September 17, 2012 | by Dane Golden
The Chicago Music Exchange is the perfect living room for any musician, with its high ceilings, hardwood floors, grand Persian rugs, and cozy couches where customers can relax with a guitar and play a few licks.
And while you're trying out that shell-pink Fender Stratocaster with relic-simulated aging, you might just bump in to some of the store's big-name clientele, such as Steve Miller, the Bare Naked Ladies, Death Cab for Cutie, and Jeff Tweedy of Wilco, to name a few.
Business owner David Kalt ('89) is the resident rock-star entrepreneur. He had already founded two successful tech companies before buying the 20-year-old Chicago Music Exchange in 2010.
Now he's retooled the business from one known mostly for high-end vintage instruments to one that caters to a wider range of customers—everyone from weekend musicians to Tom Petty.
Kalt has always loved music, though his path to the Chicago Music Exchange was a circuitous one. He cut his teeth on audio recording at U-M’s East Quad Music Co-op, then got a job after graduation at a Chicago recording studio.
Unfortunately, the 120-hour workweeks and low pay sent him looking for a career change. He had discovered a knack for writing software while working on the studio's computer, so he decided to go back to school and get a master’s degree in computer science at DePaul University.
After school, he founded, built, and sold a company called Third Party Solutions, which made software for travel companies. Then, in 2000, Kalt co-founded optionsXpress to help people trade options online. As CEO, he took the company public in 2005.
He left optionsXpress in 2007, in part a victim of his own success. While the company had continued to grow, and was recognized as the best online broker by Barron's and Kiplinger magazines, Kalt felt the urge to move on to something new.
"While I loved the company, and the challenges of running a public company, that wasn't my strong suit," Kalt says. "My strengths lie in startup mode and establishing the vision and product."
Translating his online expertise to the retail world, Kalt has built out the Chicago Music Exchange web experience to engage the national and international audiences who crave its American-made guitars and other merchandise. The store sometimes hosts informal performances, videos of which are posted to the YouTube page along with demos of drums and other gear. One recent video,"100 Riffs (A Brief History of Rock N' Roll)," starring guitar salesman Alex Chadwick, went viral in June. It's been viewed more than three million times to date. In the video, Chadwick plays his top riffs in one continuous, 12-minute take. It has dramatically increased traffic to the store's website, creating an uptick in sales and enhancing the store's mailing list.
And the business continues to grow. But don't expect the Chicago Music Exchange to go opening stores in every local mall. Rather, Kalt likens his business model to Ann Arbor's own nationally known Zingerman's Deli.
"I don't want to be 800 locations and the biggest," Kalt says. "I just want to be the best at what I do. I want to have a following so that when people come to Chicago, and they're musicians, our store is a destination."
What's up next? Kalt is combining his music, tech, and trading experience to develop his latest project, Reverb.com, which will be an eBay-like market for guitars and other instruments. Musicians will be able to buy, sell, and collect.
Kalt enjoys connecting with his U-M friends who live in Chicago. Many have also become successful entrepreneurs.
"There's something right about that [University of Michigan] environment that produces driven individuals who are innovative, and don't really succumb to a traditional, corporate, 'show me what to do' attitude," he says. "There's a think-big attitude that comes out of Ann Arbor that's really inspiring, in all disciplines."
Photo: © Daniel Shea