We have over 22,000 square feet of demo space, where you can meet each startup team at their table.

The top 5 startups will have a chance to pitch to an audience of entrepreneurs, VCs, angels, bloggers, media and Chicago’s tech community.  A panel of expert advisors will ask the tough questions — ultimately choosing one company to win over $15,000 in cash, prizes, and services from our partners.

Agenda

5:00pm – 6:00pm Registration / Open-Floor Expo

6:00pm – 7:30pm Welcome / Open-Floor Expo

7:30pm – 7:35pm Welcoming Remarks

7:35pm – 8:15pm Top 5 Startup Pitches (3 minutes each)

8:30pm – 9:00pm Judge’s Results / Awards

9:00pm – 10:00pm Networking

The focus of midVentures25 is to show the national technology and investment community that the Midwest has an abundance of early-stage innovators within the technology, consumer, and sustainability space. You can expect to engage thought leaders in education, art, media, business, science, and technology during the conference. Dress is Web Casual.

You can purchase a ticket on midventures25.eventbrite.com or you can pay $10 at the door. You can also come any time from 5pm until 10pm. You can park at the garage on Adams and Franklin.

Yet it is obvious that corporations reduce the transaction costs of exchanges, management, and economic processes. Why else would every entrepreneur need a lawyer, yet every employee in a company uses the same company lawyer? But my interest in the transaction cost of entrepreneurship is not in reference to the transaction of management, delegation, or exchanges in products or services. Rather, my interest is in the transaction cost of Deal-Flow.

Someone should conduct research on the amount of time and resources spent by an entrepreneur preparing, planning for, seeking, negotiating, securing, and maintaining either investment, strategic partnerships, acquisition, or equity-based deal-making. Some startups ignore ‘deal-flow’ and focus on the basics such as organic sales. Yet some companies do nothing except push their own deal flow. Many startup lawyers tell me new tech ventures might spend 20% of their revenues on the legal and administrative costs whose purpose is little more than to secure more funding. In other words, the transaction cost of finding, negotiating, and securing either funding or equity-based deal flow is not efficient. Mostly because its a buyer’s market and the startups need to jump quite high to get noticed.

Therefore my interest is in reducing the transaction cost of entrepreneurial deal flow. In other words, both eliminate the guesswork or ‘information assymmetry’ from startups who do not know when or where to get funding or partners, as well as the ‘game theory’ information assymmetry of multiple investors or partners conducting multiple independent reviews and negotiations. Within a corporation the transaction cost of an acquisition is the salary to the analyst and then the VP in charge of presenting the acquisition to decision-makers. In Entrepreneurship, there is no well-defined process.

I have some ideas in mind.

1. At least one of the founders must have a car, in case you need to pick up office supplies from Office Depot. However, multiple founders should help pay for parking when you meet at Starbucks.
2. There should be at least one girl in the group, whether she’s a founder, employee, or one of the founder’s girlfriends. The girl is a good litmus test for flagging extremely stupid ideas.
3. Draft roles, processes, timelines, plans, bylaws, org charts, or resource allocation charts at least once a year, but no one should look at those docs for the rest of the year. At least one team member should protest “whats the process for this” or “whats his role” to which someone might reference the fact that there is a document for that somewhere.
4. Whenever the founders go home from the office around 6pm or 7pm, they should go back to their computers and keep working until 1am, communicating frequently over gtalk ot Skype. In fact, more communication should happen over gtalk and Skype than by phone or in-person.
5. Own at least 2 dry erase boards and always run out of markers. Accidentally use a permanent marker at some point.
6. Have at least one founder who thinks he is a good designer, humor him a little, though everyone unanimously agrees he can’t design.
7. At any one point in time, at least one founder should be working at a coffee shop, even if you have an actual office.
8. Have 3 pitches for your startup. One pitch is for smart investors who understand your market and might actually invest. Another pitch is for people you meet at parties, explaining why you’re going to save or change the world. The third pitch is for your parents or non-techy degree’d friends explaining why you’re not wasting your life.
9. Have private corporate documents indescriminately mixed in with personal notes, like print-out maps to the airport or university alumni newsletters.
10. Have at least one founder who refuses to maintain a calendar, so that everyone else is forced to call him every few hours asking where he is or if he is coming into the office.

