Chicago: Incubator for the Incubators

By Zack Issleib, VP, Commercial Banking, John Sassaris, Regional President

The next crop of business incubators will look different than just a couple of years ago. Find out how they’re reinventing themselves – and the industry.

When entrepreneurs around the world think of business incubators, Chicago is on the short list for dependable leadership and innovation. Incubators have become an industry sector of their own in Chicago, across the nation and globe. Some of the most recent crop of incubator innovations revolves around narrowing focus, applying digital solutions to specialized fields and creating unique public/private partnerships. In Chicago, each of these next-generation business incubation trends continue to cement the city’s reputation as a tech and innovation hub.

The rise of innovation
Business incubators grew out of a big idea in economic development. Similar to the post-World War II practice of “chasing smokestacks” – recruiting new industries to relocate and bring jobs with them – cities started to grow their own industries by supporting startups. 

Chicago was an early adopter in the development of incubators. The Industrial Council of Nearwest Chicago (ICNC), which launched the Fulton-Carroll Center, was created in 1980 and at the time was one of the nation’s largest business incubators in the country. More than 30 years later, the 416,000 square foot facility houses more than 100 tenants in what has become an urban landscape dotted with dozens of like-minded neighbors. 

To continue that innovation, Chicago recently established UI LABS on the former Goose Island site.  It was created to bring top talent from universities, civic organizations and industry professionals to collaborate and pursue innovation in regard to economic development in the Midwest.  The formal launch was less than three years ago, however by the end of 2016, UI LABS had already grown to a $17.6 million operation with 300+ partners across 34 states.  

Growth spurt
More recently, new incubators have opened their doors in Chicago. Icons of the incubator sector have expanded, some more than once, while others have announced new ventures that will be up and running within the year. In virtually every case, the focus is on the industries for which the city has a global reputation.

  • Food and beverage - The city and three non-profits; Accion Chicago, IFF and ICNC; along with two corporate partners, Kellogg Company and Conagra Brands, recently broke ground for The Hatchery. The $34 million facility in East Garfield Park will provide space for approximately 100 startup or early-stage food entrepreneurs when it opens in 2018. They will have access to 56 private kitchens as well as a shared kitchen, co-working and multifunction space, bulk storage and office space.  One of the first tenants, celebrity chef Rick Bayless, will run a workforce training for high school and college students. It is estimated that The Hatchery will support up to 900 jobs within the first five years.  

  • Manufacturing - The manufacturing sector now has its own incubator with the opening of mHUB last March. This is one of Chicago’s first innovation centers for physical product development and manufacturing. The 63,000 square foot co-working space serves a community of product designers and developers, entrepreneurs, engineers and manufacturers, a network of manufacturing mentors, industry experts and investors and provides a source of intellectual and economic capital. mHUB is home to ten fabrication centers and labs, including electronics, plastic fabrication, metals and rapid prototyping. Also housed at mHub will be a micro factory called FuseTM, a new venture by GE that is the first operation as part of the company’s crowdsourcing initiative to create and build innovative industrial products.  

  • Music/Film/Video - Chicago also has a business incubator focused on the development of entrepreneurs in music, film/video and creative industry-focused technologies. Creating new use for an overlooked industrial corridor bordering the Kennedy Expressway in Portage Park, music makers are filling practice spaces and recording studios at 2112 (pronounced “twenty-one twelve"). They can also make use of instrument repair facilities and a shop for building out concepts in studio furniture and sound proofing. 2112 is housed inside Fort Knox, a rehearsal space, along with another new incubator called the Hangar, whose early-stage businesses create videos and movies.

Academic incubators
Universities have also emerged as strong partners in the incubator community. As they look toward teaming their research capabilities with a mission of preparing students for rewarding careers, incubators offer experience beyond lab experiments. Gensler, a national design and architecture firm with a growing practice in creating academic incubators – including some in Chicago – says, “They embrace a culture that promotes tenets like “take risks” and “fail fast” while allowing students to develop hands-on entrepreneurial skills – (something) classroom settings often lack.”

One of the Chicago pioneers in creating academic incubators is Illinois Institute of Technology’s University Technology Park (UTP) that has launched dozens of startups since the doors opened in 2005. Among the high profile success stories:  Cleversafe, a service that provides scalable big data storage for major clients in government and business, and Chromatin, the UTP’s first commercial tenant and biotech innovator that helps serve the growing worldwide demand for food, fuel and feedstocks.

In other corners of the city the University of Chicago’s Polsky Center and Northwestern University’s The Garage are turning out new ventures. In addition to the standard offerings of incubators, the Polsky Center offers Innovation Clinics where the university’s law school students work with student entrepreneurs to give guidance on the legal hurdles to starting a business. At The Garage, a pre-accelerator program prepares students for the next stage of their startup, whether that means raising capital from angel investors, working with mentors on business plans or simply networking.

Just the beginning?
The business incubator as a sector of its own is clearly well established, in Chicago and across the nation and globe. But not all succeed. “For incubators to live up to their full economic potential, they need to overcome two pitfalls: they need to provide real value, not just office space, and they need to measure success in more than just outside funding,” says Sramana Mitra – herself the founder of a virtual incubator – writing in the Harvard Business Review. 

The data shows that the Chicago incubator community delivers on that economic potential. The now iconic 1871 in the Merchandise Mart has opened two expansions since its founding five years ago. Today more than 1,500 members are spread across two floors of the Mart. And south of the Loop, UTP is thriving after a dozen years. Both are turning out high profile success stories – some from entrepreneurs with more than one money-making business to their credit. 1871 CEO Howard A. Tullman says the facilities’ “… members aren’t remotely all first-timers. There are dozens of serial entrepreneurs working (there).”  

And 1871 may only be the tip of the iceberg. Chicago now boasts more than 20 incubators including MATTER, Bunker Labs, Insight, Impact Engine, TechStar, Wavetable Labs, Sunshine Enterprises and many more.  Some incubators are specific to a certain cause or industry, while others promote their cause as entrepreneurs working together to create new companies.  

So what does this mean for Chicago as a tech hub and home to innovation?  “We’ve come a long way in the last 10 years, says Illinois Technology Association CEO Fred Hoch. “Entrepreneurs are choosing to stay and be part of this community because it’s a strong community now.”  This may just be the beginning to an already vibrant incubator scene in Chicago.