A Look at Chicago’s Green Startup Community

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Article by guest author Alexandra Moree.

In recent months, Chicago has been ground zero for the unholy marriage of a fumbling economy, unstable yet steadily increasing energy costs, and an uncertain mayoral transition. This combination of potentially paralyzing factors could leave a young enterprise without the financial and material support necessary to launch a new business, especially those now entering Chicago’s nascent but increasingly robust green business market. A few up-and-comers have proven their staying power in this city, however, as they were borne out of the recession and are forging ahead at full speed. The Great Recession has proven to be stubborn, wreaking havoc on the dreams of many would-be borrowers. As banks drastically cut lending, at times avoiding start-ups altogether, venture capital firms were also tightening the purse strings and only lending to companies that seemed to be guaranteed winners.

Chicago has long been a hub of innovation, building itself from a Rustbelt city into a world-class business center. Local entrepreneurs have been working tirelessly to prove that the Windy City can also lead the pack in the green business realm. For years, Daley h as been touting Chicago as the greenest city in America, a title supported by the construction of over 7 million square feet of green roofs on public and private buildings, the addition of 1,300 acres of open and green space in 12 years, and the promotion of LEED certification for 88 Chicago buildings (as of 2009), among other projects. N ow ex-commissioner of the Chicago Department of the Environment, Suzanne Malec-McKenna announced at the 2010 State of Green Business Forum that $900 million in federal and state grant money was expected to be pouring into Chicago for energy efficiency work, expected to be a boon for those starting green businesses, as well as those focused on green operations in existing companies.

Chicago’s own Green Exchange has quickly proven itself to be resilient– its hulking physical exterior coupled with a grandiose mission—as a green start-up that is lumbering ahead. Slated to open in Summer 2011 after more than a year of planning setbacks, the Green Exchange will be a hub for the city’s sustainable business community. The Exchange is to be housed in the sustainably rehabilitated factory of both the Vassar Swiss Underwear Company and the Cooper Lighting Company, and plans to be rated at the Platinum level by the Leadership in Energy and Environmental Design (LEED) green building certification system developed by the US Green Building Council.

Situated at a highly visible and readily accessible site where Diversey Parkway meets the Kennedy Expressway, the Green Exchange will be home to over 272,000 square feet of showrooms and event, retail, and office space to be occupied by companies committed to sustainability. According to Aaron Gadiel, Director of Community Development with the Green Exchange, “the common thread amongst the tenants is that a [member] business operates with a triple bottom line philosophy.” Gadiel specifically notes that the Exchange is a for-profit business center and, to remain a sustainable venture, such businesses must continue to make a profit while affecting a positive impact on people and the environment. With more than 16 tenants already in place to comprise this green business center, including Coyote Logistics, Mindful Metropolis, Local First Chicago, Pivotal Productions, and more, we expect that the Green Exchange will open into the excited arms of the Windy City. To view a current listing of confirmed tenants along with company profiles, visit the Green Exchange website.

GreenChoice Bank was one of the first tenants to sign on to calling the Green Exchange “home” in 2009, and has since opened its doors on August 29th, 2011 as the first green community bank in the Midwest. Housed in retrofitted LEED certified buildings in its two branch locations in Cicero and Lockport, GreenChoice is committed to encouraging sustainable decision-making throughout the community it serves. The bank is hoping to promote this commitment by “leveraging [funds] on deposit to invest in local green businesses; offering green baking incentives to our customers… and benefits to our employees who use public transport or purchase hybrid vehicles.” At the end of the day, however, GreenChoice preserves its commitment to a triple bottom line, to affect positive change while remaining profitable in a less than ideal economic climate.

Steve Sherman was COO of Family Federal Savings of Illinois, which was acquired and transformed into what is now GreenChoice Bank. Sherman, Executive Vice-President and COO of GreenChoice, admits that purchasing and transforming a company, especially a bank, in an unstable economic time is not an simple or painless process. However, Sherman explains that the best time to start a company can be in a stagnant economy because, “If you succeed, you’ve proven that you and your company can make it through most anything. Additionally, you have far fewer competitors to contend with as an emerging company.” For GreenChoice, less-than-ideal economic factors may ultimately prove to be a boon for business.

The combined effect of a poor economy, fewer investors and less capital to be readily invested can be paralyzing if a young company can not differentiate itself from the crowd. Sherman muses, “were GreenChoice a standard bank, we might not have been able to attract the funds necessary to acquire Family Federal Savings. Some investors were interested because of our fairly unique social and environmental mission…” and other investors recognized the benefits of an innovative business plan. Sherman notes that in recessionary times, “people are realizing that their jobs are less secure and that there are a lot of entrepreneurial opportunities to be a part of something new.” For those involved with helping GreenChoice open its doors, a decision made during dark economic times is expected to be fruitful indeed.

