What Can Philanthropy Do To Revitalize a Bruised Economy in a Rust Belt City?

There's a lot of talk these days about reducing poverty and inequality. But one gap we've noticed is that fewer funders than you might think focus on supporting new job growth, which is essential to providing opportunity. Entrepreneurs and small businesses, everyone knows, are key engines of prosperity—yet often are barely on the radar of foundations. 

One notable effort in this regard, though, is the New Economy Initiative (NEI) kicked off as a special project of the Community Foundation for Southeast Michigan in 2007. Ten funders, both local and national ones, kicked in $100 million at that time to help restore the city as an economic leader and create new jobs.

Of course, in the interim, there's been big news around Detroit and philanthropyinvolving historic financial commitments by major foundations to bail out and revitalize the city. 

Still, the New Economy Initiative, which has now been going for nearly nine years, is interesting to look at in its own right. Quite apart from the unique situation of Detroit, the initiative is an important instance of top foundations coming together to tackle the biggest problem facing any number of U.S. cities—a lack of economic growth, jobs, and opportunity. Since the onset of de-industrialization a few decades ago, there have been many efforts in many places to jumpstart devastated local economies—mostly with disappointing results. So we were curious to learn more about how this one was going. 

The purpose of the New Economy Initiative is to provide support for small businesses and entrepreneurs to give the local economy a much-needed boost and improve the lives of residents. This is a way to support service providers with technical assistance for business planning, providing capital, and connecting businesses to each other.

Geographically, this initiative is all about Detroit, so it makes sense that a Detroit-born leader has recently taken the reins. NEI just announced the hiring of its new leader, a woman of color who’s committed to making Detroit’s economy truly inclusive for its population—something the city has lacked for a long time.

Statistics show that the percentage of women and minorities who start businesses in the city are actually higher than national averages; however, they remain underrepresented in terms of follow-on investments. Only 1.8 percent of investment capital goes to minority and immigrant-owned ventures and only 2.4 percent to businesses owned by women.

To learn more about the entrepreneurship challenges faced by women and minorities in Detroit and how philanthropy can step in to ease those barriers, I connected with NEI’s new president, Pam Lewis, to ask a few questions. Before stepping into this role, she served as a senior program officer for NEI and had an emphasis on evaluation and impact reporting. 

In your opinion, what is the current status of Detroit's economy and where does it stand to grow and improve the most?

It’s no secret that Detroit has struggled in recent years. After the 2008 financial crisis, which was just after NEI launched, unemployment levels in the city rose to nearly 25 percent (and 16 percent across the Detroit region) and poverty peaked at 40 percent. But today, things are vastly improving in the city and throughout Southeast Michigan. Employment is rising—industrial jobs, for instance, have increased by a remarkable 30 percent over the last five years—GDP steadily climbs, and we’re finally seeing population growth once again in the city.

Just as important, there is a resurgence of an entrepreneurial mindset that is allowing individuals—of all backgrounds, economic and educational status; in the city and throughout the region—to consider alternative paths to job and wealth creation. It’s a mindset that is paying dividends and diversifying the economy. For example, the demand for entrepreneurial services from NEI’s grantees has grown significantly in recent years. Hundreds of thousands of Detroiters participate in entrepreneurial programs, events, and workshops. And today, there are about 4,500 companies receiving support from NEI-backed service providers. Companies from diverse sectors—from traditional high-tech areas like clean energy and life science to other sectors like food, construction and creative design—are emerging and growing, in many cases, fast. 

Detroit’s economy still has a ways to go, but it is absolutely headed in the right direction. Continuing to highlight the value of entrepreneurship and providing an inclusive system of support to nurture it will, we hope, help fuel Detroit’s ongoing recovery.

How has your background and connection to Detroit prepared you to become NEI's new director?

I was born in Detroit, and feel a deep connection to Michigan and its people. I went to college less than two hours away at Michigan State University and recently completed an MBA at Spring Arbor University. At the beginning of my career, I pursued engineering, finding myself driven by solving systems-related problems. As an employee at DTE Energy, I focused on process management and continuously improving business operations—not realizing how much that experience would inform and assist me today.

