The history of NEI: The path to focusing on underserved small businesses
Funders commit $100 million to transform southeast Michigan economy (talent, innovation, culture change)
A collaborative of foundations launched the New Economy Initiative (NEI) to invest $100 million in the transformation of the southeast Michigan economy over eight years
Ten national, regional and local funders established NEI:
- Community Foundation for Southeast Michigan
- Max M. and Marjorie S. Fisher Foundation
- Ford Foundation
- Hudson-Webber Foundation
- W.K. Kellogg Foundation
- John S. and James L. Knight Foundation
- The Kresge Foundation
- McGregor Fund
- C.S. Mott Foundation
- The Skillman Foundation
Governing Council was established to create foundational principles and to advise on grantmaking
The Governing Council, now called the Steering Committee, inaugural membership:
- Lizabeth Ardisana
- Susan V. Berresford
- C. David Campbell
- Ahmad Chebbani
- Paul R. Dimond
- David O. Egner
- Paula Lynn Ellis
- Phillip Wm. Fisher
- Roderick D. Gillum
- Allan D. Gilmour
- Ronald E. Goldsberry
- Carol Goss
- Steve Hamp
- Alberto Ibargüen
- Kate Levin Markel
- Richard M. McGahey
- James B. Nicholson
- Brenda G. Price
- Rip Rapson
- Suzanne F. Shank
- Richard D. Snyder
- Maureen H. Smyth
- Sterling K. Speirn
- Miguel A. Satut
- Douglas Bitonti Stewart
- Laura J. Trudeau
- William S. White
Original NEI Vision:
Southeast Michigan is a prosperous region with high per capita income and low unemployment, where all residents who are willing to learn and work will thrive in the new knowledge economy.
Original NEI Goal:
To speed the transition of southeast Michigan to the new knowledge economy, and to ensure that this occurs in a manner that is as complete and thorough as possible and allows all residents to participate. Preparing, retaining, and attracting talent is key to this transition.
Original NEI Objectives:
Teach and train residents of southeast Michigan so they can lead and participate in the transition to the new knowledge-based economy.
Invest in a new generation of entrepreneurs and innovators, both for-profit and nonprofit, who will serve as examples of the new knowledge economy.
Build the innovation infrastructure that supports economic growth.
Change the culture of southeast Michigan from entitlement mentality to one that values innovation, lifelong learning, and entrepreneurism.
Values constructed to guide all aspects of NEI’s work
Inclusiveness. NEI endeavors to increase prosperity for all residents and communities in the region with an emphasis on expanding opportunity for all. NEI recognizes the historic pattern of economic marginalization of some racial and ethnic minorities and strives to include these groups and all others in the transition to an innovation economy in our region.
Regional transformation. NEI is committed to the fundamental transformation of the region and sustainable regional economic growth.
Entrepreneurship and innovation. NEI encourages innovation and entrepreneurship, broadly defined, in all aspects of life in our region.
Talent. NEI believes that opportunities should be available to all students, workers, and employees so they can assume the responsibility for their skill development and career path for the betterment of the community.
Welcoming. NEI believes our region must be warm and welcoming to creative, talented people of all backgrounds, including immigrants and foreign-born workers.
Collaboration. NEI strives to work with other organizations and agencies in both the private and public sectors that are focused on improving the regional economy to ensure that our efforts are well aligned and mutually reinforcing.
The grants included support for
- entrepreneur training
- a system to place 25,000 Michigan college students into Michigan-based internships,
- a health/life/bio science research project,
- initiatives around innovation in entrepreneurship,
- an arts district, and
- other projects.
Investment Strategies in 2008
The Creative Economy, including a place-based strategy to develop a Creative Corridor
Venture Capital Building and support for commercializing research and innovation from universities and the private sector
Entrepreneurial Support, including capital/talent-building projects to commercialize new technology firms and support entrepreneurs, with a focus on BIPOC entrepreneurship
Workforce Development and Education, including efforts to increase the impact of federal, state and local job training resources currently spent in Detroit
David Egner appointed as executive director
Entrepreneurial Ecosystem approach included:
- Training and Education
- Connection to Resources
- University Technology Transfer
- Access to Capital
- Entrepreneurial Culture
Startup financing, business acceleration, telling the story
The First Step Fund provided access to capital for burgeoning entrepreneurs with high-growth business plans; NEI invested $5 million.
Prior to this, most local entrepreneurs looking to start up in southeast Michigan had to look outside the state for investment.
