Tag Archives: Creativity

THE SECRET OF HARD TIMES

The Chicago Innovation Awards – Part 1

John Jonelis

Time Share Gulfstream JetI’m talking to investing legend, Loren Bukkett—the Prophet of Pekin, immediately after a big event in Chicago. “Twelve whole years,” he says. “A hundred percent of their winners are all still in business. And tonight they break that perfect record.” He’s talking about the winners of the Chicago Innovation Awards and he’s got my attention. Which companies are going down?

This guy is seemingly unassuming. Uncombed hair. Rumpled blazer. Now he leans across the lounge table of the big Gulfstream G450 and speaks softly to the lady taking shorthand. “Pardon me Aussy,” he says, “Would you please file this conversation with the rest of tonight’s papers?”

She nods and then graces me with a striking smile and I think back to a time before they got hitched. One smile, that’s all, and I’m lost in the past, only vaguely aware of the man’s voice in the background. This gal sure doesn’t show her age.

“Hey Jonelis, you awake?”

With that, I stop ogling his wife and look him in the eye. This is turning into a strange interview. Because of his tight schedule, we’re going Mach 0.8 at 40,000 feet in this beautiful corporate jet enroute to—I don’t know where. In an hour, he says he’ll send me back in another plane. I’m hoping for something small. A Piper Citation can land at my home airport for an early-to-bed. This big jet is a corporate timeshare. I saw a similar timeshare scheme pitched tonight, but with trucks instead of airplanes.

Gulfstream G450

Gulfstream G450 – photo from Gulfstream website

An acerbic voice jars me to my senses: “Jonelis—are you done daydreaming yet?”

I smile. “For now, I guess—till I get another chance.”

“Good, then stay alert. As I was saying, Chicago’s in big financial trouble. A lotta trouble. You know it as well as I do. Heck, the whole state’s in trouble—almost as bad as California.” He gives me a down-home grin. “And as you’re no doubt aware, that’s what brought me here tonight.”

“You see a bottom?”

“A bottom? Nobody ever knows if it’s the bottom but use your common sense. This place will bounce back eventually. I’m not saying this town will solve its problems—likely as not they’ll do nothing or move in exactly the wrong direction. But business here has such a long, long way to bounce—a heck of a long way. I’m willing to take a position on that. The trouble with young investors any more is they don’t have the nerve or the stamina.”

I scribble some notes. It seems a safe bet he just took a stake in some of the companies honored at tonight’s event—maybe all of them. Could be he acquired all of them. He’s going on:

“One thing most people don’t understand about hard times—and John, these are real hard times—no doubt about that. The thing people get wrong is this: Tough times don’t blunt the sharp point of innovation. Not at all. When it gets this bad, desperation feeds creativity. Invention kicks in. People find a way to survive. Look how India and China exploded out of utter ruin in spite of their governments. I see Chicago as the next center for thought leadership in the entrepreneurial world. It could rival New York, Boston, Silicon Valley.”

Chicago Innovation Awards

Chicago Innovation Awards – jaj

“You’re really sold on Chicago?”

“I think I made myself clear on that. I’m not betting on the city—not even the state. No, I’m looking at individual companies that rise out of these terrible circumstances. Only strong organizations succeed in an environment this nasty. If they can make it without greasing palms, I’m interested.”

I scribble more notes and try to memorize as much as I can. “You’re telling me that squalor makes it easy for you to pick winning companies.”

“You think you got me figured out. Put away that blasted pencil.” He glances at his wife. “Aussy, see that Mr. Jonelis gets a transcript, would you please?” Then he swivels his leather chair and faces me head on.

“I’ll lay it out for you straight. It’s real simple. Here’s my secret: Hard times create a supply and demand imbalance. Innovation takes off, but at the same time investors run scared. Banks won’t lend. You end up with too many good ideas and not enough capital. That’s when I buy.”

“At a bargain?”

He looks at me from under his shaggy eyebrows. “D’you think?”

That draws a laugh out of me and I tuck away my notes.

“John, you’re the one that lives in that town. Look around. Don’t you see the huge vacuum? You know what happens in a vacuum?”

“Sure. It gets filled. Real fast.”

“That’s exactly right.”

Now that I’m in on his game, I can picture how it unfolds. “And when that happens, politicians grab the credit.”

He just smiles.

“And you laugh all the way to the bank.”

He tenses like a gambler holding his cards to his chest. “Let’s just leave it that the vacuum gets filled.”

“So what’s your take on the mayor and governor getting awards at the event?”

He grins. “That’s how the Chicago Innovation Awards loses its perfect record. But you do not want to get me started on politics!”

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Continue to Part 2

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Find Chicago Venture Magazine at www.ChicagoVentureMagazine.com Comments and re-posts are welcomed and encouraged. This is not investment advice – do your own due diligence. I cannot guarantee accuracy but I give you my best.

