The Chicago startup competition this week that you didn't hear about

This was the week of TechCrunch Disrupt in Silicon Valley, where perhaps the biggest news was AOL's (or is it aol's) acquisition of TechCrunch itself. There was a startup competition in Chicago this week as well, midVentures LAUNCH, but it didn't get much press coverage, even in Chicago. I was very pleasantly surprised and encouraged by some of the startups at the event, and the health of the startup community in general.

First, we need to define the Chicago venture community as covering a lot more than Chicago. Some of the most impressive startups I saw at the event were from Indianapolis, Bloomington, IN, and even Bethesda, MD. Rather than being a standalone center for startups, Chicago is really the hub for ventures throughout the Midwest. Next, there were companies competing that are actually making money. TinderBox, for example, is already very successful "under the radar" with an impressive service for creating, managing and tracking proposals that's integrated with Salesforce.com. There were contestants with pre-release services that already look very refined: MyJibe is going after the Mint.com market space with a personal financial management and budgeting service. They're targeting the local and regional financial services companies (banks and credit unions) that want online services to compete with those of much bigger companies like PNC, but don't have the resources to build their own solutions.

For all the hand-wringing over the lack of new hardware startups, the winner of midVentures LAUNCH was a hardware company. The winner, Wearable, makes the AirStash, a $99 wireless flash drive with built-in media server that fits into your pocket. It holds any SD card with up to 32GB of capacity and then shares the contents of the card with other WiFi-enabled devices. It also connects via USB and looks just like a flash drive to a PC. The AirStash is an impressive device, and it's shipping now.

The one thing still missing from Chicago that's holding down the number of startups is a large angel community. A large, successful startup that cashes out in an IPO or acquisition spins out lots of potential angel investors, and the only company in Chicago that's likely to be in that category soon is Groupon. However, those Groupon angels will fund other startups, and as those companies cash out, a new generation of angel investors will be born. That cycle is the backbone of seed funding in Silicon Valley, and it needs to be "jump-started" in Chicago, possibly through Silicon Valley angels investing in some Midwestern startups. They would have been very excited by what they saw, had they attended midVentures LAUNCH.