The First Step Fund was
designed to address the deficit of startup financing in southeast Michigan and promote economic development by identifying, nurturing, and fostering demand for early-stage, commercially viable businesses that can scale—resulting in job creation and increased tax revenue for the southeast Michigan region.
In an effort to formalize a region-wide collaborative of business accelerators, NEI launched the Business Accelerator Network of Southeast Michigan
The Business Accelerator Network of Southeast Michigan, a region-wide network for building and retaining new business in southeast Michigan, included the region’s largest business accelerators:
- Automation Alley
- Ann Arbor Spark
- Macomb-Oakland University
The Business Accelerator Network of Southeast Michigan, with a $750,000 grant from NEI, announced the Accelerate Michigan Innovation Competition, slated to be the world’s largest business plan competition with more than $1 million in cash awards, plus in-kind awards of services, staffing and software
The business plan competition was open to entrepreneurs in Michigan and worldwide willing to establish a business in the state.
Growth Capital Network was charged with two primary goals:
- Deliver data, analyses and stories about the impact of NEI and its role in shifting the local economy
- Build a performance measurement system for NEI grantees
Grantmaking enhanced its focus to support for women and immigrant entrepreneurs
NEI partnered with W.K. Kellogg Foundation to fund ProsperUS (a culturally-competent immigrant and BIPOC entrepreneur and small business training program based on a longstanding Minneapolis-based program called Neighborhood Development Center). ProsperUS was framed to serve BIPOC and immigrant new and existing businesses in nine neighborhoods.
NEI made its first grant to Michigan Women Forward to develop a woman-focused entrepreneurship and micro lending program focused on low-income women in the city of Detroit. This was the first of its kind with a sole focus on low-income women, providing training, mentorship, and capital to support business growth.
- fund an innovation network,
- develop a robust evaluation system,
- convene strategic partners, and
- support regional infrastructure and data collection
With this role shift and investment focus, NEI anticipated these results:
- Jobs and talent among Detroit residents would increase.
- Detroit-based innovation and new companies would be invested in and developed.
- Existing investment in “place” would be enhanced and sustained.
- Socio-economic results, in time, would improve for a diverse group of residents employed by new businesses serving local, national, and global markets owned by diverse entrepreneurs who are supported by a Detroit-based nationally recognized innovation network.
Detroit Regional Innovation Network’s organizations were primarily concentrated in Detroit’s 3.5-mile Innovation Corridor that runs from Midtown to Downtown Detroit.
Focus areas for investment were in six key areas:
Two place-based, neighborhood-specific entrepreneurial programs were granted funds.
ProsperUS provided training in the Cody-Rouge, North End and Southwest Detroit neighborhoods. ProsperUS was a program designed specifically for immigrants and entrepreneurs of color.
ACCESS focused on bringing entrepreneurial training and mentoring to two communities: the Dearborn/Detroit neighborhood of Warrendale that has a high concentration of Middle Eastern immigrants and the city of Hamtramck that includes Yemeni, Bangladesh and Bosnian immigrants. ACCESS also provided a mentor and professional service provider network, a micro-loan fund and resource mapping.
Small Business Owners
While grant-making continued, NEI spent 2013 reflecting on what was learned and determining the best course moving forward. Although much had been accomplished to identify and develop an entrepreneurial ecosystem, more was needed to ensure its growth and sustainability.
Therefore, it was determined more work was required to support entrepreneurship, small business growth and innovation.
The BizGrid is an interactive online directory and a physical infographic designed to help entrepreneurs navigate the landscape of organizations providing business assistance in Detroit.)
NEIdeas: Rewarding Ideas for Business Growth launched and awarded $500,000 in direct grants to 36 small businesses to support business growth and retention in Detroit, Hamtramck, and Highland Park – all cities with poverty rates over 40 percent
NEIdeas was started to provide grants directly to existing small businesses across every zip code in Detroit, Hamtramck and Highland Park with ideas for growth. This program had a low barrier to entry for the application process and all materials were translated in five languages.
It not only provided over $500,000 in direct grants to 36 small businesses, it provided an entry point for all 600 businesses who applied to access the growing network of available small-business services NEI had been supporting.
Of the first 30 winners, 73 percent were BIPOC owned, 60 percent were women owned, and 50 percent were both women and BIPOC owned.
Thus, NEI 2.0 began, with new support from the William Davidson Foundation and Surdna Foundation.