The bottleneck is most often that entrepreneurship and sustainable development never get off the ground and remain in ‘idea land’ since any collaborating agent must set aside his own short-term self-interest in order to cooperate with other self-interested agents on a goal that might profit the public as much as it profits the institution. Sometimes the goals run in parallel, such as corporate investment in electric cars or alternative energy patents, where sustainable outcomes are also privately profitable to the investor. Yet often the goals are divergent, when an entrepreneur cannot bring his invention to public market because it might be more convenient to the investor or partner to create artificial scarcity, or a startup may not get funding from any one institution because each institution may want to develop the technology internally (or not at all).

Private institutions often create artificial scarcity of information, where a startup may have a technology whose distribution is both a private good to the investor or partner, and a public good to the economy. Yet what that invention is, how it can be used, and who might best take advantage of it is effectively privatized and kept secret via the corporate partners. The question of ‘who has the incentive to help fund, distribute, and integrate this innovation’ is similar to ‘who has an incentive to integrate this sustainable campaign’ in that few individual agents have the incentive to best capitalize on innovation within the context of public good. Often these innovations and sustainable campaigns are funded by universities, private benefactors, the government, or corporations looking to make a PR play. Yet both entrepreneurship and sustainability are not ’systemetized’ to incentivize all parties to act both out of private incentives and public good. Therefore it is a campaign for the next century to systemetize, through PR and marketing as much through legislation and tax credits, the macro-processes of discovery and distribution of innovation whose greatest benfactors may not be the investors but the public at large.

http://www.techcrunch.com/2009/12/13/how-to-pitch-vc/

Now admittedly I am not the foremost expert on pitching to VCs, though I’ve had the luxury of doing so on several occasions. This article gives some good broad strokes on pitching to venture capitalists, yet I believe it misses the ‘relationship’ part of the deal. You’re not pitching a product, you’re pitching a relationship, which means you need to know more about your partner.

1. First, tell the investor why your company is of strategic value to the investor. In other words, if the investor has a portfolio company in the same industry as you, which would make a great partnership opportunity, cite these overlapping incentives. You might even want to chat with the strategic portfolio company before you pitch the VCs.
2. Find allies on the VC team. You aren’t going to sell the entire team on your idea, but you can convince at least one team member to “champion” your cause. Ask the VCs a question such as “how long will petroleum be a feasible energy source” and “has your firm invested in alternative energy solutions?” in order to find out who on their team answers, gets excited, and is worth contacting later on.
3. Create a next step during the pitch. For example “We are hosting an alternative energy fund raiser this Friday, I would like to invite your team”. There are no rules stating you can’t invite the investors to social events. In fact, at the IVCA several VCs unanimously agreed they would never fund an anti-social entrepreneur.

I also confess that, should your product already have exponential growth and a ton of press, you may not need to spend as much energy creating relationships with the investors, since investors might just court you. Likewise, if one VC firm champions your startup, the second or third firm included in your current round of funds will not need to be courted quite as much. Yet I am a big believer in creating a relationship as being just as significant in securing investment presenting your product.

Google did one thing well- indexing the internet via pagerank. Microsoft built its leverage off of operating systems inside IBM computers. Facebook out-competed Friendster and Myspace by focusing on colleges. Then they grew into conglomerates with diverse footprints. Take midVentures. Back on day one, I wanted to be a web development shop, a consultant, an incubator, an event planner, and a venture capital firm. Each customer will ask you for different products and services- do not give every customer what they ask for. Focus on the one thing you do well.

Entrepreneurs always veer towards the ‘Do Everything’ model; because the entrepreneur is at heart either a visionary or a salesman. Visionaries want to change the world; requiring them to do everything better. Salesmen want to sell a customer whatever they ask for- requiring the salesman to deliver on any request. But there’s a difference between ‘wearing a lot of hats’ where the entrepreneur is the lawyer, the accountant, the HR, the salesman, the developer, and the marketer - and ‘trying to do everything’ where the entrepreneur is practically running different companies for each customer set. I’ve never seen a company start with a ‘do everything’ model and succeed, unless the ‘do everything’ model was simply a litmus test for finding opportunities.

Doing everything works well for diversifying personal skills; I have a friend who’s a yoga and kick boxing instructor, fluent in german and japanese, a concert pianist, pre-med, art history degree, anthropology degree, classics degree, a painter, and future doctors without borders member. Best of luck to her. Doing everything also works well for conglomerates, where you have an economy of scale via vertical or horizontal integration. Doing everything does not work well for the early growth stage of a startup.

