One big win other companies here have noted is finding great employees that stick around is easier here. There is a great university in Madison (that frankly sources many great developers for the valley) and it's just a matter of making people realize you can do cool stuff from anywhere, as long as you have an internet connection.
I love the west coast, but right now I'd rather just travel there periodically and focus on my product here.
...though I hope it doesn't catch on :)
Is it the second largest in the country? I dunno. Probably not, I would think that'd be New York.
I don't really care though. I'm too busy contributing to the scene and working to keep that tide rising. :)
There are loads of startup related happenings regularly now. I produce some myself. :)
Shoot me an email (tim ATatAT entrepreneursunpluggd DOTdotDOT com) and I'd be happy to give you some suggestions.
Code Academy is an excellent startup to check out. Their offices are located at 1871 in Merchandise Mart.
Someone above already said Technori. A ton of great Chicago startup people show up to the networking event held before the actual Technori presentation.
I have heard good things about the Chicago Lean Startup Circle meetup group.
If you are either a web developer or designer you should checkout Refresh Chicago as well. Every Refresh meeting I have been to was definitely worthwhile. The presentations are normally pretty technical though.
Code and Coffee meetup group is worthwhile for developers that don't mind waking up early. I've paired with some great developers and learned a lot.
I would highly recommend checking out all of the above. Chicago definitely has a great startup scene. Being pretty introverted, I initially had to really push myself to get out and meet people. TRUST ME, it is worthwhile.
The most amazing people I know in Chicago have nothing to do with the startup fans and are reasonably insular (probably because it's less irritating to be insular).