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Copyright © 2012 John Jonelis – All Rights Reserved

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Filed under 1871, Characters, Chicago Innovation Awards, Conflict, Entrepreneur, Entrepreneurship, Entrepreneurship and Politics, Events, Innovation, Innovation and Culture, Invention, Kellogg, Northwestern

THE GROUPON EFFECT – “Throw yourself into the fire”

Throw Yourself into the FireVERBATIM – Transcribed recording from Bill Blaire – as told to John Jonelis

This is Bill Blaire reporting on the keynote event at the Second Annual “entrepreneur @ nu” Conference.  Why they call it that, I dunno.  No capital letters.  So how come everybody complains about the way I talk?  You figure it out.

I’m here with John but he told me I should cover the big interview myself.  Pretty good, huh?   Well we’re gonna give it a shot.  Hope this gizmo’s recording my voice, ‘cause I ain’t gonna memorize this stuff.  That’s fer sure.

They open a wall and make the room bigger but the place is still packed.  I’m sitting with a crowd from the Levy entrepreneur group, so I gotta keep my voice down.  If I get any of this wrong, just write a comment and let me know about it.

The setup seems kinda strange.  It’s Andrew Mason from Groupon interviewed by his own VC, Peter Barris of NEA, who’s also on his board.  Kinda chummy to my way o’ thinking.  Barris is a smooth talker.  Makes me wonder which one of ‘ems really the boss.  He sez there’s gonna be two sets of questions.  Puffball and deeply embarrassing.  We’ll see.

Groupon

Turns out Andrew Mason starts college in engineering then transfers to music. Barris points out, “The best and most creative programmers were music majors.  I haven’t yet figured that out.”  Me neither but I heard it in other places too.  In college, Mason holds fake auditions for a fake play.  Then he stages a fake annual university event called ‘Mattress Day,’ where everybody brings their own mattress and they create the tallest stack.  He quotes Ben Franklin as saying he sees mattresses all the way from Chicago—as if there were a Chicago back then.  (Hey—check out that subjunctive verb.  Yeah, I can do that.)  The school shut Mattress Day down good ‘n hard, but he had a great time.  I guess the point is you gotta be playful and ready to take risks to succeed at this startup game.

Mason goes through a long trail of failed startups but keeps trying.  He loves music and he’s a computer geek—started building websites in high school.  It’s not till he graduates from Northwestern and he’s recording music and working as a freelance developer at the same time when he discovers that the Internet is a more wide-open creative space than music.  Not so congested with talent.

According to Mason, “I always assumed that people who developed companies were vastly smarter than me but I found out that’s just not true.”  So does he mean he’s smart or the other guys are dumb?  I give him the benefit of the doubt and call him an egalitarian.  (Hey—I can spout three-dollar words with the rest of ‘em.)

He gets, an idea for a website called Policy Tree and gets a scholarship to the University of Chicago to learn public policy.  Then in after few months o’ school he gets this idea for a different website and drops out to start a company called THE POINT.  Turns out a cell phone company wants to charge him 150 bucks to cancel their service.  That after being a loyal customer for five years. He figures a lot of people must be having the same problem.  “I wanted to make it possible for people to come together to accomplish something that no one of them could accomplish alone.  Because people’s ideas aren’t coordinated, they can’t cross the finish line.  I needed a way to coordinate a lot of people with the same problem.”  So that one idea grows from an irritation to an actual company, kinda like a tumor, I guess.

Barris’ boss hates THE POINT.  Sez it’s the worst idea he heard in 35 years in the VC business.  But he likes Mason’s enthusiasm so he invests in it anyway.  Sounds like another example of a jockey who’s more important than the horse.  That make any sense to you?   We can argue it out later.

The problem with THE POINT is it’s too abstract—too hard to explain to people.  As he put it, “How do you convince people that the idea matters to them personally?  It turns out that the best ideas are just a baby step away from something that already exists.”  Another problem—if the idea isn’t tangible, it’s hard to find other backers.  He wasn’t gonna be able to fund every good idea he planned.  Does he quit?  No, he picks the best element—the one that’s easiest to explain—and starts Groupon.  Barris made a good call after all.

Mason: “Groupon snuck up on us.  So many companies wanted it that I knew I must be solving a problem.”  He finds out that local businesses don’t have a good way to reach their local customers and that’s the pain point he works on.  Merchants have TV, radio, newspaper—traditional stuff—all expensive, all paid up-front whether it works or not.  So this solves a consumer problem and a merchant problem, too.

GROWING PAINS
Groupon takes off big time like everybody and his mother knows.  Forbes calls it “The fastest growing company in history.”  Meanwhile, Mason faces his biggest challenge.  He never managed people before.  Now he’s got 12,000 employees.  He used to write code, design stuff, and personally answer customer calls.  That just don’t scale.  Now he’s gotta delegate, build teams, set goals to keep those teams aligned—it’s a big role change.  Think about it.  Amazon is in 9 or 10 countries in 15 years.  Groupon is in 43 or so in just a few months.  According to Mason:  “Going public has been a stress test.  It forced us to get stronger.”

