Educate yourself before locking in an energy deal


Phil Nevels, co-founder of Power2Switch, says to educate yourself before locking in an energy deal.

Business owners who want to swap their old standby energy provider for a newer player in the deregulated Illinois electric power market will find a dizzying array of choices.

Making the right selection can be daunting when there are more than 25 alternatives to Commonwealth Edison Co. for the commercial market, and getting the lowest bid may not always be the smartest way to go, warns Phil Nevels, co-founder of Power2Switch, a Chicago-based startup that offers commercial and residential power customers online comparison shopping between electricity suppliers in Illinois and Texas.

Power2Switch is expanding to New York, Pennsylvania and Ohio this spring. The firm also recently launched a free online electricity comparison widget through the Illinois Chamber of Commerce and the Lakeview East Chamber of Commerce.

(Power2Switch is one of the hottest startups in Chicago’s growing entrepreneurial scene, getting a leg up via Excelerate Labs in summer 2011, and in December garnering a $1.3 million investment from venture capitalists including OCA Ventures, Hyde Park Angels, New World Ventures and I2A.)

About one-quarter of ComEd’s small commercial customers have signed with another provider, and at least 88 percent of the biggest electricity consumers in the state already have taken their business elsewhere, according to the utility. For the remainder that haven’t investigated the benefits of switching, here’s some advice from a local power broker who’s been doing his homework about how to get the best deal around.

Crain’s: What do you tell commercial power users who may be confused about the sudden flood of electricity provider choices they have?

Mr. Nevels: The Illinois Commerce Commission site and the Citizens Utility Board are sources of solid information. Also, visit our site and get educated. When you receive a rate from a supplier, find out what that rate includes. For example, make sure you’re making an apples-to-apples comparison and also make sure that it’s a fixed rate. The No. 1 way people get burned is by signing a variable rate contract. Many other providers engage in multilevel marketing practices, which we discourage, as they incentivize the selling of electricity supply by individuals lacking sufficient knowledge on this space.

Crain’s: If business owners switch to a new power company, what range of discount can they expect to get compared with their current monthly bill?

Mr. Nevels: Businesses can get a 20 percent to 25 percent discount coming off of ComEd. Some businesses switching from another supplier may not see savings that are as dramatic, maybe 10 percent to 15 percent. On our site, businesses can get discounts as high as 30 percent depending on their current supplier, their size and when they lock in rates.

Crain’s: Is there any downside to locking in a multiyear contract with a new provider if the discount looks good enough?

Mr. Nevels: Our customers typically sign one- to two-year contracts. You’ll probably still have some savings even if the rates change a bit. I wouldn’t recommend longer than two to three years because the ComEd rate may be lower than supply rates in 2013, when it makes its next long-term electricity supply purchase.

Crain’s: Some communities are getting discounts from suppliers by aggregating their energy needs with one provider. What’s your opinion of these arrangements?

Mr. Nevels: These are typically opt-out programs, and businesses have a window of time during which they can choose not to participate. They’re not a bad thing, but our site is about giving people a choice of where they get their energy.

In aggregating, someone is doing that for you and doesn’t take into account the preferences of the individuals in the community. One preference might be lowest-cost, and others might want green energy. Oak Park made the decision to be green, but it’s not the lowest possible price. We found some instances where the broker would go out and say they’re getting the lowest rate, but they may have a conflict of interest or better relationship with one energy supplier over another.

Crain’s: If businesses want renewable energy in their mix of power, will they pay a premium?

Mr. Nevels: Depending on the supplier, a consumer can pay a 2 percent to 5 percent premium for green compared to a regular brown plan. But you can be green and still save money if you’re coming off of ComEd and you can decide what proportion of your energy you want to be green. The two major priorities are: Do I want to help the environment or save the most money possible? Most people choose the latter.

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This week’s Green Scene column in Crain’s Chicago Business: Impact investors target Midwest farmland to grow more organic food — and portfolios, too

David Miller is among a relatively new breed of financiers targeting investments in the local, sustainable farming sector.

Last week, the UIC Forum in Chicago was transformed into the Good Food Festival & Conference, where more than 3,500 people engaged in the local food economy met over three days to learn about new policy initiatives, networking and financing opportunities, and share ideas.

I met Mr. Miller at the trade show standing behind a table and next to a huge photo of a field of wheat gently blowing in the wind on a farm in Illinois. After 35 years of working in real estate and banking, Mr. Miller, based in Winnetka, formed Working Farms Capital to bring new capital to the field of sustainable agriculture. The photo was taken at the company’s primary venture, Iroquois Valley Farms LLC, a 600-acre parcel of land in Iroquois County, Ill., where about 35 investors own an equity stake in farmland that’s operated by farmers with long-term leases.

