Chicago’s $600 Million in Protein Bars

Crain’s Chicago reports that a local protein bar company called RxBar is being acquired by Kellogg’s for $600 million.

RxBar was started by some friends in their early 30s with $10,000 in funds. They initially built it out of their parent’s suburban kitchen, then into a commercial space in the city. They now have $120 million in revenue, employ 75, are hiring 40 more, and the owners (and any later investors they may have) are about to become spectacularly rich:

Four years ago, Peter Rahal was making protein bars in his parents’ Glen Ellyn kitchen. Today he agreed to sell his company, Chicago Bar Company, to Kellogg for $600 million.

“We couldn’t have dreamed of this opportunity,” says Rahal, 31, who co-founded the company that makes the RXBar—made from only eggs, dates and nuts—with his childhood friend, Jared Smith. “We started with $10,000 dollars. We didn’t go to investors. We just f—ing did it.”

This is the kind of company that’s a perfect Chicago entrepreneurship story. The city has an agro-industrial heritage, and as I’ve mentioned before that translates into a lot of food and consumer goods businesses today.

RxBar isn’t a Silicon Valley style tech company, but a food company. So it’s right in Chicago’s sweet spot. It isn’t a huge employer, but probably does disproportionately employ blue collar workers, assuming it still does its manufacturing in-house. And this will be a nice wealth injection into the city.

There’s nothing stopping folks in Chicago from doing a tech business, nor other cities from creating artisanal food companies, which are widespread in America. But with its base of expertise and deep history in food and consumer goods products, Chicago would seem to be a great base to launch these kinds of companies.

from Aaron M. Renn


Ed Glaeser on the Future of the American Heartland

Economist Ed Glaeser delivers the annual James Q. Wilson lecture on policy at the Manhattan Institute. This year he talked about the future of the American heartland. He has some interesting frameworks to help analyze the problems, including his east vs. west heartland distinction, and the “rules and schools” principle. If the video embed doesn’t display for you, click over to watch on You Tube. If you’d rather just listen, the lecture only (no Q&A) is available from my podcast feed.

from Aaron M. Renn

Puerto Rico Needs Debt Writedowns

In Puerto Rico this week President Trump made one of his patented off the cuff remarks, saying:

President Trump said Tuesday that the U.S. would have to “wipe out” Puerto Rico’s multi-billion dollar debt after Hurricane Maria.

“They owe a lot of money to your friends on Wall Street and we’re going to have to wipe that out,” Trump said during an interview with Fox News. “You can say goodbye to that.”

“I don’t know if it’s Goldman Sachs but you can wave goodbye to that.”

Puerto Rico had roughly $70 billion in debt before Maria hit.

His White House staff promptly backtracked on it:

The Trump administration on Wednesday walked back the president’s apparent vow to wipe out Puerto Rico’s debt, suggesting that the island would have to solve its own fiscal woes despite the catastrophic damage it has endured from two powerful hurricanes.

“I wouldn’t take it word for word with that,” Mick Mulvaney, director of the Office of Management and Budget, said on CNN in reference to President Trump’s suggestion that the United States might clear Puerto Rico’s debt.

Trump’s original remarks reflected a critical truth about Puerto Rico, albeit in his normal, overstated way. The island simply isn’t going to be able to repay its debts, and some form of restructuring seems inevitable. Unlike countries or US states, Puerto Rico is not a sovereign borrower. It can go through bankruptcy or a similar process, one that’s likely to get preference to local residents over out of town investors (cf: Detroit).

As someone who is familiar with the bankruptcy process, Trump knows what’s up here. Even Mulvaney doesn’t seem to be promising full repayment of debts.