Another startup growing quickly—not only in Chicago, but nationwide—is product-cum-service photovoltaic full-service retailer PV Power. Founded in 2009 by Dan Kuthy, CEO, and his partner, Nick Yecke, PV Power aims to eliminate the transactional costs associated with purchasing the various components necessary to assemble a functioning photovoltaic (PV) solar array. By precluding the need for so-called “soft” costs, those which are not directly related to construction, Kuthy hopes to grow PV Power into a one-stop shop marketplace, practical for anyone interested in designing, ordering, shipping and ultimately installing photovoltaic panels.

The demand for access to renewable energy is growing steadily across the country, even through recessionary times. According to the Energy Information Administration, (EIA), renewable energy accounted for about 8.3% of U.S. total energy generated in 2009, up from about 7% of U.S. total energy generated in 2007. The EIA predicts that renewable-generated electricity will account for at least 17% of total U.S. electricity generation in 2035, but Illinois has mandated an even more stringent timeline through Illinois’ Renewable Portfolio Standard (RPS), which has set a goal requiring 25% of retail electric sales be from renewable sources by the year 2025. This expected growth would be promoted in part, by new federal programs, including extensions of federal tax credits, and the loan guarantee program included in 2009’s American Recovery and Reinvestment Act (ARRA). These federal programs are in line with a global increase in investment in clean energy technology, up 30% globally from 2009 in 2010, to $243 billion worth of finance and investment.

The continued growth in the renewables market presents a robust case to foster business opportunities in alternative energy generation, and Kuthy of PV Power is careful to note, “we are not building a business around a passion market; rather, alternatives to coal are increasingly lucrative and serious growth [in our business] happens because the economics make sense.” Though PV Power entered the market in 2009, at the height of economic stagnation, the PV company did not have trouble attracting attention from Chicago-area investors after an initial push: “the Chicago investment community was getting its feet wet with the solar industry in 2010, and the interest level has continued to grow dramatically into 2011.” This parallels national investment in solar technology, which accounted for 30% of all U.S. investment in clean energy in 2010.

Though based in the Ravenswood neighborhood of Chicago, PV Power has quickly and successfully become a nationwide distributor of PV technologies. They have no plans to move away from the Windy City as they expand, however, as they do not require warehouse space and have built strong relationships within the unique business community here– specifically through their participation in the Midwest Clean Energy Challenge, as well as Excelerate Labs in 2010. Excelerate Labs is a 13-week intensive summer program in which 10 startup companies work with world-class entrepreneurial mentors to build connections as well as their business. Kuthy points out that Chicago offers a ripe environment to build a business, and PV Power is a prime example of a startup weathering a tough economic climate by combining an innovative business idea with creative networking and financing strategies.

The enthusiasm for a novel business plan is also at the core of the founding of Pivotal Productions, launched in 2007 by Chicago entrepreneur Shannon Downey. Pivotal Productions, a marketing and advertising firm, will also be a tenant of the Green Exchange. Downey has a background in marketing and worked as a freelancer with large marketing firms in Chicago, which I when she had an eye-opening encounter. She recalls a pivotal moment (hence the company name) following a massive marketing event—every thing that went into making the production a success was promptly thrown in the trash, much of it still useful material.

Increasing dismay with the wasteful practices of some large marketing firms led this Chicago-based businesswoman to establish a start-up marketing enterprise with a more conscious approach to operational strategy. Downey explains, “ I intentionally didn’t herald Pivotal Productions as a green firm, for fear of being perceived as a greenwashing company.” Her passion for and commitment to sustainable management was not something to remain hidden, however, and Pivotal’s clients were quick to recognize the company’s behind-the-scenes dedication to issues like energy efficiency and waste reduction. Once realized, many clients began to seek her out because of her unique business plan that incorporates sustainability, an appealing supplement to her firm’s outstanding design and marketing portfolio. As a certified Women Business Enterprise and B Corporation, Pivotal is a profitable operation that exercises its power as a business to address environmental and social concerns.

Downey admits some aspects of running a sustainable company can be a bit more time-consuming than those of a conventional marketing firm, but she’s been convinced from the start that it is a worthwhile commitment. A bit of self-identified naiveté coupled with a healthy dose of frustration with the status quo led Downey to erect a new marketing firm in the midst of an economic slump. She insists that it wasn’t nearly as worrisome as such a proposition may seem. In fact, Downey says, “it was almost a positive thing to start [Pivotal Productions] in a bad economy because I started at zero and the only direction to go was up; not being in the red was an indication of success.” Accepting a few clients during the recession allowed Pivotal to stay on its feet until market growth again loomed on the horizon.

