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 the demographics of program participants. Love estimates that 25 percent are Middle Eastern, 35 percent are African American, and 30 percent are women.

LauchPad’s secondary mission is to convince participants to play an active role in the community’s economic revitalization by launching their businesses in metro Detroit. Love named three student social entrepreneurs who are already running successful startups here: Bobby Smith of EnGarde Detroit, Veronika Scott of The Empowerment Plan, and Charlie Cavell of Pay It Forward.

Bobby Smith, a self-described “social venture capitalist,” was born in Jamaica and grew up in New Jersey. As a young man, he won a scholarship to attend an elite school in Newark that required all students to pick a sport. Smith was an avid chess player, and after hearing fencing described by a coach as “chess at 100 miles per hour,” he signed up for the team. After the first year, he took sixth in the state and eventually trained with the U.S. Olympic team for two years. Fencing, he says, changed his life.

“I’m from a low-income background,” Smith says. “Fencing afforded me a way out.”

He received a fencing scholarship to Wayne State, a university that ranks third nationally in producing NCAA fencing champions. (Smith says Detroit actually has a rich fencing history despite the fact that the closest fencing club is 22 miles away.)

Smith says he ran out of money to finish his education, so he reluctantly dropped out. While searching for something to do with his time, he hit upon the idea of combining his interests in business and fencing. He also felt moved to help kids in Detroit, some of whom reminded him of his younger self.

“Detroit should really be a fencing town,” Smith says. “The first women to ever wear pants in the sport of fencing were from Detroit.”

He started En Garde Detroit not only to teach kids how to fence, but also to offer lessons in financial literacy, health, and nutrition. His program continues to grow, now serving hundreds of kids each year through schools, non-profits, and youth groups. His fundraising goal for 2012 is $60,000, nearly twice the 2011 goal of $33,000. He even won a Spirit of Detroit award for bringing a national fencing tournament to Detroit, where 10,000 participants spent $2 million in the city over the course of the tournament.

Smith says his long-term goal is to help transform Detroit into the “Silicon Valley of social entrepreneurship.”

“Detroit is the perfect place for it—Detroit created the middle class. People here are not afraid of hard work,” he adds.

If Bobby Smith is a social venture capitalist, Veronika Scott is practically an accidental entrepreneur. She describes her startup as a “class project gone awry.” Her company, The Empowerment Project, makes something that is part coat, part sleeping bag to help homeless people survive Michigan’s harsh winter climate.

Scott, who’s a student at the College of Creative Studies, was inspired by a humanitarian group that visited her classroom to design something with a greater purpose. She had recently learned that as many as 30,000 Detroit residents are homeless—nearly 1 in 42 people. She began contacting homeless shelters to get real-world input on a product that homeless people could use.

“I found out that there weren’t many homeless shelters left,” Scott says. “I found a warming station at Martin Luther King and 3rd, and I naively went there at 8 o’clock one night. I told the group of people there that I needed their help designing something. I ended up going back three times a week for the next five months.”


Empowerment Project's Hybrid Coat


What Scott created is a Tyvek coat with a synthetic wool layer inside. It’s warm, it’s waterproof, and it only costs $10 in materials to make. Since becoming more intimate with Detroit’s homeless community, she has expanded her mission to include a factory of sorts. She and her crew rehabbed a building on Vermont owned by Phil Cooley. She now employs three full-time seamstresses (formerly homeless women whose compensation includes a place to live and a meal plan) and hopes to expand to 25 in the next two years.

Scott says that she was initially “in denial” about the scope and success of her project.

“It took a while, but I think it finally sunk in after the CNN appearance,” she says. “I realized that I employ people now. Suddenly, I have a responsibility. I realized I’m not going anywhere, and I’m more than OK with that.”

Charlie Cavell, who started Pay It Forward, could certainly empathize with Scott’s commitment to improving the lives of the people of Detroit.

“There are two things about Charlie that are insanely great,” says Terry Cross, founder of Windward Associates, a Michigan venture consulting business, and a mentor of Cavell’s through the Blackstone LaunchPad program. “He’s passionate beyond belief, and there’s no end to the work he’ll do to address his mission. This guy’s pants are on fire, and to really be a good social entrepreneur, that’s what you need.”

Cavell and Pay It Forward provide job-training and employment services to unemployed Detroiters through internships at partnering non-profit organizations. In exchange for their hard work, interns receive a stipend of $900, two letters of recommendation, and assistance in building a resume. Pay It Forward also runs a program called Parent U, which provides parenting education to low-income residents of Detroit’s North End neighborhood or those who live on the Wayne State campus.

“I want to help people—that’s why I get out of bed,” Cavell says. “The problem I saw right here, right now in Detroit was unemployment.”

Cavell walked into Blackstone LaunchPad with his idea written down on a piece of paper and but no clear strategy of how to turn it into reality. Since then, with the incubator’s help, Pay It Forward has drafted a board of directors and become incorporated as a tax exempt non-profit group under section 501(c)(3) of the revenue code. The organization has placed 11 interns, three of whom went on to find full-time positions, and recently won a grant from Connect Detroit to fund 25 more. He says he recently acquired $50,000 of funding through an investor and is now looking forward to paying himself “a decent living wage” after he graduates from Wayne State’s social work program in May. Not bad for a startup that has only existed since September 2010.

“To me, Charlie is kind of like the Steve Jobs of the social entrepreneurship world,” Cross says.

“I see in Charlie everything I’d want in a social entrepreneur. He’s a young guy who’s not afraid to get his hands dirty—he actually seems to revel in it. He’s selfless—he just assumes he’ll survive, and he does. A lot of people talk the talk but don’t walk the walk. None of those things apply to Charlie.”

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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