More than 50 nonprofit leaders gathered in Detroit from October 3–4 to discuss philanthropy’s role in sparking entrepreneurship to boost economic mobility at an event organized by The Philanthropy Roundtable’s Economic Opportunity program. The conference, entitled Jumpstarting Entrepreneurship in Your Community, examined how philanthropy can better understand the opportunities for strategic philanthropic investment as well as address troubling trends in entrepreneurship, such as the paucity of women and minority-owned businesses.
As expected, the work accomplished in the host city was a primary focus.
Detroit Takes Center Stage
“We bet on entrepreneurship. We bet on the potential this city has for entrepreneurs,” said Pamela Lewis, director of the New Economy Initiative (NEI).
Local and national funders have embarked on the bold goal of returning Detroit to its position as a global economic leader. NEI started with the recognition that Detroit will never prosper with so few private-sector jobs. So in 2008 ten foundations joined forces (Fisher, Kresge, Skillman, Ford, Hudson-Webber, Kellogg, Mott, Knight, the Community Foundation for Southeast Michigan, and the McGregor Fund), pooling $100 million to spend over eight years to revive the region’s economy. Given the varied philosophies and priorities of those foundations, it took the leaders several years to agree how to spend the money. Eventually, though, they placed a big bet on attracting private entrepreneurs.
“In all of our communities, we have got to pay attention to growing those entrepreneurs in less-traditional areas and in different ways,” said Mariam Noland, president of the Community Foundation for Southeast Michigan.
“We knew that the talent was here, industry was here, and innovation was already here. We were looking to use our resources to accelerate what was happening,” added Tosha Tabron, vice president and relationship manager for global philanthropy at JPMorgan Chase.
Successful collaboration among several partners was a constant theme throughout the conference. With more than $100 million committed to the NEI project up front, getting multiple partners to agree on a strategy that often changed throughout the process did, at times, prove to be a sticking point.
“I think there is real faith and trust in the leadership among the group of foundations and now also the entrepreneurs when it comes to giving guidance in an ongoing basis,” said Noland.
The consensus among the panelists was that measuring success for entrepreneurial initiatives is different from other projects funded by philanthropy. Grantmakers need to be committed to an evolving process that ultimately sees free market solutions as the strongest indicators of accomplishment.
“For us, success looks like the market taking over these funds,” said Tabron. “We’re not measuring based on a direct return on investment from the organizations we fund. We’re measuring based on private investment that starts to follow behind what we do.”
“I have come to the conclusion that philanthropy can’t be the market. Ultimately, the market has to own it and NEI has to step back, play its coordinating role, and let the market own some of these pieces,” said David Egner, president and CEO of the Ralph C. Wilson Jr. Foundation.
To showcase those NEI successes, attendees also heard from local entrepreneurs at a Tech Town reception on October 3. Lewis, who moderated the panel, explained that entrepreneurs start businesses for many different reasons.
“There are entrepreneurs out of necessity and there are entrepreneurs out of opportunity,” she said.
The role of philanthropy is increasingly critical to entrepreneurship and economic development, particularly when it comes to securing capital. Most traditional lenders will not offer credit to first-time entrepreneurs, who already suffer from limited financial backing.
“The Detroit Development Fund, which is a philanthropic loan, was the only way we were able to bridge the gap for our first big contract,” said A. K. Bennett, co-owner of Benkari, a family-owned Detroit plumbing and mechanical contracting business.
Yet, despite the uphill climb for these entrepreneurs, the benefits of success reach beyond lifting someone out of poverty or being your own boss. It increases the social and economic well-being of the community. Lana Rodriguez, owner of Mama Coo’s Boutique in Southwest Detroit, unexpectedly found herself serving as an inspiration for a Detroit mother and daughter who visited her store. After Rodriguez made a connection with the pair by explaining that she attended the same high school as the daughter, she was asked if she was the store owner.
“When I told the daughter I owned the store, just seeing her face and her mom’s face and seeing how it uplifted them. It was a great feeling,” Rodriguez said.
For Omer Kiyani, founder of Sentinl, a biometric gun lock manufacturer, entrepreneurs’ contributions to society are woven into the fabric of the country.
“My success is the success of America,” he said.
Entrepreneurship Philanthropy is Difficult—and Necessary
“Philanthropy supporting entrepreneurship is excruciatingly hard and rough,” said Andrew Yang, a speaker at the conference and founder of Venture for America.
Yang laid out an honest and straight-forward picture of philanthropy and entrepreneurship. While other areas of the philanthropic sector are traditionally stable, investment in entrepreneurship is unpredictable and fraught with failure. The failure rate of most entrepreneurial investments is more than 80 percent.