Mason calls Groupon an operating system for commerce.  Their biggest problem?  “When it works too well it’s like concentrated detergent—when you put too much in…  Merchants get too many customers—a completely new problem that they’ve never had to deal with and we’ve had to adjust our operations to solve it.”  Hey, that’s the kinda suffering I can get comfortable with.

New ideas?  Lots of ‘em.  Now 30% of their sales are mobile.  They’re test marketing a pull strategy where you say, hey, I’m hungry.  Where can I get a good rack o’ ribs?  And you go on the mobile Internet and find a deal.  That’s different from their email push strategy.

This year, I been hearing a lotta startups say they’re gonna be better than Groupon because of this or that dingus they offer.  Turns out it’s harder than people figure and Groupon’s not done inventing itself either.  These people are very smart.  And as Mason tells it, it’s a very intense business that needs a lotta operational excellence.  As he puts it, “We built our moat inside the castle walls.  People get up to the walls and say, ‘Sweet.’  But once they get inside they find out there’s a big scary moat and all the gold’s on the other side.”  That’s brings up a great picture in my mind and tells me all I need to know about the barriers to entry.

Groupon
COMPANY CULTURE

People read stories like them hiring a guy dressed in ballerina outfit to walk around the grounds for a week without talking to anybody.  Then when Mayor Bloomberg comes, they got a pony in the office.  Mason doesn’t think about culture that way.  “Culture as the element that helps get work done.  And that has to get stronger as we grow.”  So they hire entrepreneurs.  They give ‘em goals but also the freedom to pursue those goals the way they want.  That approach has launched a bunch of new business segments.  Hard to compete with a big and fast-growing company that acts like that.  Reminds me of Google.  Anybody agree with me?

Has Groupon contributed to the growth of entrepreneurship in Chicago?  Mason doesn’t feel comfortable with the question but when Barris asks the audience, everybody shouts out “Yes.”  Myself, I think Groupon is the biggest morale-booster this city ever saw.  Entrepreneurship is exploding here because of one spectacular success.  Finally Mason answers the question. “We couldn’t have built Groupon in Silicon Valley.  Hundreds of our customer service people have come out of the Second City improv tradition.   We solve problems using people—not always technology and self-service which is the bias in Silicon Valley.  In Palo Alto you get a lot of mission driven people who are good at the one thing they do.  And the cost of an engineer has tripled.  Chicago has just as much talent.”  Amen to that, brother.

The universities in Chicago are teaching entrepreneurship big time these days.  Three important messages:

1.) It’s okay to fail. 
2.) Be persistent.
3.) Surround yourself with other talented people. 

Mason wishes there was more entrepreneurship training when he went to school.  “I learned more in an internship on music technology—actually doing things—than I ever learned in class.  Throw yourself into the fire.  Go to a company and offer yourself cheap or for free so you get a lot of latitude to fail.”

Q&A

How will they stay ahead?  He wants to be the operating system of ecommerce and talks about how all their new ideas support each other.

Is there a social media bubble?  Not compared to the 90’s.

Does Groupon do social good like THE POINT meant to do?  They’re making things possible for millions of people.  Companies have grown because of it.  That’s business enabling business—a nice slant on the do-gooders.

How do you isolate Groupon employees from media criticism?   “The employees know what’s really going on in the company so they have thick skin and stay focused on long term while this new industry is being built.”

AFTERWARDS
John takes me for a walk around campus.  Beautiful place. No wonder he went to school here.  But they’re tearing down parking lots to make more buildings.  Digging up others to make green space.  Those numbers don’t add up.  I dunno if I believe this but John claims he avoids campus events any more.  After a long drive he gets a rhino boot on his car. This time they sell a parking pass online, so he shows up.

We stop at the Allen Center and run into the Wildcat Angels just starting a meeting.  I like that group.  After grabbing some refreshments, we go down the halls.  Funny thing:  The gift shop is open and John buys one o’ them silver cases holds business cards.  Real class, too—sez ‘Kellogg’ on it.  Never had one before.  But he can’t wrangle a Kellogg nametag lanyard.  Go figure.

Find Northwestern’s entrepreneur program at http://entrepreneur.northwestern.edu/
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GO TO – SIX REASONS WHY TECH BELONGS TO THE YOUNG

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Find Chicago Venture Magazine at
www.ChicagoVentureMagazine.com
Comments and re-posts are welcomed and encouraged. This is not investment advice – do your own due diligence. I cannot guarantee accuracy but I give you my best.

Copyright © 2012 John Jonelis – All Rights Reserved.

46 Comments

Filed under Chicago Venture Magazine, Chicago Ventures, Kellogg, Northwestern