With David Bank
When you meet and and talk with dozens of leaders working to revive entrepreneurship in cities and towns across the U.S., you’ll find some common threads.
Over the last few weeks, ImpactAlpha has featured a series of profiles of these “New Revivalists,” in collaboration with the venture capital firm Village Capital. Among the takeaways: Go to overlooked places. Solve real problems. Give entrepreneurs space to grow. Revolving loans make the world go ‘round. Build businesses on revenues, not venture capital. And most importantly, spot hidden and underestimated talent.
Those are among the elements that can make entrepreneurship more than a get-rich quick scheme for a well-connected and well-placed few. Such intentional steps can help startups succeed, and succeed in creating jobs and pathways to prosperity across race, gender and geography.
The startup culture of Silicon Valley and other coastal hubs is starting to take hold in other regions. But the U.S. has only begun to rebound from a 40-year-low in business starts, which took a dive in the Great Recession. The New Revivalists are accelerating the rebound in U.S. entrepreneurship, and giving it a new face.
Here are six New Revivalist strategies gaining traction across the country.
1 — Go to overlooked places
Love of place drives the desire of entrepreneurs to solve local problems.
“Because people from Cincinnati love Cincinnati, there’s a strong desire to see their hometown succeed, to be inclusive and to bridge racial and social inequities,” Derrick Braziel, co-founder of neighborhood business accelerator MORTAR, told ImpactAlpha. MORTAR’s 12-week accelerator has graduated 13 classes, with a 96% graduation rate, and 180 student alumni.
In Louisville, Bryce Butler started Access Ventures, a nonprofit venture firm, with a series of strategic real-estate investments to reverse blight in a 15-block area. Butler has now raised more than $35 million to tackle the multi-dimensions of poverty keeping residents from participating in the economy.
2 — Solve real problems
The best entrepreneurs solve problems they understand from their own lived experience.
In West Virginia, Brandon Dennison and the Coalfield Development Corp are helping generations of coal miners build career pathways by solving the state’s current problems: wasteful construction, fossil-fuel dependence, and a weakened food supply. “We’ve been so dependent on one extractive industry for so long, we need a bridge strategy,” Dennison told ImpactAlpha. “Generating jobs isn’t enough. We have to create holistic opportunities and build relationships.”
The daughter of two Latin American immigrants, Carmen Rojas says she “benefited from the economy’s ability to deliver on a promise to working people that they can provide for their families and not make impossible choices.” Rojas founded the Workers’ Lab in Oakland to help workers transform low-wage industries and build models for worker ownership, employee benefits and fair wages.
3 — Give entrepreneurs space to grow
Entrepreneurs need room to trial and test their ideas. Many founders, especially in under-resourced communities, have nowhere to turn.
Propeller’s 10,000 square foot “Incubator building” in New Orleans is providing space to minority-led businesses solving local problems. “Having a physical space where we could bring people together, host workshops, pitch competitions, and also have a co-working space was really key to that ecosystem,” Propeller’s Catherine Gans, told ImpactAlpha. The accelerator has worked with more than 160 founders, who have generated more than $85 million in revenue and created more than 360 jobs.
Back in Cincinnati, MORTAR provides safe spaces for local entrepreneurs to fail in the form of pop-up retail spaces. It’s third space, a food pop-up in partnership with a local bar, will open this spring.
4 — Revolving loans make the world go ‘round
Much of venture funding is focused on venture capital, but very few businesses actually raise, or even need, VC dollars. More important for local entrepreneurs is access to credit and loans from local banks. Traditional small-business lending has relied heavily on outdated underwriting models, such as collateral-based models, that too-often exclude diverse business owners and communities. About eight in 10 small businesses that apply for loans still get rejected.
Access Ventures in Louisville, MORTAR in Cincinnati and Propeller in New Orleans also support entrepreneurs through some sort of revolving loan fund. “We created a character-based, no-collateral loan fund in Louisville called the Growth Loan,” Access Ventures’ Bryce Butler told ImpactAlpha. Access has made 18 loans and loaned over a half-million dollars. “Businesses can get low-cost working capital and all of them have been denied from a bank.”