The truth is, a lot of people loaned money to Puerto Rico long past the point where it became obvious it probably wouldn’t all be paid back. Just like they continue to loan money at favorable rates to jurisdictions like Illinois and Chicago. Yes, borrowers shouldn’t be borrowing to excess. But it’s also true that lenders have a responsibility to exercise good judgment of the risks of continuing to pour money into these deeply indebted governments and their affiliates.

from Aaron M. Renn

Where Columbus Is Getting It Right on Marketing

Photo Credit: Wild Goose, CC BY-SA 3.0

I recently wrote a couple of articles dinging Columbus, Ohio for its branding and marketing. So today I want to highlight where they are getting it right: transport innovation.

You may have seen that Columbus recently became the first city in America to provide a free bus pass to every downtown worker, one that can be used anytime (not just for commuting) and is available to everyone regardless of who they work for. It appears to be funded by the local business improvement district equivalent.

This recently got a nice writeup in the Guardian, which is about as good as it gets in terms of press. The program was also written up in City Lab, Slate, Streetsblog, Next City, and Fast Company.

This is great for Columbus. Why did the city get such excellent press? As the Guardian put it, “Columbus is the first major US city…”  They were first.

Doing something new and different made Columbus stand out from the crowd and drew in national spotlight.

We saw the same thing with Columbus winning the DOT smart cities challenge grant. That was another big win in the transport space. (This free bus pass initiative appears to be separate).

These wins point at an opportunity space for Columbus: transport innovation. All of the focus on transport ideas comes from usual suspect cities on the coasts. But things like light rail are a bad fit for a low density, polycentric metropolis like Columbus that grew up in the automobile area. That’s much more then norm of American cities than San Francisco is.

If Columbus can continue to come up with new, different, and innovative ways to create 21st century transport solutions for its profile of city, that could be a way it sets itself apart in the marketplace. It’s already something that’s paying dividends for them.

from Aaron M. Renn

Superstar Effect: Venture Capital Investments

This is the latest in my “superstar effect” series. Richard Florida posted an interesting analysis of venture capital investments over at City Lab.

Four cities dominate the charts: San Francisco Bay Area, New York, Boston, and Southern California. Call them the Big Four. No place else is even close.

It’s not just that they dominate in total dollars as in the above graph. They also dominate in total number of deals, with 52% of the national total. So it’s not just a handful of big deals making the Big Four standout.

Florida points out that the data don’t back up the idea of the rise of the rest. The superstars account remain in a league apart as far as VC investment goes.

That doesn’t mean the interior is getting nothing. Certainly plenty of cities now have tech startups where there were none before. That’s reason to celebrate. But it’s too early to declare a major decentralization of VC activity.

Also, tech has historically been a very cyclical industry. The last crash wiped out almost all emerging startup clusters – even New York’s Silicon Alley. We’ll have to see how things shake out in the next crash when it comes.

In the meantime, there remains a superstar bias in VC funding.

from Aaron M. Renn

Local Empowerment Should Be About Local Matters

I’ve generally been someone who wants to see local governments have more power and flexibility to meet local needs. My rationale is simple. States are full of diverse communities that are a bad fit for one size fits all policies. Chicago, Danville, Peoria, Cairo, etc. are radically different places. They have different circumstances, needs, and local priorities. Hence it makes sense for them to have the ability to chart their own course to some degree. Some states have accommodated this to some extent through classes of cities with different powers based on size. Others give even more flexibility through home rule or individualized city charters.

A good example of responding to local needs was Austin’s regulation of Uber. They were responding to specific local complaints about sexual assault by Uber drivers. And they put in place regulatory requirements including fingerprint background checks directly targeted at this problem.

Similarly Oklahoma City used its sales tax powers to put forth a series of referendums to approve temporary tax hikes to fund capital improvements like parks, sidewalks, and school renovations. (This was their Metropolitan Area Projects (MAPS) initiative).

Today though we are seeing cities abuse their local authority. Rather than using them for bona fide local matters, they are deploying them to politically grandstand and/or affect federal or state policy.