Grantmaking and programmatic activities were organized into three key areas:
Innovation Network Core Support
New Ideas and Programs
Entrepreneurial Culture and Promotions
New Ideas and Programs: Identify programs and administer grants catalyzing new or unrecognized approaches to improve the effectiveness and accessibility of the entrepreneurial ecosystem to Detroit residents. NEI funds grants and programs that address the unmet demand of entrepreneurs and owners of new and growing businesses. The identification of these programs is driven by a diverse business support community engagement process and by assessing the needs of neighborhood-based businesses within the city of Detroit. There is an emphasis placed on organizations to form and operate strategic collaborations that increase efficiency across the Network’s service providers.
Entrepreneurial Culture and Promotions: Design programs and administer grants to promote and grow a vibrant entrepreneurial culture in the region and the city of Detroit. Facilitate the design of activities intended to attract national attention to Detroit in order to draw talent and investment. Lead in forming and implementing programs that provide opportunities to increase and diversify the pipeline of entrepreneurs and investors engaging with the ecosystem.
To strengthen and grow the number of businesses owned and operated by members of historically underserved populations and increase the investment in place-based community assets that support entrepreneurs, the Neighborhood Business Initiative was developed, with three priority areas
- enhancing business advocacy in the neighborhoods,
- strengthening the readiness of new and growing small businesses to access capital, and
- promoting the availability of accessible neighborhood retail and commercial spaces.
The series, published at semichiganstartup.com, identified local gazelle companies that were perfecting new and innovative products, creating jobs, and generating lots of revenue. It provided readers a full accounting of each one.
Content included everything from the stories behind the entrepreneurs and the investors that backed them, to the resources they leveraged and the challenges they faced.
At each High Growth Happy Hour event, a founder of a successful larger company, such as Garden Fresh or Shinola, shared stories about launching and scaling a company in southeast Michigan; this was followed by an informal Q&A session and networking with an audience of aspiring high-growth entrepreneurs.
- support for community development corporations
- support to organizations that provide entrepreneurship training
- convening a worktable to strengthen neighborhood businesses
Neighborhood strategy focus areas:
- Providing grants to three community development corporations serving entrepreneurs in three Detroit neighborhoods: Grandmont Rosedale Development Corporation in northwest Detroit, Central Detroit Christian CDC in the North End, and the Osborn Neighborhood Alliance in northeast Detroit.
- Supporting organizations such as ACCESS, Build Institute, TechTown SWOT, Accounting Aid Society, ProsperUS Detroit, and FoodLab that provide neighborhood entrepreneurs with training and services.
Convening a quarterly worktable dedicated to enhancing business advocacy in the neighborhoods, strengthening new and existing businesses’ readiness to access capital, and promoting the availability of accessible neighborhood retail and commercial space.
In addition to selecting and sponsoring the Detroit delegation, NEI partnered with the State Department to develop and host “The Detroit Story,” an official GES side event featuring panel discussions between entrepreneurs engaged directly in Detroit’s social, food, and mobility sectors. The event, which took place at the Hana Haus in Palo Alto, California, was attended by more than 100 people and provided NEI and Detroit entrepreneurs with exposure at one of the most prominent entrepreneurship events in the world.
The 5-year strategy (2017-2021) focused on supporting and growing:
- neighborhood businesses through expansion
- high-growth ventures through scaling
- high-growth firms owned by women and people of color
- community-driven innovation challenges
- comprehensive storytelling strategy around entrepreneurship in Detroit and southeast Michigan
- assessments to determine recommendations for the sustainability of NEI-funded programs and collaborations.
DDF is a Detroit based Community Development Financial Institution (CDFI) that has 15 years of experience in lending to new and existing small businesses in the city of Detroit. DDF is responsible for all the loan underwriting and management as well as loan documentation. Potential borrower businesses are identified by nonprofit neighborhood support organizations that are supported by NEI.
- Invest in your assets, not your deficits.
- Keep showing up. You’ve got to be inclusive from day one and at all levels to impact systemic change.
- An ecosystem is a complex thing. Don’t try to force it to be one thing or another. Instead, establish and reinforce connections.
- Need a regional consciousness around the entrepreneurial support work
- Never declare mission accomplished
- Focusing on job creation is not enough; focus on how you change culture through economic development.
- The value of place is important to attracting, retaining, and growing entrepreneurs and talent who will create a better future.
- Develop environments that not only support entrepreneurs’ business needs, but also those that create a sense of community among entrepreneurs.
