Jeff  Carter
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My friend Raman Chadha sent me this article from the New York Times on new food start ups in New York City.

My wife and I like to say we eat our way through the city of Chicago, but we don’t have this start up food scene like they do in New York and San Francisco. There are plenty of great spots here, and some really unique independent artisan shops. But we could use more of them.

Competition has a great effect on business. It drives existing businesses to perform better and provide more service at better value for its customers. Food trucks, pop up restaurants and allowing independent food providers to make artisan food products easily will drive more competition in the local food industry. The net net is more choice at cheaper prices for consumers.

When looking at entrepreneurial ecosystems, mom and pop small businesses are a critical part of it. Yesterday, I was lecturing at Notre Dame and we were talking about investable businesses from an angel’s perspective. One facet of analysis that we discussed was market size. Angels like to invest in market size measured in billions. However, I told the students, if you find a business that seems like it fills a niche and doesn’t have a market size of a billion dollars, don’t toss the idea out. Go run that business. It may always be a lifestyle business but that doesn’t mean you can’t earn a lot of money off of it. Lifestyle businesses may transform into angel investable businesses, you never know.

Ecosystems are like a building. At the top of ecosystems sit the big Fortune 500 firms. They provide the steel girders economies are built around. Think stability when financial earthquakes hit. Then come your medium size businesses that provide the flooring and raw space. Start ups fill those buildings up, sometimes breaking off to form entire new buildings or neighborhoods. The cracks, streets and sidewalks are filled with mom and pop businesses. They are the blood cells of the economic ecosystem.

In Chicago, city government regulates the hell out of them. Alderman and city inspectors walk around with hands out, palms up. It’s very expensive and time consuming to start up a business in just about any industry. A friend of mine started a pie business, deliberately outside the city to avoid regulation. The problem is, many uneducated, uncredentialed people can’t do a technical start up and don’t have the skills to work at a Fortune 500 firm. Their only option is to set up a business where they might have the skill to execute. It might be a hair braiding or nail salon, a donut shop, sandwich shop-or making artisan food.

The children of those sole proprietors get a better shot at life. They witness their parent running a business. They aren’t on the government dole. They might go to college. They might become the next wave of start up activity. Consider what the Lender’s did for bagels.

It’s bad enough the FDA regulates the food industry incorrectly in many cases. We have our own version of the local FDA. Instead of experiencing a food renaissance like other cities, Chicago engages in protectionism for existing businesses.

Try opening up a hardware shop in the city. There is paperwork to file, licenses to buy, building inspectors to pay off, signage approval and the “correct” company has to erect your sign, buying insurance from the “right” agent, and getting approval from the local alderman to set up shop in their ward. That’s before you buy equipment and inventory and hire employees. It’s the “piece de resistance” of machine politics.

Hey, the nation voted for it in 2008. I knew what you were getting.

Typically, midwesterners wonder why the coasts have a lot of start up activity. Silicon Valley outpaces the rest of the country in start up investment by a lot. There is a lot of activity there, but it’s gently coming to the midwest and transforming our communities.

Instead, we Chicagoans gaze at the coasts and our mouths water at the things going on. “The rise of artisanal food like small-batch pickles, basement-cured charcuterie and hand-churned ice cream has been a boon to Brooklyn’s image.”, the NY Times article begins. I hope they have mail order.

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Jeff Carter

Jeffrey Carter is an independent speculator. He has been trading since 1988. His blog site, Points and Figures was named by Minyanville as one of The 20 Most Influential Blogs in Financial Media.