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Want to Increase Minority Entrepreneurship? Make Incubators More Inclusive

Written by Lena Ferguson and Kim Zeuli

Last year’s first ever White House Demo Day, for which entrepreneurs were invited to the White House to present their ventures, focused on inclusive entrepreneurship. At the heart of the growing political interest in minority entrepreneurship is a well-documented underlying problem: While minorities make up over one-third (36 percent) of the U.S. population, only 18 percent of U.S. firms are minority-owned.[1]

Incubators, which are designed to address the networking, education and capital challenges that all, but especially minority, entrepreneurs face, are a promising strategy for increasing minority entrepreneurship numbers. However, minorities represent a small percentage of the firms being supported by incubators. How can we get incubators to be more inclusive?

One solution might be to establish more incubators in inner cities (the subject of our latest infographic), which have high concentrations of minority entrepreneurs. While inner cities only make up 10 percent of the population nationwide, 21 percent of minorities live there.[2] But most incubators are located in higher-income, less diverse communities. ICIC’s 2015 analysis of the location of incubators in nine states (California, Louisiana, Massachusetts, Michigan, Missouri, New Jersey, New York, Washington and Wisconsin) identified 261 incubators, of which only 24 percent were located in an inner city.[3]

Detroit is just one city that offers a compelling argument for more inner city incubators. In Detroit, an estimated 86 percent (1,237) of minority-owned firms with paid employees are located in the inner city. We found four incubators in Detroit’s inner city and estimate that collectively they can support just 11 percent of minority entrepreneurs, and that’s if their representation was 100 percent, which typically it is not.[4] If minority entrepreneurs can’t access the support they need in these incubators it could limit the numbers of successful minority-owned businesses.

One just has to look at Detroit’s successful incubators to understand the significant impact these organizations could have on growing minority entrepreneurs across all sectors, such as food, fashion, retail and tech.

One inner city Detroit incubator helping minority entrepreneurs succeed is Detroit Kitchen Connect. In 2014, Detroit Kitchen Connect supported 18 entrepreneurs, and 90 percent of them were minorities.

Detroit Kitchen Connect is run by the Eastern Market Corporation, a nonprofit economic development organization in Detroit’s Eastern Market district. The area that surrounds the district has some of the highest poverty rates in the region. Eastern Market partnered with FoodLab Detroit, a nonprofit that helps start-up food businesses, to create Detroit Kitchen Connect in 2013.

Detroit Kitchen Connect is designed to help entrepreneurs overcome one of the biggest obstacles for starting a food business in Detroit: the high cost of setting up a commercial kitchen. Detroit Kitchen Connect currently consists of two commercial kitchens that Detroit area food entrepreneurs can use to test recipes and create products. Eastern Market Corporation is also in the process of developing an accelerator program to support the growth of more food entrepreneurs.

Another of Detroit’s inner city incubators is TechTown, started in 2000. It has three programs for tech entrepreneurs: a business incubation program as well as two accelerator programs, DTX Launch Detroit, a 10-week summer accelerator for students, and the Labs Venture Accelerator, a 12-week program designed for later-stage technology start-ups. TechTown employs numerous strategies to boost minority participation rates in its programs, including intentionally building diverse leadership and mentorship teams, targeting recruitment, and hosting public events that are open and free to the public.

TechTown also operates a program called BLOCKS to further promote inclusive entrepreneurship throughout Detroit. The BLOCKS program takes TechTown’s tech and business support on the road to Detroit neighborhoods and it serves entrepreneurs in sectors beyond tech, such as small manufacturing, retail and various lifestyle businesses. The program was started, in the words of Paul Riser, TechTown’s Managing Director, because “there was a realization that not everyone will make it to our doorstep and not everyone’s a tech-based entrepreneur, but we still have something to offer and it’s in the interest of the economy to stabilize commercial corridors in neighborhoods, deliver community development and try to grow that into true economic development.”

BLOCKS has two primary initiatives, Retail Boot Camp, an eight-week program that prepares retail businesses to open their own brick-and-mortar establishment, and SWOT City, where TechTown offers business acceleration services to stabilize and grow small retail and wholesale businesses in Detroit’s underserved neighborhoods in partnership with private sector, community and economic development organizations.

Detroit Kitchen Connect and TechTown are just two examples of the important work Detroit’s inner city incubators are doing to encourage minority entrepreneurship. Scaling and establishing more incubators like these in inner cities across the U.S. will help spur the growth of more successful minority-owned businesses, which in turn will help to revitalize inner cities.

For more strategies on creating inclusive incubators, read our report with JPMorgan Chase & Co., Creating Inclusive High-Tech Incubators and Accelerators: Strategies to Increase Participation Rates of Women and Minority Entrepreneurs.

 

[1] 2007-2011 American Community Survey; 2012 Survey of Business Owners, for privately-held firms with paid employees.

[2] 2007-2011 American Community Survey, ICIC analysis.

[3] The states were chosen at random to represent different geographies within the U.S. We utilized state incubator associations and searches using public search engines to identify the incubators.

[4] 2007-2011 American Community Survey; 2012 Survey of Business Owners, for privately-held firms with paid employees. Estimation based on 35 firms supported in one incubator on average, from Knopp, Linda. (2012). NBIA Research Series: 2012 state of the business incubation industry. National Business Incubation Association.

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