This year, Pivotal Productions has been flourishing and Downey is striving to keep up with her company’s expansion. Scaling up Pivotal’s operations to sustain demand for marketing and advertising work has been a challenge, and led Downey to retrospectively recognize the recession as an opportunity to establish Pivotal without immediate and overwhelming demand for marketing services. Downey believes the whirlwind of growth this year has been due, in part, to a continued commitment to her mantra, “evolve or die.” The transition of a more traditional experiential marketing firm with some ancillary capabilities, toward a firm predominantly focused on social media marketing and advertising has scaled up very quickly to keep up with the seemingly exponential growth of social media outlets. Downey and Pivotal Productions have evolved together rapidly, and will continue to do so into the unknowable and hopefully prosperous future.

To continue to live up to the title of Daley’s “greenest city in America,” Chicago must remain committed to expanding and diversifying its green business sector. We need robust federal, state and local laws that encourage current businesses to remain in the metropolitan area, as well as attract new environmental sector companies to bring their operations here. We must fully utilize our region’s natural and capital resources to support the growth of new and existing business. Chicago’s newly appointed and very first Chief Sustainability Office Karen Weigert has a background in business and in the 3 months since she was appointed, has voiced a strong commitment to fostering a competitive green business environment in Chicago. By uniting the City’s commitments to economic development and sustainable operations, Weigert hopes to transform Chicago into a model for successful green business sectors. This isn’t to say Chicago isn’t off to a strong start—we are already a formidable presence in the nation’s growing green economy.

Chicago is currently the nation’s largest exporter of green goods and services, a direct result of the sheer size of the city’s economy. Our region’s economy has added 17,729 green jobs between 2003 and 2010, ranking us the 4th metro area in the nation with a total of 79, 388 green jobs, but is equivalent to a growth rate of 3.7 percent annually, a notably slower than that of other metropolitan areas. Chicago is also lagging behind in the ratio of green jobs to total jobs because of our already massive local economy, with just 1.8% of all jobs considered to be green jobs. By allocating institutional and financial support to this sprouting sector, the green economy, we can advance the growth of nascent green businesses in Chicago, which will create green jobs, and concurrently promote the conception of those that are yet-to-be.

Additional growth will require continued allocation of resources to mass transit, recycling/reuse and waste management operations. All three of these sectors have received much public attention in Chicago in recent years and are together responsible for the majority of the region’s green jobs today, with an aggregate of over 39,000 jobs in 2010. To continue to support the growth of Chicago’s green economy, we must maintain and reinforce our current strengths while focusing on the areas that are expanding. The two sectors of Chicago’s clean power economy that are growing most quickly are wind and solar thermal technologies. Chicago-based start-ups like Sun Phocus Technologies, Clean Urban Energy Inc., Invenergy LLC and NextGen Solar are enjoying rapid growth. In fact, 13 wind companies are currently located in Illinois, and the industry has expanded 39 percent since 2003, impressive growth that takes a backseat only to the solar thermal industry. It is expected that a positive feedback loop will encourage this growth to continue, as congregating relevant industries in an area drives growth up to 1.4 percent faster than businesses that are not clustered near others in their sector.

The manufacturing sector accounts for roughly 26 percent of green jobs, a historically important sector in Chicago that should continue to expand as political commitments come to fruition. Such recent promises include Governor Quinn’s commitment to invest $31 billion in public works retrofitting and efficiency projects over six years, as well as Chicago Mayor Rahm Emanuel’s announcement of a program to use $40 million from private financing to retrofit up to 100 city buildings to enhance energy efficiency, double the number of LEED certified municipal buildings, saving taxpayers millions of dollars in energy costs. By uniting private sector funding and state and local government support with community-level awareness, we can continue to boost Chicago’s competitive advantage in retaining and attracting green businesses to this region. With favorable natural, political and entrepreneurial resources, we can become a leader in the green business realm.

Are you interested in helping grow Chicago’s green economy? Check out these interesting resources for more information:

Illinois Green Business Association: http://greencu.com/

Green Business Bureau: http://www.gbb.org/chicago-green-business-certification

Chicago Green Office Challenge: http://chicagogreenofficechallenge.org/

US-GBC Chicago (always accepting new volunteers): http://www.usgbc-illinois.org/

Foresight Design Initiative (organizes a monthly Green Drinks networking event): http://www.foresightdesign.org/

Delta Institute: http://www.delta-institute.org/

Center for Neighborhood Technology: http://www.cnt.org/

Chicagoland Green Collar Jobs Initiative: http://greencollarchicago.org/

Clean Energy Trust: http://www.cleanenergytrust.org/

312 Aquaponics: http://www.312ap.com/site/

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