – which is named after the year the Great Chicago Fire happened, and was inspired by the rapid rebuilding that took place after – has been reported as saying he hopes to boost the number of start-ups and venture capital firms to 400 by the end of the year. Another incubator – Matter (matterchicago.com), for healthcare – opens early next year. What do 1871’s members say about their experience? Eileen Murphy, founder of student-teacher platform ThinkCERCA, says: “You go to get a cup of coffee and are standing in line waiting for them to pour it, and the next thing you know you have an intern, you have a partnership, you have a deal with somebody that helps you to grow your business.” Daniela Bolzmann, cofounder of crowd-sourced local delivery platform We Deliver, says: “This is a place that every start-up can call home. It’s where I met my co-founders, and it’s where we work for months at a time. The culture at 1871 is inspirational – the passion and fury that’s going on in the hallways is contagious.” Happily, the buzz is spreading far beyond the walls of the incubator – the River North district, where the Merchandise Mart is located, is, according to Forbes, home to more than 70 of Chicago’s top 100 digital companies (the city has more than 1,500 in total). Times have changed since the 1970s, when the area was the equivalent of LA’s Skid Row, full of prostitutes and homeless people. Now, real-estate prices are rocketing, with office rents jumping more than 25 per cent in the past two years. About a mile away, across the river, is the West Loop’s up-and-coming Fulton Market district, the former home of Oprah Winfrey’s Harpo studios (after 25 years, the site was sold to a developer in the spring for US$32 million). More commonly known as the Meatpacking district, Fulton Market was put on the map – literally – in the run-up to the opening of the Soho House Chicago members’ club and hotel, which launched this summer in a renovated 1900s industrial belting factory. Over breakfast at Soho House’s rooftop poolside eatery, its developer, Jeff Shapack, president of real-estate company Shapack Partners, explains how he negotiated with Mayor Rahm Emanuel for Fulton Market to be defined as a neighbourhood in itself. He describes Soho House as the “catalyst” for change, with top restaurants such as Green Street Smoked Meats, Girl and Goat, Au Cheval and the Aviary (with its Office speakeasy underneath) all gracing the area with their presence. “Soho House brings an international culture to Fulton Market district, creating a gathering place for our creative community,” he says. Such is Shapack’s confidence, he is also planning a 28-storey residential tower around the corner. The City of Chicago, meanwhile, has drawn up an investment strategy to create the Fulton Market Innovation District, the boundaries of which are Ogden Avenue, Hubbard, Halsted and Randolph streets. The website, cityofchicago.org, reads: “The plan is intended to… balance the area’s historic role as a centre for food production and distribution, along with its more recent evolution as a home to innovative industries, culture, nightlife and housing.” The fact that the air smells of chocolate wafting from the nearby Blommer Chocolate Company – the largest cocoa processor in North America – is a bonus. One of the most exciting projects is 1K Fulton, a 50,000 sqm converted warehouse that will soon be home to bike-part manufacturer SRAM Corporation, and to Google in 2016 (its offices are currently in River North). Co-working space provider We Work has a base in Fulton Market, while taxi app Uber has also taken a lease in the district. In addition, there are rumours that an Ace hotel will be arriving, while Nobu Hospitality is planning a 12-storey hotel and restaurant for 2016. Last October, the mayor put JB Pritzker in charge of Chicago Next, a new branch of World Business Chicago, an organisation dedicated to furthering “new venture formation and accelerating the growth and/or expansion of established businesses”. Fortune 500 companies headquartered in the Windy City include Aon, Boeing, Exelon Corporation and United, while McDonalds is just outside in Oak Brook. Jeff Malehorn, World Business Chicago’s president and chief executive, says: “Mayor Emanuel is focused on making Chicago the most business-friendly city in the nation – since he took office, he has announced more than 26,000 new jobs at 100 companies, including 25 headquarters.” He adds: “Chicago has become an innovation hub, with 300 corporate R&D facilities, more than US$3 billion invested in start-ups over the past five years, and 1,700 patents issued to inventors last year alone.” Back at Wrigley Field, a ball comes flying into the crowd not far from me. A scrum of people leap to their feet to catch the speeding bullet as the Dodgers’ AJ Ellis sprints for a home run. Predictably, the Cubs suffer a 14-5 defeat, but at least I know that when it comes to business, Chicago is a winner. SOHO HOUSE HITS CHICAGO UK entrepreneur Nick Jones opened the first Soho House members’ club in London in 1995 – since then he has added branches in Miami, Toronto, New York, LA and Berlin. The Chicago outpost debuted in the Fulton Market district in June and, with 40 hotel rooms and more than 11,000 sqm of space across six floors, is the largest so far. (Next year, Soho House Istanbul will be even bigger, with 87 rooms.) Unlike other clubs, certain areas are open to all – these include Pizza East, Chicken Shop, Cowshed spa, Neville barbers and the buzzy Allis lobby lounge. Guestrooms can also be booked by non-members. Available in Tiny and Small (23 sqm-32 sqm), Medium (46 sqm) and Medium Plus (56 sqm), they have double-height ceilings, exposed concrete walls, reclaimed timber floors and gorgeous vintage furnishings. They also come with everything from a full bar with 375ml bottles of spirits, shakers and decanters, to a Marshall amp for plugging in devices, a Nespresso machine, straightening irons, full-size bottles of Cowshed products and free wifi. Hotel residents can use the superb 1,400 sqm gym, which features cutting-edge Technogym machines and a boxing ring with old-school skipping ropes and punch bags, and an 18-metre rooftop pool. Other facilities include a 30-seat cinema, the Belt room for 100-person receptions, and the Club floor with a huge open-plan bar and two restaurants. Note that no suits and ties are allowed, and photography and phones are banned. Expect excellent service. Soho House Chicago, 113-125 North Green Street; tel +1 312 521 8000; sohohousechicago.com HOTEL SCENE HOTS UP This year, Chicago is expecting to welcome 49.5 million visitors – by 2020, the goal is 55 million, and a number of hotels are in development to cater for the extra numbers. Don Welsh, chief executive of Choose Chicago, says: “We are probably one of the fastest-growing hotel markets in the world right now. In 2011 we had 33,000 available rooms, and now we have about 38,000 daily. If everything in the pipeline opens by 2020, we will have 43,000 to 44,000 rooms.” In 2011, the Radisson Blu Aqua became the first from the brand to open in the US – you will easily spot the rippling façade of the 82-storey Aqua building. Last year saw the arrival of the five-star, 316-room Langham, the 247-room Thompson and the 272-room Aloft Chicago City Centre, while the 2,020-room Hyatt Regency completed a US$168 million revamp. In February this year, the 221-room Godfrey was unveiled in a quirky Cubist-inspired block designed by architect David Jennerjahn. Not long after, the 215-room Kinzie took over the former Hotel Amalfi, while the spring welcomed Hotel Indigo Chicago Millennium Park with 156 rooms in the converted Atlantic Bank Building. Bookings for the first-ever Virgin hotel (at 203 North Wabash, just north of Millennium Park) start on January 15. It will have a “social club” (a hybrid lobby bar, study and restaurant), an American diner, a rooftop bar, a gym and spa, and will offer free wifi and minibars stocked at street prices. A 54-storey, 1,200-room Marriott Marquis will open on McCormick Place in the South Loop in 2017.