“But if you’re a philanthropy looking to invest in entrepreneurship, you typically have another layer of motivation that’s not monetary. So, you’re taking a failure-laden process and ramping up the level of difficulty,” Yang said.
Philanthropy also looks to be inclusive, seeking people with a wide range of qualities, not just those whose qualities are typically associated with entrepreneurship. This can make the entrepreneurship philanthropy difficult at times. How do you reach people who fall out of the traditional, familiar networks? Anyone who has a good idea, regardless of where they live or who they are, should have access to the tools to test its viability—a refrain echoed by many people throughout the day.
“We are the least entrepreneurial people in the world,” Egner said, speaking of the foundation community.
Entrepreneurship often caters to outside-the-box thinkers who, when successful, overcome certain economic and poverty obstacles not only for themselves but for those around them. Philanthropy serves a critical role as the catalyst to address the economic obstacles many face in the world.
“If you look at the challenges we are facing—whether it’s income disparity in the U.S. or some of the challenges in the developing world—we need new ideas,” said Raj Melville of Deshpande Foundation. “But having the new ideas is not enough, and that’s where entrepreneurship comes in.”
Melville participated in a panel discussion with Nathalie Kylander, managing director of the Draper Richards Kaplan Foundation, and David Parker, founder of Entrepreneurship for All (EforAll), where they discussed how philanthropy can empower more entrepreneurs and help them succeed, particularly in traditionally underserved markets.
“We see our roles as supporting and testing out new approaches to critical problems as a way to spark innovation in the nonprofit sector. We develop close relationships with the entrepreneurs we support and help them get to the level where they can attract funding or develop financial support and sustainability through earned income,” Kylander said.
“There are plenty of entrepreneurs across this country ready to take their ideas and get started with them and they are just waiting for a program to get them going,” said Parker. EforAll is an accelerator that strengthens entrepreneurship in mid-size cities. It utilizes mentors, cohorts, and grants as part of its model for all-inclusive entrepreneurs. It sees innovation and entrepreneurship as an opportunity to invigorate entire communities—a sentiment shared by all participants.
“Entrepreneurship isn’t just about economic growth and jobs. I think there’s something about small businesses creating and revitalizing a community,” Kylander said.
Success is Critical
In the final panel of the conference, panelists from nation-wide funders provided insights about the successes and failures of past investments. They continued discussing collaboration, which was a focal discussion theme throughout the day, as they shared their strategies of teaming up with local organizations.
“As a catalytic funder, we are not in these regions for the long term. So, finding a local partner, a local foundation on the ground actually helps sustain these programs over the long term,” said Tony Tolentino, vice president of the Blackstone Charitable Foundation.
Financial investments are not the only approaches for entrepreneurship programs to have success. Sarah Koch, the vice president of social innovation at the Case Foundation, explained how her organization looks to showcase the people whose lives have changed because of entrepreneurship. By doing so, Case Foundation helps these people serve as an inspiration for others.
“One of the ways that we’re trying to build and catalyze the entrepreneurship movement is through something we call inspiration capital. That is the culture change that needs to happen around the way that we talk about entrepreneurship and who we represent as successful entrepreneurs,” Koch said.
The Case Foundation ran a campaign as part of its Inclusive Entrepreneurship Movement calling on entrepreneurs to share their stories. However, Case found that building partnerships outside of its traditional sphere of influence was critical to finding entrepreneurs and stories beyond its usual scope.
In perhaps a different mold of inspiration capital, the Paul E. Singer Foundation looks to connect entrepreneurs to a place that has the highest percentage of venture capital investment and research and development centers per capita in the world: Israel. According to the book Start-Up Nation: The Story of Israel's Economic Miracle, written by Singer and Dan Senor, Israel produces more start-up companies than Japan, India, Korea, Canada, and the UK.
“At the foundation, we saw a real opportunity to…connect business, government, and NGO leaders all over the world to this incredible island of innovation and entrepreneurship—and to make it accessible to people who want to access Israeli innovation,” said Deborah Hochberg, director of strategic partnerships at the Paul E. Singer Foundation.
Whether achieved through a local initiative, nation-wide collaboration, or work with non-traditional participants, entrepreneurship has the potential to be profoundly influential. For the grantmakers who have navigated the difficulties and found a successful strategy, the impact is immeasurable and often surpasses traditional philanthropic programs. It just takes a leap of faith.
“You still need to do it. You should do it because it’s so important because as a society right now, we are losing it. We generally are losing it,” Yang said.
“You all are here because you are interested in doing something with your philanthropy and entrepreneurship, and I encourage you to do it,” said John Tyler, general counsel and corporate secretary for the Ewing Marion Kauffman Foundation, speaking to the audience. “There are a thousand and more ways to engage, and how you engage will be meaningful, it will be impactful, and it will make a difference.”