What's Been the Impact of a Funder-Backed Effort to Boost This Rust Belt Economy?

In the bleak economic landscape of southeastern Michigan, a funder-backed effort, the New Economy Initiative (NEI) offers a ray of hope for Detroit. According to recent analysis by Pricewaterhousecoopers LLP and the W.E. Upjohn Institute for Employment Research, $96.2 million in grants since NEI’s inception have led to $2.9 billion in economic gains and 17,490 new jobs. Those are great numbers for a region that rarely gets positive news coverage for anything economic. It's also a striking example of the leverage power of well-targeted philanthropic dollars. 

Still, NEI faces a tough battle. Between 2000 and 2010, the initiative’s home region lost over 300,000 jobs, and while several neighborhoods of metro Detroit have seen some reinvestment, the situation is still dire. But a formidable coalition backs NEI. In our previous coverage, we discuss how the project got its start in 2007 as a coalition between ten funders committed to rejuvenating entrepreneurship throughout the rust belt, with an emphasis on the area around Detroit.

Since NEI got up and running, additional funders have swelled the ranks. The current list includes many of the nation’s biggest anti-poverty philanthropies, including (brace yourself) the Ford, Knight, C.S. Mott, Hudson-Webber, Kresge, Fisher, Skillman, Surdna, Kellogg, and William Davidson foundations. The McGregor Fund, the Community Foundation for Southeast Michigan, and the newly rich Ralph C. Wilson Foundation round out the list of donors.

In conjunction with the analysts’ heartening report, Ford, Knight, and McGregor recently pledged $5 million, $3 million, and $500,000 respectively toward NEI's current fundraising goal of $28.5 million. This follows the funders’ initial $100 million commitment in 2007 and another $35 million in 2014, strengthening an effort for economic rejuvenation that has fostered 1,610 new companies in the Detroit area alone.

NEI takes a “support the supporters” approach. As its president Pam Lewis told us, “Much of NEI’s success lies in identifying, building, and strengthening connections among the various resources that help entrepreneurs convert ideas into successful enterprises.” That involves a two-pronged strategy: grants to local organizations supporting entrepreneurs and small businesses, and convening the grantees and entrepreneurs to learn from each other.

In this, NEI’s work mirrors many of the big foundation backers in its commitment to systems thinking and network building. But NEI is somewhat unique. Its focus is on job growth and capitalist stimulus, not direct aid to underprivileged communities.

The demographics of its entrepreneurs are also distinct: Of nearly 4,500 companies receiving NEI-funded services across southern Michigan, 31 percent are owned by women and 39 percent by people of color. An estimated 29 percent are in the tech sector, which means 61 percent aren’t. In other words, NEI isn’t your usual startup incubator. For the curious, NEI just released a lengthy but reader-friendly reportdetailing its approach, impact, and stakeholders.

We often define southern Michigan by what it lacks. NEI takes the opposite position, identifying and funding regional assets. These include a large population of engineers, abundant “creatives,” and top-tier universities, all the legacy of Detroit’s former glory as a manufacturing powerhouse. Though it didn't last, that 20th-century prosperity made for a racially diverse city with a strong middle class. It remains to be seen whether efforts like NEI can catalyze something similar in this century.