- Entrepreneurs create jobs, wealth, opportunities and positive impact for communities. Their innovations lead to positive social change and improved quality of life.
NEI’s primary roles evolved to
- Strategic Grant Maker
- Strategic grant maker to nonprofits that support entrepreneurs
- Convener of philanthropic, government, nonprofit and for-profit partners who develop and sustain network of support for entrepreneurs
- Storyteller that shares how diverse entrepreneurs are creating better future for their communities, and thus inspires other
Twelve fellows representing nine projects were selected to participate in the inaugural 2018 cohort. Each fellow received a stipend ($10,000 per project), as well as additional funding for professional development.
Neighborhood Business Initiative Worktable members published the Capital Readiness Checklist, a resource developed by members of the Neighborhood Worktable that business support organizations could use to prepare client entrepreneurs for loan capital
The checklist details the “5 Cs of Credit” (capacity, capital, character, collateral, and conditions) that lenders use to assess the creditworthiness of potential borrowers, as well as a checklist of to-dos that, if satisfied, demonstrate an entrepreneur’s preparedness for receiving a loan. NEI printed versions of the checklist in four languages: English, Spanish, Arabic, and Bangla.
Capital Access report key findings:
- There is a continuum of capital available for new and existing entrepreneurs with better access in metro Detroit than in Hamtramck or Highland Park.
- Resource needs for small business owners are often interrelated, complex, and nuanced. Solving for one area of need, such as capital, requires a view of the business and its owner holistically.
- For those who come from neighborhoods or communities that have historically lacked access to money, education, or networks of people who can serve as mentors, there are additional layers of awareness, trust, systems navigation, community-building and institutional bias that must be addressed to affect positive change.
- Among small businesses owners nationwide, 68 percent had outstanding debt in 2017, and 87 percent of small business owners relied on the owners’ personal credit score to obtain financing.
- The presence of bank branches in a neighborhood plays a role in the ability of that institution to collect informal information that can improve the ability to lend and contribute to more favorable credit terms.
- Federal Reserve survey results show that the location of a bank’s branches is the single most important factor influencing customers’ choice of bank, particularly in areas with lower incomes.
- Low-income entrepreneurs have limited ability to either rely on personal sources to fund a startup or use retained earnings to support an existing business.
- Detroit-area nonprofit lenders and Community Development Financial Institutions (CDFIs) are critical sources of capital for entrepreneurs along the continuum, particularly for those who are new to credit or in search of smaller amounts of capital.
- Real estate-based lending options are also important for larger or more mature businesses. A key issue in Detroit is the volume of empty commercial space and blighted residential and commercial buildings.
- Equity investment is an option for businesses at the larger end of the capital spectrum, but equity investors are often looking for businesses with high-growth potential, strong margins and a scalable market.
- It is essential that local capital providers support an ecosystem approach to capital access that leverages collaboration over competition to ensure the right type of capital is available at the right time for an underserved entrepreneur.
- Money alone will not address the resource needs of underserved entrepreneurs who need support building financial and small business management skills, navigating the capital ecosystem, and building trust in systems that were not originally built for them.
- It is essential to address capital constraints at the macro level, not just at the organizational or neighborhood levels, to overcome structural issues and support long-term success of underserved entrepreneurs.
Each month, the year-long In Good Co., Detroit campaign highlighted a Detroit business owner from diverse industries and backgrounds. In addition to stories, In Good Co. featured a directory of hundreds of business support resources that are available at InGoodCoDetroit.com.
Through the site, entrepreneurs could locate service providers dedicated to helping small businesses grow in southeast Michigan. While the resources had been available in the past, the stories provided a more personal avenue for readers and viewers to connect with subjects.
The series featured three interactive workshops that brought together NEIdeas Alumni business owners and expert service providers around three key topics:
- Investing in Design to Enhance Growth,
- Financial Strategies for Growing Your Business, and
- Accelerating Growth Through Marketing + Promotion.
NEI published independent research, Community of Opportunity, to better understand the resources that make up southeast Michigan’s entrepreneurial ecosystem, as well as the motivations and needs of the region’s entrepreneurs. Among the key findings, the report identified 232 unique entrepreneurial assets operating throughout the region.
- Networks increase the flow of information and enable coordination and collaboration. When Business Support Organizations (BSOs) are aware of peer organizations operating in their region and are well acquainted with their services and specializations, entrepreneurs can launch and grow businesses more efficiently.
