How Restaurants Get An Angel At Their Table

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Published on ChicagoGrid.com on November 20, 2013

Say you’ve got an awesome recipe for home-grown organic pickled beets and a slapped-together business plan for selling them to Whole Foods.

Don’t expect to get your funding from SloFIG.

But the angel investment group might entertain a food business that’s a little further along, like Carl Alguire’s Smart Gardener. His company just landed $100,000 from the 20 Chicago-area angel investors who make up SloFIG, the Sustainable Local Food Investment Group.

Smart Gardener sells customizable edible gardens online and will use the funding to build an interface to loop landscaping businesses into the process. The company launched its beta site in January 2012 and is enrolled at Impact Engine, an accelerator program for socially responsible startups.

“We’re still largely in a pre-revenue stage, so this [SloFIG] funding is really important to maintaining our momentum while we develop our business model for adding landscapers to the site,” Alguire says.

Two-year-old SloFIG aims to fill a funding gap for small to midsize businesses and startups engaged in Chicago’s regional food chain. So far, the group has doled out close to $800,000 in debt and equity financing to a total of four companies — most of it in the last few months, according to Teri Lowinger, a founding member and also part of Hyde Park Angels, another Chicago angel fund.

Aside from Smart Gardener, other ventures that received financing include Erie St. Clair Restaurant LLC, partly owned by restaurateur Dan RosenthalNellcôte, chef Jared Van Camp’s swank restaurant in the West Loop; and Moss Funnel Farms in Michigan, which received about $10,000 to package and freeze a bumper crop of blueberries last summer.

Since word of SloFIG’s formation hit the street, more than 60 applications for financing have poured in from smaller companies within 250 miles of Chicago. They’ve included Web-based platform creators, specialty food producers, and farmers expanding into ventures related to produce or livestock on their land.

Ironically, the bulk of investment dollars so far have gone to more established businesses — like Rosenthal’s group, which owns Sopraffina Marketcaffès — that likely could’ve found capital elsewhere. The problem, Lowinger says, is many applicants don’t have well-developed business plans even if they have terrific ideas or a promising enterprise underway.

“We want to promote the smaller companies, but sometimes there’s people who are getting into local food as a lifestyle business that’s not really long term,” she says. “Lots of companies meet our mission for rebuilding the local food system, but it’s not always clear they have a path for how they’ll pay back investors and give us a profitable return.”

For some, it’s just bad timing. SloFIG investors tell some applicants to come back when they’ve got more of a successful track record behind them. The group intends to support smaller entities when the right deals come along, Lowinger says.

It’s a Catch-22 for lots of early-stage players since they depend on outside financing to accelerate growth once they’ve used up their savings and borrowed money from friends and family, says Jim Slama, president and founder of FamilyFarmed.org, an Oak Park-based nonprofit that’s a key player in developing stronger ties in the local food network.

“Not every company is going to succeed, but there are going to be grand slams too,” Slama says. “We need investors that understand the niche and are a little more forgiving if these businesses don’t match up with typical expectations.”

Some startups in this realm have found other limited funding options. They include occasional loans from Whole Foods to its local food producers and the Frontera Farmer Foundation, a grant-making arm of chef Rick Bayless’ Frontera Grill Mexican food empire.

Many angel and venture capital investors likely shy away from local food companies because they don’t scale as rapidly as technology-based startups for a potentially quicker return on investment, explains Linda Darragh, executive director of the Levy Institute of Entrepreneurial Practice at Northwestern’s Kellogg School of Management.

SloFIG may have opted to fund more established operations as starters in its lineup for a better likelihood to show its initial investments have strong returns, Darragh says.

Lowinger notes the group is hoping to set an example and inspire other investors to jump into the local food sector as well.

“If we can put together a portfolio of companies that are profitable, it tells the investing community that investing in businesses in the local food chain is a good way to make money,” she says.

ABOVE: Carl Alguire, CEO of Lake Barrington-based Smart Gardener

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Want kale with that? Angel investors fund Rosenthal’s Sopraffina

Published in Crain’s Chicago Business on October 31, 2013

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Dan Rosenthal, left, with Mark Knauer, architect on his latest project

Veteran Chicago restaurateur Dan Rosenthal and his new Streeterville venture have secured funding from an angel investment group focused on financing all aspects of the local food system.

Erie St. Clair Restaurant LLC, the group that owns the soon-to-open Italian fast-casual Sopraffina Market Caffe and Cicchetti, a Venetian-style bacari wine bar, received $435,000 in financing from the Sustainable Local Food Investment Group, or SLoFIG. The equity infusion brings total funding for the two adjacent restaurants with a shared kitchen to more than $5 million of combined debt and equity financing, he says.

SLoFIG was formed about two years ago by a group of Chicago angel investors committed to investing in startups and midsize businesses engaged in strengthening the local and regional food system.

The group has allocated more than $600,000 to three businesses, including its first investment to Nellcote chef Jared Van Camp’s West Randolph Street restaurant that derives much of its menu from nearby farms and food producers, says Kim Hack of SLoFIG. A blueberry farmer in Michigan was the third recipient of SLoFIG funding.

The decision to offer financing to Erie St. Clair was made in large part because of Mr. Rosenthal’s track record in promoting locally sourced, naturally raised food at his restaurants for many years, Ms. Hack says. Aside from the five other Sopraffina eateries and his role as a founder of Harry Caray’s, he also is an owner of Poag Mahone’s and Trattoria No. 10. “He has a remarkable commitment and has had a huge impact on rebuilding our local food system,” she notes.

The newest Sopprafina will be the first of its five siblings outside the Loop but will continue the tradition of sourcing animal proteins raised without antibiotics. Both new eateries will tap local sources for produce, including a new partnership with the Cook County Department of Corrections that’s already underway with Mr. Rosenthal’s other restaurants for naturally grown tomatoes, kale, squash, beets and more.

The two new food establishments will be the first in Chicago to receive third-party certification from Washington-based Green Seal for new restaurant construction. Eco-friendly design features include floors made of reclaimed wood, timber beams from Northern Wisconsin, and artwork that was originally hanging inside a Wisconsin grain elevator, Mr. Rosenthal says. The restaurants will use recyclable and biodegradable products whenever possible, sourced through the Green Chicago Restaurant Coalition, a nonprofit purchasing organization Mr. Rosenthal helped establish.

Cicchetti’s kitchen will be headed by executive chef Michael Sheerin, most recently co-owner of Trenchermen in Wicker Park with his brother Patrick, and formerly a chef de cuisine at Blackbird. Just announced: Sarah Jordan, (Blackbird, Boka, Jean Banchet Pastry Chef of the Year and one of Food & Wine Magazine’s Best New Pastry Chefs in 2013) and Phil Rubino (Acadia, Cafe des Architectes, L2O, Bin 36, Spiaggia) will join Mr. Sheerin in the kitchen as sous chefs.

The small plates tapas bar will have a Venetian twist to it, highlighting foods that were influenced by Eastern and Middle Eastern cuisines introduced to Europe through that port city over the course of 1,500 years, Mr. Rosenthal says. Dishes may include pork belly buns with cabbage and argodolce and sardines with gremolata, fennel and rolled bread.

The restaurants are expected to open in mid-December and will be located at the corner of Erie and St. Clair streets, in the heart of the bustling Northwestern Memorial Hospital’s medical complex.

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