I will preface the rest of this blog post with my current philosophy: creative people should always follow an eccentric path to success or failure, because even failure towards a creative end while you’re young will set you all the more apart from every other resume on the stack. And to succeed while you’re young will open every door imaginable.

That said, we must remember that venture capital only represents perhaps 0.1% - 0.2% of the GDP. Later-Stage Private Equity and Public Equity dwarf the sum of all funds invested in startups. Likewise, the sum of all capital owned by young (<30) entrepreneurs either by exit from a startup or by valuation of their startup is less than the net worth of all young US used car salesmen. It just so happens that the subset of high value young entrepreneurs garner more and more attention from the press each day.

I’ve never worked on the finance side of any business. But within 1.3 months of midVentures, I can identify the startups who raised funds from from”family and friends” investors (30% of my clients), from professional angel investors (less than 10%), from their own savings (at least 50%), from venture capital or private equity (2%), from corporate contracts (around 8%). Since I live in a seed stage web world with such friendly startups as Cameesa, Dawdle, InklingMarkets, Trumarx, EnergyResults, Contenture, Enproperty, CommonGrants, Zolio, etc, etc, over 80% of my clients and partners jumpstart their companies with their own cash, family, or friends. In fact most “deals go down” in my circles with the good ole’ fashion “My friend’s dad is the CEO of XYZ”.

Though 80% of the startups raising funds do so within a family and friend network, I would turn around and say that at least 80% of the sum of all capital invested in the startups I work with comes from VC, PE, or Corporate. This creates the typical startup ravine, over which the majority of my startup friends live. You have raised between $5k and $100k from personal savings, friends, and family. I know at least 20 chicago startups in that category. You have a product; which may be generating revenue. You have a business plan, but likely do not have the due diligence checklist or mature management team for a $2m VC round. You’ve probably talked to I2A, Hyde Park Angels, the Northwestern Incubator or ITA, the CEC, the business schools (Booth, Kellogg, Coleman), perhaps Heartland Angels, perhaps New World Ventures, Charles River Ventures, OCA Ventures, MK Capital, Origin Ventures or Illinois Ventures. Some investors told you that your style startup could not raise funds in chicago. Some investors told you to call them back when you have more traction. Some investors told you that they just don’t get your idea, or don’t like what they see. Admittedly, I’ve been a bystander in most of these situations - but I thank the UChicago Booth School NVC program for accelerating my exposure.

As a side note on this tale, I have accidentally crossed paths with more brick and mortar investors in Chicago than tech investors. For those who have never pitched to a PE, real estate, or commodities investor; plan on over-focusing on the terms of the deal and the equity ‘kickbacks’ for whomever put the deal together. Chicago is a city of brokers. Brokers make money on fees. SF friends introduce everyone to everyone without an NDA or patent, without a finders fee contract. I had a web entrepreneur who wanted to turn midVen into a finders fee business for matching startups to investors - “Venture Brokering”. Needless to say, his background was real estate. In SF, your information capital is your skill and your ability to execute an idea. In Chicago, there is a trend towards treating your contact list (not necessarily the relationship, just the contact) as undisclosed information capital. I am under the impression a VC firm will not take a deal seriously if there are 1 to 3 people with equity stakes simply because they helped put the deal together. I have seen that model work in real estate and commodities.

In any case, you’ve raised $5k - $100k, you have a product; a programmer, a designer, a lawyer who may or may not charge you for work, at least 50 people who support what you’re trying to do. You have customers, and you either have revenue or a growing community. But its not enough to support more than one person as a full-time job. What’s the next move?

If you’ve ever played the game GO - this is one of those ladders where you and the world are probably butting heads in a diagonal direction. If you cross the ravine and raise $500k (I know 5 chicago startups in that range) then you are equally nervous about raising your next $2m. Part of you hunkers down and says you can generate revenue internally. Another part thinks there is more risk capital in San Francisco. This- by and large- is the ethos of young tech chicago.

Just as the game GO is often decided within the first several moves; so do your decisions on day one of your venture dictate how far a bridge you will build over your ravine- or how wide your ravine is. (I say Ravine instead of CHasm because ‘Chasm’ is a common startup term for the void between a funded startup’s early adopters and early mainstream custoemrs) Crossing the ravine means raising over $2m to run a company with a permanent team; or perhaps crossing the ravine means organic cash flow. Chicago produces far more internal cash flow ’small businesses’ with linear growth models such as law firms, consulting firms, hosting providers, data warehouses, web development shops, and ad agencies. Those have a small ravine. And there are no VC shops in Chicago that can jump a startup over a large ravine- say $10m+. You need to change cities. In other words, knowing your landscape and knowing the rules is just as important as the engineering of your train.