- Southeast Michigan’s entrepreneurial support system is an extensive network of at least 226 unique resources, with dense clusters of entrepreneurship support services forming in the region’s urban areas—Detroit, Ann Arbor, and Flint.
- Entrepreneurial business support is regional with the potential to impact the region. Though business support organizations tend to cluster in the region’s urban centers, many of their clients come from across the region—not just their immediate vicinity.
- Referral behavior is the regional connective tissue in the entrepreneurial landscape. A strong referral network will make entrepreneurs’ quest for support more efficient and effective.
- Inclusion-focused organizations increase the visibility of the broader network of support and raise awareness among underestimated entrepreneurs of their ability to access resources to start and grow businesses.
- In communities that have faced structural barriers to participation, opportunities for minority, women, immigrant, and veteran entrepreneurs require targeted support to create access to resources.
- Philanthropy has incentivized inclusive network behavior, and that leads to greater awareness across the board—entrepreneurs’ awareness of resources and BSOs’ awareness of each other. But awareness alone does not lead to coordination. Many business support organizations don’t have a strong grasp of each other’s services and specializations.
- Advancing the region will require next-level systems behavior. Now that the foundational structure of entrepreneurial support has been established and documented, it’s time to build an inclusive system of business support for the region.
NEI, working with Philanthropy for Active Civic Engagement, released the Entrepreneurial Reciprocity: The Case for Entrepreneurs Engagement in the Community report with key insights around the relationship between entrepreneurs and community engagement
- There is a reciprocal relationship between entrepreneurs and their communities.
- It takes a community to raise an entrepreneur, contrary to the socially pervasive belief in our culture—often stemming from the traditional American definition of success—that entrepreneurs “make it” on their own.
- Entrepreneurs circulate in many types of different communities. Some are geographic. Some are based on their business. Some are oriented to a particular subject matter or area of interest. Some are physical, while others are virtual.
- Entrepreneurs may feel a closer connection to their local community than larger, more established global organizations.
- There are a range of ways entrepreneurs give back to their communities. Some are financial, but assets like knowledge and networks are also valuable reciprocity opportunities.
- The concept of reciprocity in community engagement and entrepreneurship can be complicated by the blurred distinctions between for-profit and social entrepreneurship.
- Remaining closely connected to community is good for entrepreneurs’ businesses. Women are particularly aware of this phenomenon.
- Engaging in community benefits entrepreneur’s businesses, the entrepreneur themselves, and their communities.
- There is also interrelationship between entrepreneurship, philanthropy, and American communities. Entrepreneurs create businesses that create wealth in our economy. Philanthropy plays a major role in catalyzing the entrepreneurship ecosystem that keeps entrepreneurs in their community and helps them be successful.
especially those led by underrepresented
Over three months, this effort raised $4.84 million in grants from funders and from NEI’s existing budget to support loan relief, rent relief, practical assistance and stabilization for 2,200 small businesses in metropolitan Detroit. By month four, 96% of loan recipients were still in business.
The interventions included $1.48 million in mini-grants to low-income business owners in six cities across southeast Michigan.
NEI partnered with University of Michigan’s Detroit Metro Area Communities Study (DMACS) to survey more than 700 Detroiters and published the Entrepreneurship and Economic Opportunity in Detroit market research report to uncover key insights on how residents and entrepreneurs perceived small business in their communities
- The term “entrepreneur” is not ubiquitous. Most Detroiters think of entrepreneurs as people who are self-employed or open a family-owned business or franchise business. Before being presented with a definition, 29 percent of respondents considered themselves to be entrepreneurs, 63 percent did not, and 8 percent were not sure. After receiving a definition, more than 40 percent of Detroit residents considered themselves entrepreneurs.
- Research shows that 42 percent of Detroiters do not consider there to be much opportunity in the city of Detroit for the average person to get ahead economically. Subsequently, Detroiters see entrepreneurship as a way to make their own opportunity regionally.
- There is a reciprocal relationship between entrepreneurs and their communities. Most residents (84 percent) think entrepreneurs have a positive impact on the city.
- Though nearly half of Detroit residents believe that there are some or a lot of resources available from government or nonprofits to start a business, financial security did not feel like a possibility for most.
- Though small businesses comprise the majority of employers in Detroit, they account for only 14 percent of jobs in the city. Building and supporting the growth of small businesses in the city may be a valuable strategy for leveraging entrepreneurship into employment opportunities for more Detroiters.