Could Detroit Become the Silicon Valley of Social Entrepreneurship?

11/7/11Follow @XconomyDET

The first rule of starting any entrepreneurial venture is: Find a problem that needs solving. Detroit, as we all know, has some big social problems: poverty; crime; homelessness; abysmal literacy rates; rampant unemployment. It should hardly be a surprise, then, that a motivated young class of social entrepreneurs has sprung up in the city, and the successful startups they’ve created are gaining the attention of the region’s veteran entrepreneurs. The local boom in social entrepreneurship has even spawned a business incubator, Wayne State University’s Blackstone LaunchPad, and a capital fund, University of Michigan’s Social Venture Fund.

“Detroit is a great testing ground,” said Jeremy Schifeling, a fellow at the Social Venture Fund. “We want to make this city the epicenter of social impact.”

U-M’s Social Venture Fund, launched in September 2009, is the first student-run fund of its kind in the nation. Schifeling described its business model as having a “triple bottom line” of profit, environmental concerns, and social impact. The fund focuses its investments in four areas: health, education, food systems, and the environment and urban revitalization.

Housed at the Zell Lurie Institute for Entrepreneurial Studies, the U-M Social Venture Fund received more than 100 business plans for consideration during its first year of operation. Though most of the interest comes from startups in Southeast Michigan, it’s not exclusive. Thirty students from across campus, both graduate and undergrad and from schools as diverse as Natural Resources, Finance, Education, and Public Health, administer the fund, which has the capacity to invest $250,000 per company, though Schifeling says the typical investment amount is $50,000 to $100,000. The money in the fund comes from within the university, from high-net-worth individuals, and educational foundations.

U-M’s Social Venture Fund doesn’t just invest in companies—it also offers assistance in honing organizational skills and solidifying business plans. It’s a fairly ambitious program, especially considering that the folks running it already have full academic plates.

“It’s intense,” Schifeling says. “We’re trying to run a world-class fund in between classes.”

Quentin Love, Blackstone LaunchPad’s Program/Marketing Coordinator, knows a thing or two about student intensity. Funded by the Blackstone Charitable Foundation and modeled after a program at the University of Miami, the LaunchPad opened its doors a little over a year ago with the goal of being a comprehensive resource for student entrepreneurs at Wayne State. LaunchPad’s goal is to help the students develop “bulletproof business plans,” and to that end it offers workshops, networking events, and consulting sessions, as well as a brick-and-mortar location on campus for like-minded young innovators to gather and hash out ideas.

“We tell the students that we won’t run their business for them, but we’ll do everything we can to help them get it off the ground,” Love says.

One factor that sets the LauchPad apart is … Next Page »

Sarah Schmid is the editor of Xconomy Detroit. You can reach her at 313-570-9823 or sschmid@xconomy.com. Follow @XconomyDET

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  • http://www.facethestation.com Jeff DeBruyn

    So sorry Ms. Schmid but in Detroit the first rule re being a successful social entrepreneur in Detroit is “Who do you know and how much have you drank the cool aide they offer.”
    Furthermore, the next test for Detroit’s social entrepreneur is whether you are willing to do what it takes to get the foundation money because merit (the need) is certainly not relevant.
    The last rule: if you don’t comply, an organization from outside Detroit will be funded and brought in to do the service the foundations’ seek.
    So the lesson is: stick to the Woodward Corridor area or downtown and if you are to venture into a neighborhood to do good be sure to partner with a gigantic non-profit or a foundation that will assist you to bring these “innovative” ideas into our neighborhoods.

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  • http://adventuresinimpact.com Brent @ Adventures in Impact

    I am not sure that a litany of problems sets a city up to be a hotbed of business activity, but I do agree that those needs make Detroit an attractive testing ground.

    Entrepreneurs may not move there to found their next big thing, but people with impactful ideas may find it an easy place to start, especially if the programs you mention are successful. Well done Detroit!

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  • Nathan Phenicie

    The social entrepreneurship movement in Detroit is far larger than this article goes into detail about. Not only are there companies who’s entire mission is to “do good” but many of the other entrepreneurs around town support each other to build a strong business community. The Imagination Station comes to mind, which started as a purchase of two homes for under $1000 apiece and led to “inchvesting” which involved selling off square inches of the property online to raise funds for project, as well as local art, and alto to give the “inchvestors” control over their tiny parcels of property.

    Detroit will continue to innovate, there are more business incubators (Tech Town) and plenty of help from non-profit foundations as well as local business.

  • http://www.sanhandesign.com Anika E. Sandy-Hanson

    I just stumbled across this article and I think it is a great story. Also, even though they seem to oppose each other, I agree with many of the comments. In my research I’m finding that there are many hurdles to smaller ventures in neighborhoods outside the “traditional investment hubs”. However, I have also found an untold number of individuals and groups who are using a very, very grassroots effort and are getting a lot done. My desire is to see them linked together so that the power can be seen in the numbers. Perhaps a “social network” map could be constructed to show where energies are being exerted and how they overlap.

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