Reading time: 5 – 8 minutes

I have begun to read Umair Haque more and more lately.  Haque’s writings have done a few things for me:

1. Reminded me why I love to write and share my ideas.
2. Challenged me to think differently and more critically about the current state of the economy and of business in general.
3. Fired me up about the possibilities for the future.

As all of you know, I love innovation.  I particularly love innovation in technology but I also love innovation in business models, management styles, organizational structures, etc.  I love pushing the boundaries of what is possible and challenging assumptions and commonly held beliefs.

Recently I read a post by Haque that got me thinking.  The post was entitled, “A Manifesto for the Next Industrial Revolution“, and in the post Haque does a great job at assessing where things are and then follows on with what he thinks the future looks like.

Haque suggests that the future of, say, finance, isn’t simply getting more money to lend, it is about organizing the system better.  Haque uses the example of Muhammad Yunus and the Grameen Bank to illustrate this point.  Yunus didn’t simply get some money together to loan to the folks at the bottom of the pyramid, he changed the way lending worked by organizing the lendees into groups that would create necessary lendee payback discipline via peer pressure (this was much needed since there was no collateral available to back the loans) in order to keep payback rates high, which, in turn, made the whole Grameen system sustainable and able to help many more people.

Haque thinks that organizing things is where the innovation that will fuel the next industrial revolution will come from and I don’t think he is far off.

Google is probably one of the most shining examples of the organizing phenomenon.  Their mission is to organize the world’s information and, in doing so, they revolutionized the advertising industry while making it more efficient.  This of course let to incredible growth and huge profits for Google.

Some other examples include Threadless (organizing a group of t-shirt designers and t-shirt buyers who create and buy the shirts rather than Threadless trying to guess at what people might want) and Etsy (organizing production of handmade goods into one place).  Both of these websites list in my top ten and both are centered around organizing and enabling people to choose and create what they want rather than trying to guess at what people may want, mass produce that product and then jam it down people’s throats until the inventory is sold.

What is interesting about both Threadless and Etsy to me is that at a high level they really created marketplaces and marketplaces aren’t new at all.  Perhaps rather than using the term organize we should really use the term market.  Creating markets where people can interact and exchange ideas, goods and services are inherently valuable.  The trick is trying to figure out where the business who facilitates the market can extract the value that will keep the organization and its market up and running.

With Etsy and Threadless the value extraction is fairly simple in that goods are sold to people who pay for them and the companies make a profit (Etsy from fees from the sellers and Threadless through the sales of the t-shirts).  Selling goods is a clear cut way to extract value but perhaps there are other innovative ways to extract value from a market in other industries.

Haque throws out some more things that need organizing including the world’s hunger, energy, thirst, health, finance and education.  All of these are industries that need fresh ideas and new blood and are perhaps areas in which businesses that organize can thrive.

I personally get fired up about innovating in the financial space since I have always been a fan of the financial markets but also realize that they are in dire need of innovation.  What ideas do you all have for a business that organizes things in a way that benefits the business and the financial industry? How do you think the theme of markets and organization can help with the other areas Haque mentions?  I am curious to hear your thoughts and I hope this idea of organization as a means of change and innovation inspires you as much as it has inspired me.

Midwest side note: I see organization as a part of the solution around making the Midwest into the technology hub is really should be.  I find that a lot of people around the Midwest don’t know what other folks are doing and that lack of information really stalls innovation here.

Think of the issue in comparison to Silicon Valley.  In the Valley there are a number of events, meetups, etc. that you can attend in any given night.  This allows for great networking and fantastic visibility into what is going on in the area.  This visibility really helps people to collaborate on things, find talent for their business, get the funding they need and many other things.

The idea of organization as a means to innovate and create value is exactly what Frank and I had in mind when we created TECH cocktail.  We believed, and still believe, that organizing technology focused people in the area would lay the ground work for some amazing change to happen here in the Midwest and we’re starting to see the idea become reality.

We’re going to continue on with our organizing mission by working on events in each of the Midwest cities (i.e. Ann Arbor, Madison, etc.), which will be added the current roster of Chicago, Champaign, D.C. and Boulder.  The intent here is to organize the local communities and then to bring all of the Midwest communities (and some other select communities) together once or twice a year so that everyone from the Midwestcan start a regular dialog with one another.

When combined the Midwest is much more, and will be much more, than the sum of its parts and we hope to be the folks that organize and, therefore, catalyze the technology innovation here in the Midwest.

Reading time: 2 – 2 minutes

The journey that started early this summer is finally over.  The GMATs are done.  My applications are in.  The acceptance letters were received.  I was fortunate enough to be accepted to both Kellogg and to the University of Chicago GSB (incredibly humbling I have to admit).  Both programs are top notch so the decision where to attend was very, very hard to make.

After much thought I decided the University of Chicago GSB was the right place for me.  I am looking forward to starting classes in January and to meeting all of my classmates (I will be part of the part time program so I can continue my work at DFJ Portage).  I am also very excited about getting more involved with the Polsky Center for Entrepreneurship.

Now, I just hope my many friends and colleagues that are Kellogg grads and students won’t be too hard on me!  Actually, it has been just the opposite.  Everyone has been incredibly supportive.  Also, I should mention that I still plan on being involved with entrepreneurship and VC at Kellogg/Northwestern (in fact, I am going to be up there the next two Saturdays working with students, which will be a lot of fun).

Thank you to all who helped me and supported me along the way.  Special thanks to Matt McCall, Rick Klau and Kyle Blackburn for writing my recommedations, to my friends and family for their support and especially to my fiance, Laura, for putting up with my craziness over the past five months.  Onward!

