The pandemic did a lot to diminish the primacy of coastal cities as meccas for the brightest minds in tech. As tech work migrated from the office space to virtual space, suddenly the cost-benefit calculus of life in the tech centers completely changed. Paying sky-high rents stopped making sense: As tech workers fled San Francisco, one-bedroom apartments went from $3,300 a month to $2,400. Many techies went back to where they came from to be close to family and the familiar, while still keeping their paycheck. Now that the pandemic is ending, many aren’t eager to give up that life and go back to the office.
While Austin, Texas, Madison, Wisconsin, and Palm Beach, Florida, are getting their share of the tech diaspora, Chicago is also hoping to attract some of this talent. Mayor Lori Lightfoot, in her first post-pandemic trip, was in San Francisco last week making the case for her city to tech talent and investors.
“We are telling our story—jettisoning our Midwest modesty and talking about it,” Lightfoot tells me.
“We’re being very intentional about making sure that Chicago is part of the conversation for people who are starting to look around and say, ‘You know what? Maybe I don’t need to be on the West Coast and in Silicon Valley and the Bay Area’,” she says.
Unicorns in Chi Town
The pandemic has already brought 32 companies to Chicago, Lightfoot says. That total includes tech companies, also some life science (SOLVD Health) and logistics companies (including U.S. Xpress, and Flock Freight). Google opened an office in Chicago in 2015, then another one in 2019. Groupon and Grubhub are Chicago-born.
The city is also becoming a birthplace for unicorns, or startups valued at above $1 billion. Nine of the 71 unicorns minted in the U.S. so far this year are based in Chicago. That makes Chicago competitive with better-known tech hubs: San Francisco and the Bay Area have minted 17 unicorns so far this year, according to PitchBook valuation data. New York City comes in second with 11 unicorns. Los Angeles, Boston, and Seattle all trail Chicago with five, three, and one, respectively.
Chicago has a history of unicorns as well; it birthed two in 2020, and another—Tempus Labs—in 2018. Chicago economic development organization, World Business Chicago, says the city has now produced a total of 19 unicorns.
A number of factors play into the city’s startup growth. Advances in cloud computing and ecommerce tech have made it easier for startups to launch and scale businesses from virtually anywhere. Many of these businesses rely on data centers, and new Chicago-based data centers may end up being a big source of job growth. Cushman & Wakefield’s data center advisory group ranked Chicago the second-best place in the world to build a data center, based on land availability, land price, fiber connectivity, and other factors. In 2019, Illinois passed a package of tax incentives to attract data centers.
None of those fiscal, logistical, and strategic factors matter if the city can’t produce new tech talent in the local universities, or attract talent from other places, and keep those people in the area. Techies expect to live in a city with culture and nightlife. Silicon Valley workers were once content to live down on the peninsula; but over the past decade, they moved to San Francisco, the area’s center of urban culture. They rented overpriced apartments and dreamed of somehow, somewhere, owning a home of their own—a prospect that for many is out of reach in SF.
That’s why culture and home ownership are big parts of Lightfoot’s pitch.
“I’m going to put our music, arts and culture, and foody scene, up against anybody, literally in the world,” Lightfoot says. “If you’re looking for lifestyle and affordability, where you can buy and live in the city, there are very few places in the United States that are better than Chicago.”
It’s no secret that Chicago also has its problems. Over the Fourth of July weekend (Friday through Monday), 100 people were shot in Chicago, 18 of them fatally. Lightfoot has been under pressure to slow the violence and has called on the courts to keep dangerous criminals off the streets. Chicago saw 496 homicides in 2019, the year Lightfoot took office, but the number jumped to 770 in 2020. The city recorded 336 homicides at 2021’s halfway point, which put it on track to exceed 2020’s tragic total.
Some tech companies are doing what they can to make it easier for workers to make the move to Chicago. Garry Cooper, CEO of the resource management and exchange platform Rheaply who is part of the mayor’s delegation, told me his company offers workers a chance to do a “tour of duty” in Chicago. It’s the company’s way of giving far-flung employees a chance to check out Chicago life before committing to move there.
“We have a few folks who live in New York, who are actually going to be in Chicago for the next six months and just living in Chicago,” he says. “So we’re seeing people just kind of come in and test out the city.” Cooper says several have actually made the decision to move.
A citywide facilitator
I asked Lightfoot if Chicago’s effort to attract tech involved hard cash or tax breaks. She says the city, including the mayor’s office, is mainly playing the role of facilitator. When you consider that growing a tech ecosystem requires getting a lot of different people talking to each other, her focus makes sense.
Chicago is home to many Fortune 100 and Fortune 500 companies, spanning numerous industries, including financial services, manufacturing, pharmaceuticals/biotech, food production, and healthcare. Tech companies, some of them startups, sell specialized B2B products and services to those companies, and B2C products to their employees. Chicago-based incubators, such as 1871 and mHUB, are there to shape new startups. Venture capital firms, both in Chicago and elsewhere, are looking for promising companies to fund. Local organizations, such as Bonfire and P33, are focused on attracting and developing a diverse talent base. Some tech startups grow up within research centers at local big-name universities such as Northwestern, the University of Chicago, DePaul, and Loyola.
The mayor’s office is trying to make sure everyone knows each other, and that the right ideas and resources flow to the right people at the right times. It also works with local real estate owners and developers to make sure enough office space, lab space, and data center space is available, the mayor tells me.
Chicago also has a diverse population to go along with its diverse mix of industries. While large Silicon Valley tech companies have struggled to bring diversity to their ranks, Chicago’s tech diversity picture looks decidedly different, at least for now.
Twenty six percent of Chicago’s tech workforce is Black or Latinx, according to the mayor’s office. That’s a lot higher than the industry at large: A 2014 report from the U.S. Equal Employment Opportunity Commission (EEOC) said only 7.4% of the high-tech workforce was Black (compared to 13% of population), and that only 8% of that workforce was Hispanic. A 2019 Wired report suggests those numbers had barely moved during the subsequent five years.
Bonfire CEO Suzanne Muchin, who was part of the mayor’s delegation, cites a 2019 Startup Genome stat saying 34% of Chicago’s startups (tech and otherwise) are run by women. Bonfire is a venture-backed talent accelerator program designed to prepare for leadership roles in business.
Muchin believes it’s Chicago’s diverse business ecosystem that’s behind that impressive statistic. “That’s not a throwaway line because you have to ask yourself the question: What are the conditions that create that?,” Muchin says. “What is the community that supports those women? Do our VCs believe in women? Are the women entrepreneurs supporting other women?”
Mayor Lightfoot has plenty of politically loaded issues on her desk in Chicago, from crime to COVID-19 to high property taxes to the city’s financial future. But bringing more tech to town is something Chicago’s citizens can agree on.
“Every job that you can think of now—and in the future that we don’t even know is going to be created—is somehow going to be tied to tech,” Lightfoot says. “There’s a critical role that tech is going to play in any economy of the future.”
CORRECTION: An earlier version of this story referred to Bonfire as a “nonprofit.” It is not. It is a venture-backed, for-profit company.