The ratio of entrepreneurs within linear growth startups (ad agencies, IT consulting) who make over 6 figures in Chicago to entrepreneurs with exponential growth high risk startups who make over 6 figures is likely 99 to 1 - I would like to see real research on that subject. I hear the phrase “his finance firm just raised funds” far more frequently than “his web company just raised funds”. Many of my entrepreneurial friends are reconsidering their business models to accommodate linear growth within a lifestyle business. If there was a class in Chicago on “consulting for companies” - it would fill its seats every day with web entrepreneurs who need to reposition themselves.

I can feel the seeds of the ’self-aware’ proletariat of Marx’s communist revolution being sown in a new class of web entrepreneurs who either implemented a good idea at the wrong time and in the wrong place, or implemented a bad idea. There are few riskier career paths than to be a web entrepreneur in Chicago - especially if this is your ‘first startup’. Within our self-awareness, there may be an opportunity to evaluate the landscape, the opportunities, and the new forms of capital we are accidentally producing. Techy conversations create social capital as ideas are exchanged and implemented within a startup and then within a corporation. In fact, Chicago corporations may be the biggest winners from our fledgling tech scene, as their developers experiment and converse in coffee shop hackathons. An app that cost 80 hours and several cups of coffee could see its true value in the intangible human capital of a developer who implements the right social media strategy in the office.

I have an intuition that the experimenting conducted via the web startup directly benefits the bottom line of corporations within 2 degrees of separation of the cofounders or developers. In the same sense, playing on the playground directly benefits your social, career, and athletic life outcomes through the discovery and distribution of skills and knowledge. Capital is not directly reaching the cofounders of web / tech startups in Chicago. Perhaps the startup is simply the experiment of human risk capital in a larger ecosystem - or perhaps young entrepreneurs move between cities with more fluidity than the stationary investors.

Alex Wilhelm, Jon Pasky, and Nikhil Sethi have done a great job watching the national tech incubator scene, and we all resonated on this article

http://www.pchristensen.com/blog/articles/what-would-a-chicago-style-ycombinator-look-like/

What I find interesting about this article is the truth that we in Tech Chicago tend to forget- Chicago does not have the early stage capital, the tech media, or the web 2.0 jobs that other cities have. What we do have is corporations. Ironically, corporations might just be a startup’s future best friend.

Blue Cross recently put another $18m into Sandbox Industries’ seed stage tech startup fund. I see that as a shining example of how chicago corporations can benefit from our fledgling tech entrepreneurship scene. Web 2.0 talent stays in chicago, and big corps get to outsource (or crowd-source) their R&D to 24 year olds willing to work for $2-3k a month. Some of chicago’s lowest paying jobs might become a corporation’s highest long-term return on investment.

Two of my friends have came to me holding y-combinator applications for their own ideas. And Chicago cannot compete with Y-Combinator for social capital, technology resources, or entrepreneurial connections. But some startups just need a corporate partner or a corporate sponsor. The cost of one VP’s salary can fund 10 startups a year. Beyond Blue Cross, who else will take this initiative?

It will soon be easier for an unrelated person to find your life history online. Between public records, social networks, professional experiences, and general website use: we leave fingerprints all over the internet. I am likely registered for 100 different websites and perhaps 5 of those accounts are ‘interoperable’ allowing me to log in using a single identity. But Identity 2.0 is about more than logging in with a single account, Identity 2.0 involves how the web gives meaning to our identity.