Reading time: 4 – 7 minutes

Crain’s Chicago Business published a great article about technology transfer in the Midwest a few weeks back entitled “Seeking a breakthrough“.  The article specifically focused on tech transfer in Illinois and mentioned that, to date, Illinois has not done a great job of tech transfer.

Having come to Chicago from one of the most vibrant tech transfer centers in the world, Boston, MA (second only to Silicon Valley imho), I have seen what a great tech transfer system looks like and what it can do for the local economy.  Compared to Mass and the Valley we haven’t been doing a great job of commercializing technology from university labs (and from government labs) here in Illinois.

We all know the stories that still break our hearts.  Mosaic/Netscape, PayPal, YouTube, etc.  All of these companies were founded by Illini and yet ended up on the west coast.  The numbers also back up our lack of tech transfer.  From the Crain’s piece:

Between 1996 and 2006, Illinois universities spun off 124 companies and made $180 million from startups and technology they licensed directly to existing companies, according to the Deerfield-based Assn. of University Technology Managers. In that same period, the Massachusetts Institute of Technology alone started 220 companies and made $344 million. Stanford University made $209 million between just 2002 and 2006.

Those numbers say it all but we can (and will) turn this around.

What can we do to turn this around? One of the first things we need to do is not so easy.  We need to build some high profile success stories here in Illinois.  I would argue that is already happening with FeedBurner (acquired by Google in 2007) and TicketsNow (acquired by Ticketmaster in 2008) along with a handful of other solid companies that have exited recently (disclosure: DFJ Portage was an investor in FeedBurner and TicketsNow).  That said, those companies did not come out of university labs.  However, the success stories should still show people both in and out of labs and investors that great companies can, and are, built right here.

As the Crain’s piece suggests, more high profile successes in the state will create more technology millionaires who will then help to mentor and seed the next generation and so on and so forth.  This is the same way Silicon Valley and Boston, MA were born and why the biggest thing we can do is build some very successful technology companies here in Illinois.

The infrastructure is also being put into place to make technology in Illinois a mainstay.  The University of Illinois at Urbana-Champaign has built a fantastic research park and incubator (which I frequently visit and which will house TECH cocktail Champaign this week) as has the Illinois Institute of Technology (again, another place I frequent).  Both of these places along with other facilities are helping to change the tide of tech transfer here in the state.

What about the money though?  We all know that investors like to be close to their companies, which is why many Illinois startups have to leave the state to get up and running.  So we also need more investors here in the state.  The good news is that we are starting to see a growth in the investor pool here in Illinois.  From the Crain’s piece:

U of I created an independent fund, Illinois Ventures LLC, based in Chicago, with the help of private donors in 2002. Its goal is to provide early-stage money and logistical help to university-based startups.

Illinois Ventures has invested $20 million so far in 15 companies, among them Tetravitae Bioscience Inc., an alternative fuel company in Chicago, and has attracted another $300 million in outside investments, much of it coming from venture-capital funds on the coasts.

Ron Kirschner, a retired physician with an MBA from DePaul University, started Heartland Angels in Skokie in 2004. The group has grown from six to 22 investors and has put more than $3 million into six early-stage Midwestern companies. Four of those grew out of universities, among them Abiant Inc., a Deerfield company based on research from the University of Chicago and New York University. The startup uses imaging to help drug manufacturers improve products by mapping how they affect the brain.

I would also add the the Chicagoland Chamber of Commerce created a fund a little while back called the Illinois Innovation Accelerator Fund (i2A for short) which is a $10mm vehicle dedicated to funding innovative technology companies here in Illinois.

Also, as most of you know, the firm I am an associate with, DFJ Portage Venture Partners, focuses only on the upper Midwest and has for quite some time.  We are able to bring the global resources of Draper Fisher Jurvetson (DFJ) into the region while remaining locally focused, something we think will really help the region grow and help entrepreneurs create world class companies right here in Illinois (and throughout the Midwest).  As you can imagine we are very bullish on the Midwest as a technology center and we are excited to be part of the growing technology community here.

Successful technology transfer efforts will be a big part of what ultimately makes Illinois a leader in technology and tech transfer efforts are certainly getting exponentially better each and every day here in Illinois (for example Northwestern did a $700mm deal last year to sell part of its royalty rights to Pfizer’s pain drug Lyrica – a drug based on Northwestern research).

We are just now hitting the big upswing in the “hockey stick” here in Illinois and across the Midwest.  We are well on our way to rivaling the coasts when it comes to technology but we’ll no doubt do it our own special way making the Midwest a unique and exciting place to start and build technology companies.

Further discussion on this topic: Chicago Tech Report: “Understanding why Marc Andreesen left Illinois” by Blagica Bottigliero

Reading time: 1 – 2 minutes

A number of people have asked me about the DFJ Network since I joined DFJ Network fund DFJ Portage (Midwest network affiliate) back in February.  People seem to be curious about how the network works and what the purpose of it is.  Edward Iwata of USA Today apparently had the same curiosity and put together a piece in yesterdays USA Today about the network.

The piece is very high level but I think it conveys the value of the network to entrepreneurs and to the VCs in the network.  The piece also covers why the network idea makes sense in an increasingly global world and why DFJ started to push the network idea forward a few years back.

I think the network approach DFJ has built thus far is solid and perhaps the future of the venture capital model.  I am excited to see the network idea evolve from the inside (especially given my interest in new and innovative VC models) and I’ll be sharing more of my thoughts and observations on the network as time goes on.