What Works: Opportunity Hub Fosters Inner City Entrepreneurship in Atlanta

Objective: This What Works for Cities case study highlights how a successful African-American entrepreneur, recognizing the struggles he faced, founded an entrepreneurship center to meet the needs of minority-owned businesses.

Geography: Atlanta, GA

Major Participants: Opportunity Hub, the Atlanta Workforce Development Agency, TechSquare Labs, Iron Yards, South by Southwest (SXSW), the Obama Administration (via My Brother’s Keeper, several local entrepreneurs and community advocates

Background: As a young entrepreneur, Rodney Sampson faced many barriers to success. From access to capital to mentorship, there were few resources to help African-American entrepreneurs thrive. This was even more pronounced in the tech sector where Sampson’s businesses were concentrated. Sampson went on to write a best-selling book, Kingonomics, a 21^st century interpretation of Dr. Martin Luther King Jr.’s economic vision. This evolved into an annual large-scale conference called Kingononics. More than 3,000 people have since attended these events in Atlanta and Washington, D.C. At these events, a few common themes emerged: minority entrepreneurs would greatly benefit from shared meeting places, stronger business education and greater access to capital.

These realities led Sampson to cofound Opportunity Hub (OHUB) in 2013.

How it Works: Initially, OHUB was created to provide a co-working space and business education for startup companies. Since, it has evolved into an entrepreneurial hub that also offers a pre-accelerator program, business incubator, networking events, mentorship opportunities and access to an ecosystem of investors and capital providers.

At the end of 2015, OHUB merged with TechSquare Labs, an Atlanta-based business incubator, seed fund and corporate innovation center. This partnership will allow OHUB to focus its expansion efforts in four key areas:

1. Early exposure. Growing the number of minority-owned startup companies in Atlanta will require building the entrepreneurship pipeline. In order to do so, OHUB is focused on early exposure – or introducing young people to entrepreneurship opportunities from a young age. To that end, OHUB recently took 50 college students and disadvantaged youth from the Atlanta workforce development agency to South By Southwest for the weekend. Those who attended with OHUB were fully immersed during that weekend, from going to classes and participating in a hackathon to watching a speech by President Obama. Moving forward, OHUB seeks to expand its partnerships to create additional opportunities for youth.
2. Talent development. OHUB has partnered with Iron Yard, the nation’s largest coding school, to pilot a program called CoStart. This 12-month program will be offered to 15 disconnected youth, who will receive free housing, a monthly living stipend and 12 weeks of intensive Java training before being placed as junior-level Java programmers. During the rest of the program, while youth are working on the job, they will also receive soft skill and financial literacy training, and will be exposed to entrepreneurship opportunities. CoStart is the first program of its kind in the nation, and will be offered in partnership with the local workforce development agency. As one of President Obama’s designated “Tech Hire” cities, OHUB and its partners seek to create over 1,000 new software engineers in Atlanta.
3. Ecosystem building. OHUB is already part of the StartUp Champions network, and has plans to grow the OHUB network in other cities. This will enable OHUB to recruit entrepreneurs in other cities, and will expand its entrepreneurs’ access to investors and resources in other regions.
4. Capital formation. OHUB has already seeded a number of companies with small, early-stage investments. Now, OHUB is planning to launch a $1 million seed fund in Atlanta with support of local, affluent residents of color. Access to pre-seed and seed capital is a major pain point for minority entrepreneurs; addressing access to capital through seed funds will bolster efforts to attract and pair startups with capital from investors in other cities. One of OHUB’s primary tools for expanding capital access is through an equity crowd-funding portal; OHUB will educate minority entrepreneurs about what equity crowd-funding can do for their businesses, including how to effectively raise capital this way.

 Results for Local Economy: In just over three years, roughly 100 companies have gone through OHUB’s Pre-Accelerator program. Most of those companies are minority-owned businesses, and all are technology-related startup companies. Roughly one-fifth of the companies who have completed the Pre-Accelerator have gone on to become viable companies. OHUB has helped to create 25 direct new jobs, and helped to raise over $5 million for its member companies.

Demand for OHUB’s programs and space was so great in its early stages that OHUB went on to expand to a second Atlanta location. Today, those two locations have a total building footprint of 17,000 square feet. OHUB has hosted more than 300 meetings and events, and more than 15,000 entrepreneurs, investors, innovators and mentors have come through OHUB’s doors to date.

Remaining Challenges: Given the rapid expansion of OHUB, raising capital remains a challenge. OHUB is eager to expand its programming but all of those programs are capital intensive. Moreover, as OHUB expands to new cities, it will require building a local team in each of those markets. OHUB’s funding strategy is multifaceted; foundations, corporate partners and local donors have contributed to get OHUB off the ground, as have many local residents who donated through a crowd-funding campaign. OHUB continues to raise capital using a for-profit model. OHUB made the decision early on that incorporating as a for-profit business with shareholders helped set an example that business ownership is a path to wealth creation, a mantra OHUB seeks to instill throughout the minority community.

Another challenge, for OHUB and for the broader entrepreneurial ecosystem, is creating s broader base of minority-owned businesses. Startups already have a high failure rate, but the failure rate among minority-owned businesses is higher than the failure rate of their white counterparts. For those that survive, the growth rates of minority-owned businesses lag the growth rates of white-owned businesses. Specifically, more African-American entrepreneurs are needed to grow the pipeline of minority-owned businesses. As more African-American startups succeed, those business owners must be encouraged to stay involved in the entrepreneurial ecosystem along the way.

Lessons Learned: Despite the popular cry for co-working and meeting space, OHUB learned early on that physical space is actually less valuable to its minority-owned businesses than business education and access to capital. In a recent interview with OHUB cofounder Rodney Sampson, he explained that he wouldn’t discount having a physical space – building a community often requires a common meeting space – but co-working spaces are often dominated by white freelancers, part-time entrepreneurs and telecommuters; entrepreneurs of color often say they feel “invisible” in these spaces. Moreover, OHUB felt that focusing too heavily on building out the physical infrastructure proved an unnecessary distraction – especially since they did not own the real estate OHUB would be occupying. Worrying about overhead and maintenance can become all-encompassing. Instead, developing its pre-accelerator and capital access programs proved to be more valuable to the minority entrepreneurs who came through OHUB’s doors.

Finally, Sampson talked about the need to have allies: “Economically and technically, the African-American community does have the resources to fund a black tech ecosystem, but the reality is that the wealth cap and discretionary income that is available is still incredibly nascent.” In order to grow the ecosystem, it will require building strategic partnerships with white allies that believe in black and Latino entrepreneurship – not just because it’s the right thing to do, but because they see the economic impact. If a broad-based coalition of entrepreneurs and venture capitalists start to see the value in supporting minority entrepreneurs, there will be much less pressure on individual minority entrepreneurs, who are often risk-adverse for fear of failure. “Failure is not fraud,” Sampson reminds his team. “It’s part of the journey.”