For the last five years, the company has been investing in Illinois farmland, with an eye toward transitioning what’s grown there to organic and sustainable crops for the local food network, says Mr. Miller, president and CEO. Last year, he raised $1.2 million in new capital and bought two more farms.

Mr. Miller’s setup is not your typical network of angel investors who invest in a standard equity structure. Rather, people invest in an operating company that buys farms as a business and then negotiates long-term leases with farmers that do the hard day-to-day work of running the farm.

Between handshakes at the trade show, Mr. Miller spent some time discussing his innovative business model.

Crain’s: Investing in farmland is a far cry from big city real estate and banking. How did you make the crossover?


David Miller

Mr. Miller: My family comes from farming communities and the switch from my corporate background was inevitable. In 2005, I bought my Uncle George’s 10-acre farm in Iroquois County, where he was growing conventional corn and soybeans. In the process of figuring out what to do with the farm, I reconnected with family members who were farming organically and I transitioned that land to organic. The idea of investing in more farmland came out of that.

Crain’s: How do you scout for new farmland to purchase?

Mr. Miller: We don’t have to. Farmers are coming to us with opportunities. A farmer has a parcel of land that comes up for sale near his farm, and they might come to us to help them with the financing. We’re typically working with mid-size family farmers that already own anywhere from 80 to 800 acres of land.

Crain’s: Entrepreneurial experts call these types of ventures impact investment. Can you describe the philosophy behind what you’re doing and why you set up an advisory board to help out?

Mr. Miller: Our mission is to impact local and organic agriculture and we want to bring more local and healthy foods to more people. We’re trying to be thoughtful about how to impact the local food movement, so we set up an advisory board. Board members include Jamie Jones (assistant director of the Social Enterprise program at Northwestern University’s Kellogg School of Business), Helen Cameron (co-owner of restaurant Uncommon Ground) and Irv Cernauskas (co-owner of Irv & Shelly’s Fresh Picks, a local organic food delivery company). This will help us expand locally.

Now we’re going to focus on investing in smaller farmers too. we’ll be buying smaller parcels of land so we can work with a more diverse group of farmers, such as vegetable and dairy farmers, and those with pastured livestock, like grass-fed beef, and even permaculture farmers. Dealing with grain farms was easy, they just had to be certified organic. When you’re growing 100 different types of fruits and vegetables, it’s not so easy. The advisory board will help us with this.

Crain’s: Have investors done well so far by purchasing private equity shares in your company?

Mr. Miller: The original 2007 investors have more than doubled their investment. Few people have sustainable farmland investments in their portfolio. If you believe that people will want to continue to eat healthy, then you should have some money in this area. It’s also good if you want a diversified portfolio. Over 60% of our investors use their IRA or pension funds to invest.

Crain’s: You’re working on getting a new round of equity financing this year. How much are you expecting to raise and what are your investment plans?

Mr. Miller: We’ll be raising $1.5 million and some of those shares have already been pre-sold. We’ll be investing in more farmland, and we’re trying to work on a new venture to help younger farmers get started.

In Iowa, there’s a non-profit group called Practical Farmers of Iowa (that promotes diverse and sustainable agriculture). They have a starter program for new farmers and we’ve been working with them for the past year to see how we can bring investment capital to a new entity focused just on beginner farmers. They’re so passionate about farming and consumers want the local, organic food. It’s not such a leap of faith to think people would want to invest in it.

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This week’s Green Scene column in Crain’s Chicago Business: Home design showroom aims to be a green beacon to designers, homeowners


The Green Home Chicago showroom

Karen Kalmek calls herself a late bloomer.

She waited till her fifties to launch a business of her own that combined her interests in art, saving the planet and job creation. But Ms. Kalmek’s decision to open Green Home Chicago in 2008, just as the sustainable interior decor movement was taking off, seems to have been well-timed.

She opened her showroom in the Fulton Market area when most interior designers weren’t yet seeking green home products for their clients and the trend for such finishes in commercial space was still considered cutting-edge.

Green Home Chicago’s interior finishing products include flooring, tiles, paint, carpets, furniture, lighting, fabrics and one-of-kind pieces made by local artists. The showroom carries a custom cabinetry line that’s made locally with FSC (Forestry Stewardship Council) certified wood.

The market for these goods has grown since her first days in business. Last year, sales rose 70% from the year before (she declines to specify dollar amounts), but 2010 was slightly worse than the year before, she notes. About two-thirds of the company’s revenues come from residential clients, but Ms. Kalmek is placing more emphasis on growing the commercial side of her customer base through architects and interior designers.


