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C R A I N ’ S D E T R O I T B U S I N E S S // A U G U S T 1 7 , 2 0 1 5
Q&A: DAVID EGNER, JIM BOYLE, NEW ECONOMY INITIATIVE
NEI works to make sure its network survives The Detroit-based New Economy Initiative is in its seventh year. Its role is to fund the nonprofit organizations that support entrepreneurship, small-business growth and innovation for both grassroots and high-growth companies. Crain’s Detroit Business contributor Marti Benedetti interviewed NEI Executive Director David Egner and Jim Boyle , NEI senior program officer, for an update on the NEI, which by the end of 2014 awarded almost $88 million in grants to Detroit area companies. This is an edited version of that conversation. How healthy is job growth through entrepreneurship in our region?
Job growth potential won’t come from startups in the next 10 years. It will come from existing companies that will really blow it out. Endeavor (a New York-based nonprofit with a Detroit office that offers various services to companies on the brink of rapid growth) was brought here to do that. They don’t care if it is hightech or food as long as it has highgrowth potential. McClure’s Pickles and Algal Scientific are two examples that are getting access to Endeavor’s expertise and mentors. (These companies were chosen to be Endeavor Entrepreneurs Aug. 8, giving them access to business mentors and volunteers from Fortune 500 consulting firms to spark rapid growth.) What are some small but significant companies you have seen blossom as a result of your funders?
Success stories include Ron Waters, owner of screen printing business One Custom City on the city’s west side; Functional Fluidics, created by Dr. Patrick Hines, who invented micro-fluidic devices to help physicians assess which drugs to use to treat patients when clotting is a concern — particularly AfricanAmericans with sickle cell anemia; Ellis Island Tropical Tea, a bottled tea production-distribution company; Floyd Design LLC , a company that makes table legs and clamps that can transform an old door or plank into a table; and high-growth companies such as McClure’s and Algal. The food sector in Detroit is really robust. Numbers crunched by Jonathan Silberman, a professor at the Oakland University School of Business, show the Detroit area ranking dead last among the country’s 15 largest metros when it comes to startups. (See July 26 Crain’s story.) How can that be ?
Those measurements are blunt instruments because they are attached to venture capital money. VC money is not an indication of entrepreneurial activity; it is an indication of high-tech activity. It’s the
David Egner
Jim Boyle
wrong metric. We think the right metric is measuring the network itself and its connectivity. We know in 2008 there were five “on-ramps” for new business; now there are dozens of on-ramps. We are trying to find the right metrics and the right impact studies and finding the metrics that measure entrepreneurial outputs accurately. In April, 1,400-plus businesses had been started by clients of NEI grantees. The number of people asking for help and potentially getting services is a telling number. We could fill Michigan Stadium and still have 30,000 people in the parking lot. That’s how many people have asked for help since 2009. Detroit has epicenters of entrepre neurship such as Midtown and Cork town. Where are the next big hubs?
Well, Midtown encompasses six neighborhoods, including New Center, so it is larger than people realize. We are seeing the development of micro-markets across the city such as West Village. Expect to see more business in GrandmontRosedale, Southwest Detroit’s Hubbard Farms and Clark Park, further east in the Jefferson Chalmers neighborhood — although that’s a ways off, and Livernois and Seven Mile Road. What’s missing with Livernois is a strong community development corporation. Do people understand your organi zation?
Entrepreneurs have no idea what we are. We’re a funding organization. When we think about our transition (of ceasing to exist), we think about how to make sure this network survives as a network. … what does it look like moving forward? We’re starting to have that discussion. Do we need to promote the system? When we go away, we want to make sure people understand the system, so we are trying to explain the system’s message as much as possible. There are so many nuances. It’s like explaining cold fusion. What would you like to change about NEI’s mission?
To some degree, we’re still elephant hunting. We are looking for a big attraction, a big manufacturer, but that hasn’t worked in a couple of decades. It’s been done in the south
and it’s been done at an enormous tax cost. It has not raised the prosperity level in those areas much. Our corporate leadership is looking at economic development, and it needs a new model. So, if there is anything I could change, it would be accelerating that. The next great opportunities for this region will come from this work — not from hunting the next factory. What is the amount of funding your organization has received since incep tion?
In 2007, $100 million was raised, and we got it when we started the NEI in 2008. In 2014, we recapitalized and got $35 million more for a total of $135 million. At the end of 2014, we had spent $87 million of the total on grants and investments. This leaves out our administrative costs. What will be the focus for spending moving forward?
A sustaining innovation network — in other words, what are the innovation organizations that are trying to get new product to commercial distribution; neighborhoods; and making sure we are truly serving grassroots to high-growth companies while being inclusive at all levels. (There are) spaces and neighborhoods where we will make announcements in the next 30 days. And a third piece — stimulus and storytelling. This is where we stimulate activity by using contests and storytelling such as the Accelerate Michigan Innovation Competition. After tapping organizations for the Grand Bargain, is it a challenge now to approach them for additional funding? The
Grand Bargain has not decreased available philanthropic money, it has increased it. I don’t have empirical data to show that, but what you have is funders of the Grand Bargain — take the Hudson Webber Foundation (which Egner heads) — on a percentage basis, we were a very large contributor to the Grand Bargain. We put in $10 million over 20 years. We have $180 million in net assets, so that half million a year came out of a $7.5 million to $8 million charitable contribution. Some might say, “That’s a half million you can’t put elsewhere.” But, coming out of bankruptcy, the attention in Detroit is on new corporate dollars. New philanthropic dollars far outpace anything else. We’ve attracted more investor interest...There are more investors here than we’ve seen in my 18 years at Hudson Webber. Post-bankruptcy Detroit is far more attractive to invest in, and you have clear paths of what you want to accomplish now that you didn’t have before. So there’s more money in the system — not less.
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