For example, we hear about cities and mayors being the locus of the “Resistance” to Trump. We also see explicit strategies like the “Fight for $15” minimum wage effort that is attempting to create a new national minimum wage through bottoms up change at the local level. Note at the $15/hr minimum wage has little to do with local economic conditions, but is the target in all kinds of places. It may well be that people can’t get the full $15/hr through, but it’s being promoted as the new base.

Regardless of the merits or lack thereof of any of these items, when cities explicitly state their desire to, for example, subvert US foreign policy, this weakens the case against state preemption laws and for local empowerment generally. When local leaders get outside the areas where they are clearly chartered to do business (infrastructure, education, sanitation, etc) and get into areas traditionally more heavy on state or federal rulemaking and not nearly so obvious a local function (economic regulation, climate policy, etc), don’t be surprised when the other levels of government who see themselves running the show in those matters swoop in and drop the hammer.

Obviously, this won’t necessarily protect you. Austin was not trying to tell the state or national government or any other city how to regulate Uber. The Texas legislature, wrongly in my view, override their ordinance anyway.  But it’s still not a good idea to gratuitously invite trouble.

Mayors do not in fact rule the world. In the US, municipalities are structurally weak entities in most cases. We can debate all day long whether things should be different, but at this point that’s reality. To earn the right to go to legislatures to get more authority, or even to just keep the authority that they have, cities should be good stewards of that authority and use it for matters and reasons they make very clear are local, not national or state in scope.

from Aaron M. Renn

Their Problems Are Not Your Problems

Akron, Ohio. Photo credit: Sleepydre, Public Domain

David Zipper has a good piece up in City Lab that’s focused on urban tech startups but makes a bigger and more important point: the problems of superstar cities are not the problems of most cities.

If you live in a place like San Francisco or New York where urban tech startups (and, ahem, national media) are concentrated, these conflicts seem to be reshaping cities throughout the country. But if you dig a little deeper, it’s clear that’s hardly the case. With fewer than twenty new homes built in a city of 200,000 last year, Akron recently abated property taxes for new housing as a way to prop up the construction market. Many of Akron’s leaders would love to have the problem of excessive housing demand that Airbnb has allegedly created.

And although Uber and Lyft are available in almost all American cities at this point, their use is concentrated in big, dense regions. It’s extremely unlikely that the ride-hailing industry’s piece of the mobility pie in a place like Topeka or Louisville comes close to the 20% of vehicle miles seen in San Francisco.

In fact, urban tech innovations—as well as the narrative surrounding the field—disproportionately focus on a handful of cities that are already winning the competition for mobile workers and tourists. Urban tech’s relevance and impact are much more limited in the many mid-sized cities that are spread across the country. Why is that?

Well, for one thing, urban tech startups are often launched by the well-educated young people clustered in thriving “unicorn cities” like New York, Boston, San Francisco, and Austin. They also happen to be the places where venture capital firms concentrate, ready to finance growth (such firms tend to fund startups near their headquarters to keep a close eye on investments and minimize travel).

The same handful of cities dominates the urban discussion even though their problems are highly atypical. The profile of people designing tech solutions are likewise atypical, often young singles living in dense urban environments. No surprise the high profile apps are ones that call taxis (Uber), order food (Seamless), get your laundry done (Fly Cleaners), find a date or hookup (Tinder), and so on.

Zipper is in the tech business so he focuses on tech. But the same extends to much of the rest of the policy toolkit. Affordable housing is not really an issue in most of the country, for example. Yet many of these cities are focusing on affordable housing because it’s getting so much media attention. Louisville, for example, seems to have some sort of an affordable housing set aside program for new development, similar to superstar cities.

He highlights, I think, one of the downsides of a superstar concentrated system of media, tech, etc. It creates a media and solution focus that is only applicable to a limited number of places.

Because America is so diverse, places need to be careful not to get sucked into this vortex, but to think about their own problems and their own context. It will likely be that not just the solutions, but even the problems they should be focused on are very different from what’s on the agenda in San Francisco and Washington.

from Aaron M. Renn