Karen Kalmek

Ms. Kalmek began her career as a speech therapist in her native South Africa and worked for Fortune 500 companies in the U.S. She then veered toward entrepreneurial ventures, including a stint with a non-profit that imported home decor products from Africa that helped combat poverty in communities on that continent. And throughout, she was also an artist.


The locally manufactured chair

Ms. Kalmek is expanding her business by adding a manufacturing component to source more design products closer to home. She’s working with a mechanical engineer on the North Shore who’s crafting handmade chairs from sustainable North American wood that’s primed with soy-based, formaldehyde-free technology. The chairs are laser-cut out of one sheet of material (reducing waste) and flat-packed for easy shipment anywhere in the world.

But she has bigger expansion plans: Ms. Kalmek is trying to convince city officials to establish a partnership with her to turn some vacant warehouse space into a small-scale manufacturing plant for countertops made from recycled glass.

Ms. Kalmek is an advocate for green design even outside her showroom. She’s in the midst of organizing a panel discussion event in May that will focus on the bigger picture of sustainability in building.

Crain’s met up with Ms. Kalmek to learn more about her business and green philosophy.

Crain’s: How do you define eco-design?

Ms. Kalmek: I see design at the end of the line of a construction project. Heating, air quality and other big things that go into construction are very important if you’re trying to build green. But if you have products inside that are off-gassing, you’ve defeated the purpose. Interior design is at the end of the budget, so it gets value-engineered out of the project lots of the time. I try to work with the decision-maker to change their minds about what’s really important.

Crain’s: How would you characterize the local green design sector in Chicago?

Ms. Kalmek: It’s emerging. When I started my research in 2007 there wasn’t much green design. Today, many people still don’t know what’s available, others think it’s too expensive. And then there’s human nature. People are used to doing what they always do. I have designers coming in here saying their clients are asking for green and that’s why they’re here for the first time. There isn’t much green design in the Merchandise Mart, but there’s lots of lip service and greenwashing there.

Crain’s: You’re very particular about what you choose to sell in your showroom. Can you describe your 10-point green classification system?

Ms. Kalmek: It’s a system that educates clients and allows them to find the right mix between aesthetics, price and sustainability. On my 10-point scale, saying things are local is big. It creates jobs locally, supports our community and keeps people from moving elsewhere.

I also look at how the product is made, what’s in it, what kind of toxicity is put in the atmosphere to make it — not just the final product. In my field, I want to do the heavy lifting and dig in and get people the real story.

A perfect example is paint. No VOCs (volatile organic compounds) is a good thing (and widely available). But most paints are still petrochemical based. And the bigger story is the tints. I found out through a client that tints in most paints are filled with chemicals and toxins.The only line I carry is Green Planet Paint because the base is not made from petrochemicals, it’s clay and soy-based. And the tints are from natural minerals. This is especially important for people who have immune deficiencies or have young kids.

Crain’s: Even though Green Home Chicago is a for-profit venture, you exude a mission-driven ethos. Can you describe that philosophy?

Ms. Kalmek: It’s really important to educate people about the choices they have and what it could mean for the producers of those products and for the planet as well. For example, I began selling Arzu handmade wool carpets imported from women in Afghanistan and other carpets from Tibet. The sales were helping women there earn a fair wage to support their families and give them health care, and the end user took home a beautiful product.

When a business thinks about the people who are making things, they see they can have a bigger impact through the power of their choices. That’s also why I want to help manufacture more products right here in Chicago.

Crain’s: You’re meeting with representatives of World Business Chicago this week to try to get in on some exporting opportunities. What are you hoping to accomplish?

Ms. Kalmek: There are thousands of empty warehouses in Chicago. I’d love for the city to give me one for a dollar in a private/public partnership to keep costs down and I’ll create a place to manufacture countertops. This is a project that I know is in huge demand in the U.S. and overseas, in the Middle East in particular. It would create 12 jobs initially, and we’d be using recycled glass to create beautiful things, sell it locally and export it too. I’m ready to go.

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This week’s Green Scene column in Crain’s Chicago Business: Food hubs aim to connect small producers with large-scale customers

The growing popularity of food hubs is creating new market opportunities for entrepreneurs.

A food hub is a wholesale distribution network that connects small and medium-sized producers of local food to large-scale food companies, institutions, schools and other buyers. They might buy fresh produce and goods from a wide variety of family farms and artisanal foodmakers, and sell them directly to consumers, restaurants and grocery stores, or through distributors like Sysco and Compass Group. The centralized system aggregates products from many small suppliers and makes larger, more efficient deliveries to customers of all sizes.