Much of NEI’s success lies in identifying, building, and strengthening connections among the various resources that help entrepreneurs convert ideas into successful enterprises. Approaching this work with a systems mindset is critical. Ensuring that entrepreneurs have what they need at a given point in time, that there are accessible on-ramps at every point in the process—this requires a holistic, 360-degree view of the economy and its gaps. That’s why our funding is diverse, and spans business support services, mentoring, capital, real estate, access to markets, and access to talent. Supporting entrepreneurs in this way is akin to process management—only in this case, the customer is the individual wanting and willing to do what it takes to start or grow a business.

As someone who was raised in Detroit and still lives in the area, having even a small part in seeing it return to a thriving region, filled with innovation and entrepreneurship, is enormously fulfilling.

I understand that NEI has been a multi-year effort. What will you change within the initiative now as the new director?

During NEI’s initial phase, we worked tirelessly to support high-tech, venture-backed opportunities, with some early, experimental investments in Detroit’s neighborhoods. Our second round of investments helped to build a more connected network that continued high-growth support, but stretched further and deeper into the neighborhoods. And now, we are seeing the results from this work, including:

  • More than 8,500 companies that have received assistance to start or grow a business;
  • More than 1,600 new companies that have been started across the Metro Detroit region;
  • More than $600 million leveraged investment to new and existing companies being supported by this ecosystem.

We have also seen a tremendous increase in the number of women and minorities who are building businesses in the region, with almost 39 percent of the new companies founded by minority owners and almost 30 percent by women.

Going forward, there’s tremendous opportunity to more intentionally connect the innovation and high-growth assets with more neighborhood-based business development. In NEI’s next phase, key questions we’ll seek to tackle include:

  • How can we use innovation and entrepreneurs to attack seemingly intractable neighborhood issues, while creating the products and companies of tomorrow?
  • How can we bring resources like next generation high-speed Internet into the neighborhoods, and use that technology to grow our own entrepreneurial talent at home?
  • How can we provide more affordable and flexible spaces that support the growth of new companies—ensuring that as businesses grow, they stay in the region?
  • How do we better support women and minorities wanting to launch businesses, and ensure they are ready for and have greater access to capital?

Focusing on these issues, we can continue to grow our support for entrepreneurs, from the grassroots to the high-growth sectors. That’s a key to Detroit’s economic success—having both large companies that serve a global market and create lots of jobs, while also growing the small businesses and neighborhood commercial corridors that create a sense of place for residents. 

I also understand that NEI is supported by 12 national and regional foundations. What will be your biggest challenge in leading such an extensive collaboration?

It’s true that when NEI launched, it was an unprecedented approach—bringing together national foundations like Kresge, Ford, Knight, Kellogg, C.S. Mott, Davidson, and Surdna, with local foundations such as Max & Marjorie Fisher, Hudson-Webber, McGregor, and our host foundation, the Community Foundation for Southeast Michigan. But the collaboration that is at the heart of NEI has proven to be our greatest strength. Over the past decade, we have shown that philanthropic partnerships aren’t just capable of achieving impact, but absolutely essential to it.

NEI’s funders are extremely active in the strategic direction of our work, and too often they don’t get the credit they deserve for charting one of the most innovative initiatives in philanthropy. With so much great work being done by these foundations, across issue spaces and around the globe, the biggest challenge is ensuring everyone is informed about what their peers are doing and identifying ways to connect and support each other’s work.

Another challenge, frankly, is realizing that we can only do so much. NEI’s work is one piece of a much broader puzzle to revitalize Detroit’s economy. Our work will continue to be economic development—diversifying the regional economy and building a robust entrepreneurial ecosystem. Through that, we hope to have positive ripple effects in areas like education, crime and safety, and more.

What NEI programs/projects/strategies are you most looking forward to in 2016?

Where do I begin? First, reinforcing the network of support for neighborhood businesses. That’s some of the most rewarding aspects of this work—seeing capacity be built on the ground, service providers that help launch successful businesses, and commercial corridors that are transforming after years of struggle. 

Second, I look forward to discovering more disruptive, creative ways to build bridges between innovators and entrepreneurs with the average citizen. That’s one of the beauties of entrepreneurship, it has a triple-bottom—not only does it help the individual entrepreneur and the economy overall, but it can play a role in solving real issues for real people, particularly in areas like transportation and health.

Lastly, the release later this spring of NEI’s first comprehensive impact report will share—qualitatively and quantitatively—the progress of this unique partnership and the stories of individuals and organizations it has helped.