Community Investment Management in San Francisco, provides working capital to innovative financiers like StreetShares, which connects military veteran investors to veteran-owned business. Since 2015, CIM has lent more than $300 million to small businesses in the United States — more than half of them owned by women, minorities, or military veterans. “We need to think differently about the way that we underwrite borrowers,” CIM’s Jacob Haar told ImpactAlpha. “It is less about physical collateral and more about understanding borrowers better.”
Living Cities, a collaborative of 18 foundations and financial institutions, is testing entrepreneurial models like “mobilization funds” that can help entrepreneurs of color access capital, win contracts and create jobs.
5 — Build businesses on revenues, not venture capital
In an age of bloated venture capital funds and startups that are long on valuations and short on profit models, New Revivalists are focused on raising revenues, not rounds.
Bryce Roberts and Tim O’Reilly of Indie.vc are betting on companies focused on building real revenues and growing organically. By surrounding founders resources and networks that other VCs offer, but without the baggage and sky-high expectations, Roberts and O’Reilly are finding new opportunities. Of the 16 companies Roberts and O’Reilly have funded, more than half are led by female founders.
In Tennessee, Charlie Brock is criss-crossing the state to help city and rural entrepreneurs build and test companies, and critically, connect with industry leaders who can become clients and customers. Launch Tennessee, backed by Gov. Bill Haslam and the state of Tennessee, now supports six entrepreneur centers across the state and touches about 2,500 entrepreneurs a year. Says Brock, “If we can help them get to revenue faster, everything else will fall in line.”
6 — Spot hidden talent
A more inclusive entrepreneurship ecosystem must be made, not found. New Revivalists are building into their investment processes intentional strategies for overcoming biases that might limit who makes it onto their radar and into their portfolios. The secret: looking for deals where others don’t yields new opportunities.
The first and most obvious strategy: change who’s writing the checks. Arlan Hamilton, herself an African-American lesbian, founded Backstage Capital to back female, ethnically diverse and LGBTQ. “If the problem is that people are pattern-matching, that means there should be more people like me writing checks,” Hamilton told ImpactAlpha. To tackle systemic bias, Backstage allows any entrepreneur to apply for funding through an application its web site. “We never put out language that founders have to know someone that we already know. That’s really dangerous to say, ‘You must have a warm introduction.’”
Kapor Capital is packing its investment team with women and people of color to democratize entrepreneurship. But the Oakland-based firm also believes diversity will help it find outsized returns. “What most other funds miss is that they don’t see the lived experience of a founder,” Kapor’s Brian Dixon told ImpactAlpha. “When you look at a diverse founder, they are bringing their lived experience to a startup, solving problems they might see in their community or family. They see problems and opportunities that others don’t.” Kapor’s portfolio of more than 100 ventures contains more than half with a woman or person of color on the founding team.
Sometimes talent is hidden in plain sight. Through her career-building platform Landit, Lisa Skeete Tatum is helping companies unlock the value of women’s talent in the workplace. “Women get a trusted, personalized career playbook,” Skeete Tatum told ImpactAlpha. The companies they work for get, “higher productivity, higher retention and higher satisfaction.”
More from the New Revivalists:
- Brian Dixon: The 34-year-old African-American VC turning inclusion into a competitive advantage
- Bryce Butler: Quarterbacking capital into Louisville’s neighborhood economies
- Mark Warner: ‘Virginia is for Entrepreneurs’ shows policy leadership
- Lisa Skeete Tatum: Unlocking the value of women’s talent in the workplace
- Ben Hecht and Ellen Ward: Closing the racial wealth gap with early capital and innovative finance
- Arlan Hamilton: The VC taking cold calls from underestimated entrepreneurs
- Charlie Brock: Building a startup ecosystem for Tennessee’s entrepreneurs
- Carmen Rojas: Building a 21st-century economy that works for working people
- John Lettieri and Steve Glickman: Turning capital gains into community investments
- Propeller: Helping local entrepreneurs rise with New Orleans’ revival
- Brandon Dennison: Transforming coal country, one social enterprise at a time
- Jacob Haar: Financing the financiers expanding small-business lending in America
- Bryce Roberts and Tim O’Reilly: VCs that help startups raise revenues, not rounds
- Margaret Bradley: Turning Philadelphia institutions into impact investors
- Derrick Braziel: Breaking down barriers for Cincinnati’s entrepreneurs of color
- The New Revivalists: The people, places and policies reviving entrepreneurship — and the American…