Food hubs are just beginning to sprout in Illinois to meet a hearty appetite among consumers for fresh, local food, says Kathy Nyquist, founder and principal of New Venture Advisors LLC, a Chicago firm that works with entrepreneurs and others to launch businesses in the local food and sustainable agriculture arena. She’s moderating a panel discussion on food hubs and produce procurement next week at the three-day Good Food Festival & Conference in Chicago, organized by FamilyFarmed.org. Three of the four panelists are operating different types of food hubs and will discuss how they work.

 

The Illinois state government is getting behind this trend, too, by supplying some expertise and funding mechanisms. To give that sector a boost, the Illinois Department of Commerce and Economic Opportunity recently released a new tool kit and guidelines for creating food hubs. Ms. Nyquist and Jim Slama, president of FamilyFarmed.org, were among the guidelines’ key authors.

FamilyFarmed.org and New Venture Advisors have collaborated to help start food hubs in Illinois, Wisconsin, Virginia, and soon in Northern California. Three were launched in 2011 and six more are in development for later this year and into 2013.

Crain’s met with Ms. Nyquist this week to learn more about food hubs and why local entrepreneurs should pay attention to this trend.

Crain’s: Can new food hubs in Illinois make a difference in connecting local food producers with consumers that want those products?


Kathy Nyquist

Ms. Nyquist: In Illinois, consumers spend $14 billion (annually) on fruits and vegetables alone. The data is a little squishy, but we estimate that only 6 percent of this is grown in the state. It’s a small fraction of the total. Yet national grocery and restaurant associations report that the large majority of consumers want locally produced food. We have heard from hundreds of buyers and growers who say food hubs remove the main barriers to increasing local food production and procurement. Illinois needs a network of food hubs large and small that connect growers with local customers. It barely exists.

Crain’s: Where are these food hubs already established in Illinois? How many Illinois farmers and other small businesses are already participating in these networks?

Ms. Nyquist: We helped two Illinois food hubs launch in 2011 and will help four to five new food hubs launch this year. These and a few previously existing hubs are brick-and-mortar facilities located across the state, operating at varying scales and providing a variety of services. They are probably connected to about 30 Illinois farms and artisans, and many of these will be exhibiting at the Good Food Trade Show and Festival on March 16-17.

Crain’s: Why are food hubs a great way to increase access to local foods?

Ms. Nyquist: They make it easier for producers to sell to local customers and for customers to buy local food. If producers spend less time selling to customers and making deliveries, they can spend more time in production. We know a lot of farmers who would be quite happy to NOT get up at 3 a.m., drive 100 miles to the farmers market and stand in the rain for five hours.

If buyers don’t have to spend time finding and managing multiple small suppliers, they will buy more local food. And sometimes food hubs bridge scale differences: We have a national food system designed for large tractor-trailers but many small- to mid-size producers don’t have the docks or trucks to plug into that system. The food hub takes care of all of this.

Crain’s: Do you have any estimates of projected growth of food hubs in Illinois in the next few years?

Ms. Nyquist: It will be strong if the Illinois Department of Commerce and Economic Opportunity keeps at it. DCEO believes local food can be an economic engine for Illinois. They just released the business planning guide, which we helped author and publish. They also formed the USDA/DCEO Food Hub Partnership to make it easier for entrepreneurs to access state and federal funding for food hub development. DCEO Director Warren Ribley is speaking next week in Chicago on a panel with Colleen Callahan from USDA Rural Development at the Good Food Financing Conference on March 15.

Crain’s: Are there other aspects of the food hub trend where entrepreneurs can get involved?

Ms. Nyquist: There’s a big need for more processing kitchens in Illinois, and that’s a great opportunity for entrepreneurs. A lot of artisanal foodmakers are relying on farmers markets and french markets for distribution and they’ll max out at a certain point in time. So if you have a great spaghetti sauce or sausage recipe and need a larger certified kitchen for production, you’ll probably have to look way outside your region. Sort of ruins the idea of local.

When we studied the Illinois market for processing, we found that access to a local commercial kitchen would have a significant positive impact on farmers and local enterprises such as artisanal foodmakers, independent restaurants and natural food stores. The kitchen would help them expand existing efforts, enter new lines of business and grow their revenues.

Crain’s: What other parts of the country already have successful food hubs established?

Ms. Nyquist: The U.S. Department of Agriculture counted 170 food hubs in 2011. We mapped locations for about 100 of these and see the strongest networks in coastal California, New England, the mid-Atlantic and a ribbon stretching from Chicago to Minneapolis.

