Metro Detroit entrepreneurial effort nets $2.9B impact

DETROIT - Investing in metro Detroit's entrepreneurs appears to be a pretty strong bet for the local economy, according to two new studies of a leading philanthropic collaboration.

The New Economy Initiative, billed as the country’s largest philanthropy-led regional economic development initiative based in southeast Michigan, doled out $96.2 million to organizations and programs supporting entrepreneurs since launching in 2007.

That investment is starting to pay off, the studies found. NEI’s financial support for entrepreneurs and small businesses, in turn, generated $2.9 billion in real economic output and created 17,490 jobs in southeast Michigan (70% of those positions could be found in Wayne County, anchored by Detroit), according to analyses conducted by PricewaterhouseCoopers and the W.E. Upjohn Institute for Employment Research to be released today,

About 10,000 of the jobs cited in the Upjohn report however are "indirect jobs," or jobs assumed to be created based on a multiplier effect from the approximately 7,400 jobs created directly by new businesses funded by NEI.

"We felt that we were at a time when we needed to understand the work and the impact it was having on the economy at large," Pamela Lewis, NEI's director, said in an interview Tuesday. "We felt good about the contribution that we're making to the larger economy."

NEI launched in 2007 with $100 million in philanthropic dollars both local and national. Bruce Katz, centennial scholar at the Brookings Institution and founding director of the Metropolitan Policy Program, has called NEI a model for the nation.

It received support from 12 national and local foundations: the C.S. Mott Foundation, the Community Foundation for Southeast Michigan, the Ford Foundation, the Hudson-Webber Foundation, the John S. and James L. Knight Foundation, the Kresge Foundation, the Max M. and Marjorie S. Fisher Foundation, the McGregor Fund, the Skillman Foundation, the Surdna Foundation, the W.K. Kellogg Foundation, and the William Davidson Foundation.

In many ways, it served as the forefather to the so-called Grand Bargain, a similarly collaborative effort among foundations to speed Detroit's exit from municipal bankruptcy by saving the art collection at the Detroit Institute of Arts while preserving public pensions in the city.

NEI's goal was to focus on talent, innovation and culture change. To hit that goal, NEI has made 259 grants through 2015. An early emphasis on high-technology start-ups gradually came to include more lifestyle businesses, including mom-and-pop retailers, coffee shops, restaurants and more.

The PricewaterHouse report found that those business received financial support well beyond the NEI grants, including $234 million in outside matching grants, $579 million from other investments and $93 million in client revenues.

In the broadest sense, NEI sought to nurture an entire ecosystem for entrepreneurs. But evaluating this kind of investment can be a squishy science. It can be tough to get reliable statistics on the success rate of capital investments. And the majority of start-ups don’t make it. NEI didn't include the failure rates for its businesses in today's reports.

NEI said it does not track survival rates of all start-ups supported by its grantees. Two key NEI grantees, Ann Arbor SPARK and Invest Detroit’s First Step Fund, report that companies in their respective portfolios have survival rates of 79% and 84% since 2010.

Yet the economic and employment impact reports reviewed years worth of information reported to NEI by grantees, as well as interviews with regional entrepreneurs, to come up up with some specific findings, including:

  • 4,400 companies directly serviced by NEI grantees through 2015;
  • 179,571 attended events in metro Detroit’s entrepreneurial network funded in part by NEI;
  • And more than 1 million square feet of "entrepreneurial space" opened in connection with NEI funding;

NEI funders said they wanted to increase equity in the marketplace for young companies and include those often left out in southeast Michigan’s start-up economy. As evidence of their success, they now point to the percentage of businesses they supported that are minority-owned: nearly 40%  since 2009, or double the equivalent national average, officials said.

But the mission isn't over. The publication of the impact reports come as NEI enters the final stages of recapitalization to raise $28.5 million to continue its mission through 2020.

Craig Grissom Sr. says he knows well the power of the NEI programs. The 58-year-old Detroit native said he returned to the city after a stint in prison to find himself struggling to secure work. So he started his own lawn company.

Thanks to an outside financial backer as well as two NEI-backed training programs to learn how to obtain working capital and run your own business, Grissom's Higher Ground Lawn Care became his own, today with 103 residential and commercial clients and a full-time crew of five workers.

"I had to step out on my own," he said. "I wasn't even thinking about having a lawn company."

Now, Grissom said he's focused on the next stage of his business' growth: finding and retaining quality workers.

"All I needed was the opportunity that I could prove myself to people," he said in an interview Tuesday. "Those programs gave me the tools I needed."

(2016 © Detroit Free Press)


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