Chicago Should Open a Venture Capital Arm

Chicago using it’s Office of the Treasurer to invest in startups can solidify it as the Capital of the current hard tech renaissance

In the following post, you'll find what was originally intended to be an op-ed during my recent campaign for Chicago City Council. I had planned to release it during the runoff to generate some free press (or, as political insiders call it, "earned media"). However, as fate would have it, I didn't make it to the runoff. Consequently, this piece has been repurposed as a blog post. My decision to hold back on using this content during the campaign is just one of the many lessons I learned and something I would change if I were to run for office again (stay tuned for a future blog post on that topic).

Chicago's rise as a leading tech hub can be attributed to its unique natural advantages, thriving entrepreneurial ecosystem, and strong support from non-profit organizations like P33, 1871, and World Business Chicago. As we look forward to the next hundred years, the city government must take bold steps to secure Chicago's place among the world's most innovative cities.

Chicago boasts an exceptional combination of resources, including three tier-one research universities, a strategic position as a transportation and manufacturing center, and a reputation as one of the most immigrant-friendly cities in the US. These factors have attracted founders and emerging venture capital firms, establishing Chicago as a vibrant hub for technology and innovation.

In today's startup ecosystem, we're witnessing a resurgence of hard tech companies that bridge the gap between hardware and software. SpaceX's launching more rockets than entire countries and Anduril redefining how our Department of Defense protects our citizens are just two examples of this hard tech renaissance. As the "City of Broad Shoulders," Chicago is ideally positioned to dominate this space and become the Florence of this new era.

Another crucial advantage that sets Chicago apart as the focal point of the hard tech renaissance is its proximity to business-friendly states. Unlike San Francisco, New York, and Los Angeles, which are situated at considerable distances from Nevada (190 miles), Pennsylvania (80 miles), and Arizona (250 miles) respectively, Chicago enjoys a unique strategic location. The city's southeastern edge, the neighborhood of Hegewisch, is a mere 5 miles from the Indiana border, while its northernmost neighborhood, Rogers Park, is 45 miles from Wisconsin.

This distinctive position allows Chicago to offer the best of both worlds: a vibrant, blue-state metropolis that attracts highly educated talent and a commutable distance to states with more business-friendly environments. This winning combination enables seamless collaboration between technical and manufacturing sectors, creating an ideal environment for the growth of hard tech startups.

To spur innovation and address budget challenges, Chicago should establish a venture capital (VC) investing arm within the Office of the City Treasurer, which would invest in startups where the city can act as an early customer or partner. This move could generate significant benefits for the city:

1.      By becoming an early customer of innovative startups, Chicago would gain access to cutting-edge technologies that optimize city services and infrastructure.

2.      Investing in these startups and then being an early customer to help them scale would provide financial returns, potentially easing the burden of the city's unfunded pension problems.

3.      Supporting hard tech startups would cement Chicago's reputation as a tech-friendly city, attracting more founders and strengthening its innovation hub.

Take, for example, the New York City Housing Authority (NYCHA) awarded a 10,000-unit contract to a startup named Gradient. This product will be able to both heat and cool public housing units electrically, becoming a major tool in New York’s fight against climate change while providing their public housing residents with a superior product. Now imagine if New York was able to invest in this company in its early stages and then capitalize on the upside when it became one of the startup’s biggest customers.

WasteHero is another innovative company that utilizes trash bin sensors and optimized routing to ensure that garbage collection is as efficient as possible. In a partnership with a garbage collection company in Denmark's second-largest city, WasteHero was able to reduce the average number of collections by 55%, thus lowering emissions and eliminating unnecessary garbage trucks on the road, marginally lowering traffic problems.

Similarly, there are many parking enforcement startups that can assist in quickly and efficiently ticketing delivery trucks parked in bike lanes or bus stops, and we can use those same cameras to track stolen cars or cars used in crimes to assist police in tracking down criminals.

Katherine Boyle's American Dynamism vertical at Andreessen Horowitz aims to identify technologists tackling the nation's most pressing issues, from national security to housing and education. By embracing a similar approach, Chicago can lead the way in developing groundbreaking solutions to complex problems.

Now as any good, cynical, follower of Chicago politics would note that this proposal is ripe for corruption. I can already see Chicago political bosses promising to funds from the city if the startups promise to set aside a little equity for the machine. And while I agree with the concern, I think we can create a system that is transparent and ensures that no city employees will be allowed to invest along with or after the City of Chicago makes an investment in a startup. I think it is reasonable to enforce that the Venture Capital team will only be paid a city salary and will not be able to participate in the returns or co-invest with any of the companies the city invests in. And I think it is monumental to both the transparency and the success of this program that no Alderperson or Mayor is allowed to influence the investing decisions of the Venture Capital team.

The two people I believe are most equipped to lead this team would be Betsy Ziegler and Neal Sales-Griffin. Betsy Ziegler is an accomplished business leader and educator, who is the current CEO of 1871, the startup incubator that has helped Chicago achieve its status as a burgeoning tech scene. Neal Sales-Griffin is an entrepreneur and educator who has founded companies and now runs the Chicago branch of TechStars mentoring early-stage startups with great success. With either of these inspiring technologists at the head, I am confident that our Venture Capital Team will bring Chicago endless returns.

In 1923, Chicago hosted the World's Fair, "The Century of Progress," an event that has become an indelible part of the city's history and is even represented in its flag. As we approach the 100th anniversary of this monumental occasion, it's time for Chicago to double down on its commitment to progress and innovation. By investing in hard tech startups and fostering an environment of American Dynamism, Chicago can ensure another century of progress and solidify its status as a global leader in technology and innovation.