Still there’s so much opportunity. Our national food system is composed of thousands of processors and distributors grossing millions. We just visited an impressive food hub in Minneapolis with almost $20 million in sales, which is about the average for fruit and vegetable distributors in the U.S. This can be replicated.

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Two Midwest startups clean up at Clean Energy Challenge

A Northwestern University student-run group and a Wisconsin startup in the renewable-energy sector walked away with $100,000 apiece as the top winners in Thursday’s Clean Energy Challenge held in Chicago.

Hyrax Energy, based in Wisconsin, took home the grand prize in the startup category against a total of 10 finalists that competed Thursday before a panel of judges in a day-long event sponsored by the Clean Energy Trust, a nonprofit that connects startups and entrepreneurs to expertise and capital.

Hyrax develops bio-refineries that take ionic liquids to break down waste plant materials and other matter into fermentable sugars, which are then sold to renewable plastics, chemical and fuel manufacturers.

The winner in the student-led category was NuMat Technologies, a materials-based startup that has developed a proprietary computational screening tool to quickly identify and test metal-organic frameworks. The students who created the venture made their pitch alongside seven other student-run startups. NuMat was also awarded an additional $10,000, alongside another $40,000 split evenly among four other student finalist groups from universities in four other Midwestern states: Michigan, Missouri, Indiana and Ohio.

The prize money came from the U.S. Department of Energy and the Clean Energy Trust. The finalists were winnowed down from a pool of more than 100 applicants from eight Midwestern states.

For more on the Clean Energy Trust and the second-annual Clean Energy Challenge, check out Thursday’s ‘Green Scene’ column.

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This week’s Green Scene column in Crain’s Chicago Business: Startups compete for cash in today’s Clean Energy Challenge


The second annual Clean Energy Challenge convening in Chicago today will send home more startup winners than last year with about twice as much in cash prizes, too.

The highlight of today’s day-long event will be fast-pitch presentations from eight to 10 finalists in each of two categories: early-stage companies already along the path of developing a product or service in the clean-energy sector, and students launching ventures while still in school. The winner in each group will take home $100,000. An additional $10,000 prize will be awarded to five more of the competing student finalists. Last year, the winner took home $100,000, and smaller prizes totaling $40,000 were awarded to a few concept companies.

Judges include venture capitalists, corporate investors and business leaders with expertise in various segments of the renewable-energy sector. The event is sponsored by the Clean Energy Trust, a Chicago nonprofit that connects startups and entrepreneurs to expertise and capital. The Trust launched in 2010 with backing from Nicholas Pritzker, Chicago energy entrepreneur Michael Polsky and others.

The competition was widened this year to include candidates from eight Midwestern states; last year, only Illinoisans participated. More than 100 applications were submitted by the Dec. 1 deadline, and evaluators narrowed that pool to 18 finalists from seven states, says Amy Francetic, executive director of the Clean Energy Trust.

Challenge winners will be announced at the end of the day.

Crain’s met with Ms. Francetic to talk about this year’s competition.

Crain’s: You have two categories this year — one for student-led companies and the other for early-stage. Why did you set it up that way?


Amy Francetic

Ms. Francetic: With the help of key partners in Indiana, Michigan, Minnesota, Missouri and Ohio, we applied for funding from the U.S. Department of Energy for a university student business competition and were fortunate to win the Midwest award. That grant is funding our student prize of $100,000. CET (Clean Energy Trust) and the other state partners are funding an additional $50,000 in state-level prizes for the students. CET and the U.S. DOE are funding the early-stage company prize of $100,000, as both organizations did last year.

Crain’s: Are you trying to use the challenge to inspire students to be more aggressive about thinking of company formation sooner in their careers?

Ms. Francetic: One of our goals of the student prize is to encourage the talented undergraduate, MBA and advanced-degree engineering and science students to link up with their tech transfer offices and researchers at the schools and labs to push the cutting-edge clean technology out into the marketplace. We have a majority of student finalists that are featuring this kind of technology in their pitches. Many of the competing students are working with entrepreneurial centers in their school or are taking multidisciplinary classes like professor Mike Marasco’s NUVention class at Northwestern University.

Crain’s: Can you give a flavor of the range of company or technology ideas that are represented by some of the applicants?

Ms. Francetic: We have a broad spectrum of technologies represented with strong showings from the energy-efficiency, smart-grid, renewable and transportation sectors.

Crain’s: What are some of the most unique business or technology ideas among the group?

Ms. Francetic: We were happy to see a cluster of biomass and biofuel technologies submitted this year. We have seven finalists like this (three student and four early-stage) showcasing new ways of deriving energy from waste and agriculture. This is different from last year, and we expect this trend to continue. This is a strong R&D sector for the Midwest.

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