• Reviews: If we reviewed books, movies, colleges, jobs, restaurants, articles, consultants or investment opportunities with a single unique ID, the ‘weight’ attached to each review, its impact on the object, and its impact on ourselves would all be more contextual and meaningful. Imagine reading book reviews weighted by the set of person who like the same books as you. In the same light, “expert reviews” would be able to more quickly identify merit or fraud over large data sets of objects.
• News: I admittedly don’t read any news sites except TechCrunch, Facebook News Feed, and France24.com in french. Sometimes I leave BBC running on my TV, but not since I lived in India. If the internet ‘knew who I was’ it would both route me more meaningful news, and it would route my own user-generated news to relevant end users. In order to route me news, the internet needs to know more about me: perhaps my job, interests, travel plans, education, entertainment, or pressing concerns. The only news I receive based on who I am and what I am doing comes from other people within facebook or linkedin.
• Career: It is ridiculous that one employer should have a monopoly over the specialized skills of an expert employee. Identity 2.0 enables managers to hire specialists for short-term high-paid work based on who they are and what they know, without having to build in-house teams or core competencies. Likewise, 50% of the workforce would need to structurally change their jobs, because 50% of work performed is nothing else but the training, selection, filtering, and distribution of non-digital human information. The more human information is digital, the easier it is to find and reward, and the less redundant information will be between organizations.
• Government: The ability to connect people with shared problems or concerns is still an act of phone calls or facebook groups. The ability to connect people with shared concerns and translate those concerns into actions that affect the greatest number of people through legislation, collective action, policy reform, publicity pressures, or direct litigation is in its infancy because we only tie problems to our online identities when we are directly solicited. If we tied our critical issues to our identities in a way that the internet could meaningfully connect us: publicity would more quickly translate into reform.
• Health: Our health care system is a system of crisis response. Our health identity is consigned to our medical records in the filing cabinet of a hospital, and all subtleties of our lives that might clue in a physical or mental problem are lost to the digital world. Identity 2.0 will enable the digitalization, tracking, and analysis of passive health data from travel plans to family dynamics to financial situations. But more than just tracking us, health care should be talking to us. There will be red flags if a new diet disrupts my sleep schedule or new medications are causing excessive weight loss. Our concept of health insurance will change as we update our online identity, and it updates us.
• Social: The implications of identity 2.0 on the social sphere is a real blue ocean of possibility. Within 10 years, social networks allow us to ’stay in touch’ with thousands of weak relationships, as opposed to the few dozen strong relationships we meet in person. The more identity we have online, the quicker we can establish trust, plan events, exchange media, and transfer our identity to mobile phones or GPS locations. If you move to a new city, within a month of joining a building, finding a job, joining a gym- you can connect to new like-minded groups in a low-risk environment. Online identity also implies online activity, where our reviews, comments, tweets, articles, and portfolios represent more of our social lives.

When we search Google, we are searching the same Google as a neighbor with a completely different identity. Personalized advertising aside, the internet itself is not personal. Ideally, searching the internet would weigh search results by your identity, social network, and professional network. If I’m a University of Chicago student and I search for apartments, results should be weighed by my location, by peer reviews of other students, perhaps even by independent review firms specializing in matching college students to apartments. If I search for “Brian Mayer” the search results should be weighted by network and context relevancy. But all of this depends not only on me searching the internet but on the internet searching me.

This website is overdue for a one year anniversary post. For our community, I want midVentures to become a Chicago Tech Startup Incubator. But on a more tangible level, midVentures helps you Rapid Prototype new web application ideas for your business.

I’m not personally a ninja programmer, though I know my way around C++, PHP, MySQL, Javascript, CSS, HTML, and Visual Basic. In fact, what midVentures does best is not necessarily the programming. We turn ideas into interactive online prototypes. I have been working with some product management consultants to hone our midVentures process of turning ideas into visual mockups and interactive online prototypes in under 30 days. And from the feedback of the market: that’s a lot faster than companies can attempt internally.

I declare our Rapid App Prototyping Service to be fully operational Monday September 6th.

1. We start with the Idea Workshop with you and your team, flushing out new ideas ranging from social networks, mobile apps, front-end or back-end software, marketplaces, mashups, online tools, news and media sites, games, promotions, etc.
2. Once we flush the ideas out, we write up a market analysis and Feasibility Summary of each idea’s impact on your company and your customers; as well as the goals for each prototype once it is interactive.
3. We Rapidly Design and Develop the online interactive prototypes of your site, app, or software. This takes about 2 weeks, and our goal is to give you and your customers something to ‘play with’ early. This is not your production app and you won’t make money off of it, but you will get critical feedback.
4. We Measure the Outcomes of each prototype app. What did your team think? What did your customers think? What is the feasibility for budget, timeline, market reaction, and technology for developing the prototype into a production app?

Cynical midVentures fans will be correct in assuming that Rapid Prototyping your venture is something that midVentures has been doing for the past year. But of all the many things we have attempted, Prototyping is a stage of development where we blow clients out of the water.