--> Response to Ron May Cont.

We are still here, trying to make a go of it. Unfortunately, Chris Sorensen has been relegated to the coast. Another bright talent has left the city and his company has followed. Do you realize that Chris Sorensen and Mark Bills created RocketCheck BEFORE PayPal! These guys had the idea, the talent and the business model - and after a year of trying to get funded in Chicago - have LEFT THE CITY!

How many more companies, ideas, talent, and business are going to leave before we get our act together? I can't give you that number, however, I can tell you that ours may be next, as we continue to get pressure from both coasts to relocate closer to viable funding sources where they can impart value.

What value you may ask? How about again the quote from Chris Sorensen that he attributed to the Venture Law Group? "Building a great company is an art - the need for mentoring in these start ups is huge." The problem, he explained; "is that young entrepreneurs don't have any credibility or contacts- so you have to lend them your credibility and introduce them to your contacts!"

What do you get from investment groups in Chicago? "It's too early". "We are going to take a pass, come back when you have customers, good luck." And then they pat you on the head and send you out the door.

You know what you get in NY, Boston, and especially SF? "Your company is not for us, however here are four other VCs that are in your space, are looking for a deal like yours and may be interested. Here is their name and number, give them a call and tell them I referred you." In some cases, the VC will make the call FIRST to let the person you know you will be calling on them!

Are they concerned about their credibility? Maybe, however they also feel that their peers are grown ups and can make their own decisions through whatever filtering process they have. They also know that by sending a potential deal to their friend, they will get deal to flow back to them in return. And last, they KNOW what each VC group is funding, where the background is and what they are looking for.

All funds and VC's are not created equal. This relates to effort, domain experience, relevant knowledge, or in other areas of funding interest. We as Chicago entrepreneurs are bumping around in the dark at times wasting the time of the VC groups who don't fund the stage we are in or the sector. Well, Chicago VC's, if you are listening, Why not throw us a bone every now and then? If we are too early, which VC's bring you the deals that you are ready for? If you want biotech and we are e-commerce, who do you know that funds e-commerce? BlueStar? Kettle? KB? You guys would know better than us. If we don't have the customer base yet, who do you play golf with that could get us that contact with Motorola? Tellabs? AON? Sears? Bank One? Come on, you have to know someone!

Which leads me to my last point for the formation of knockNOW!; the strengths of Chicago. My partner Bob Gerometta and myself want to stay in Chicago. If we get the company started, we feel this City has some great strengths: Fortune 500 companies, educational institutions, logistics, easy access to the business and government leaders. Unfortunately, many of the e-businesses will never get to the point where they can utilize the strengths of Chicago.

Without proper seed level funding the ideas will leave. This will mean that most of the investment opportunities, much as currently is in Chicago, will be later stage and follow on. This means less risk, however less reward.

Well, we submit, if good "seed level ideas" aren't funded, these ideas will leave the City. What we will be left with is the bridesmaid syndrome where the city is following other lead investors. If all of the ideas are gone, the City will have less companies to be part of. They will be relegated to follow on investments with other cities getting all of the glory and benefit of the truly Killer application.

Again, less risk, but less reward. Look at the i-Street magazine from a few months ago. They did a special on who funded what deals. With the exception of Divine (which is another story in and of itself) there were very few VC's that actually "led" an investment. Most of the VC's were "part of" this deal or that one. They weren't leaders, they were followers. I know this may put us in a bad light for saying so, however someone has to. The numbers tell the story. Divine, for all of its miscalculations, at least stepped up to the plate and funded true early-stage companies. While we do not agree with their motives or methods, we do at least applaud them for "leading" over 35 local investments.

Paul Doyle asked a question: "What kind of impact would $300 million invested into Chicago make?" Well, of course, the answer is: tremendous! However, our argument is that this money will make less of an impact and produce less of a return if invested in second rounds and later stage companies, than it would in early stage. The challenge facing the City now is; even if you had the money to invest, who do you trust to make good decisions to give it out?

It is a crime, again an opinion here, that the Skyscraper Fund only gave out 1$ million. If they had made better decisions and been more apt to invest in early-stage companies, they could have easily invested past the $4 million committed and been into the $10 million that divine was obligated for. If that money had already been spent, then divine would not have had the opportunity to pull out. Why wasn't that money invested? Because there are no good companies here? I trust that is not the reason.

No, more likely, it was people being too cautious with money that was intended to be invested in seed and startup, and SHOULD HAVE been invested. What were they waiting for?

Mr. Gerometta is a former commissioner for the City of NY (actually the youngest ever). He understands what it takes to get disparate groups together and I was fortunate enough to know some great individuals from many different sectors as well.

Our intent was and is, to bridge the gap for the greater good of the City and its businesses. Ron, rather than biting the hand that feeds you, why not look for the positive and try to help us all get better. Write something about Click Commerce, the most underrated and currently most successful Internet company in the City. Write about Archipelago and the challenge of taking on the old-line financial companies.

Write about Rick Fumo and Nick Farina, both of whom left years of corporate America and ventured into the world of entrepreneurism, only to find out that it is much different and tougher than they anticipated. Write about where the Federal Reserve thinks money, e-commerce, and the Internet are going. That is what others and I want to read, that is what we want to learn, that is whom we want to be associated with.

knockNOW! is our humble attempt to do just that.

knockNOW! was designed to promote ACTION. It stands for Knowledge, Networking, Opportunity, Customers, Credibility and Contacts, Kismet, Notoriety Obligation and Winners - all vital to successful e-business in Chicago.

If anyone has comments or questions about this letter, and knockNOW!, please feel free to contact me at: Stephen.Meade@gbucs.com

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