Once a month from September through June, Detroiters from around the city gather to share a meal and creatively deploy capital. Local investors and entrepreneurs meet at the Jam Handy building on East Grand Boulevard, just outside the city’s central business district, to direct the city’s future through investments.
Organized by the nonprofit Detroit SOUP, the gatherings are known as “SOUPs.” Attendees donate at the door ($5 is the suggested minimum) for soup, salad and bread, as well as a chance to vote for ideas to improve their neighborhoods. The first SOUPs were held in a loft space above Mexicantown Bakery in 2010, and about 30 to 40 people typically showed up. Nowadays, as many as 200 people attend each citywide SOUP, and a growing number of neighborhood-specific SOUPs have started up. More than 15,000 people have attended a SOUP so far.
The meetings start at 6 p.m., when Amy Kaherl, SOUP director, gives a brief intro, welcoming newcomers and explaining the rules. Then, four presenters each get four minutes to pitch an idea or project, followed by four audience questions apiece.
After the presentations and Q-and-A, diners discuss and then vote on their favorite projects. The project with the most votes gets all the donations collected that night.
More than 144 SOUPs have been held so far, deploying more than $127,000 to nonprofit and for-profit ventures. “It’s a collaborative environment and a safe space,” Kaherl says. “We are hearing firsthand how some people are innovating around problem-solving.”
Your company can become a force for good when you download our FREE Special Report, The Benefits of Employee Engagement: A Positive Work Environment Boosts Performance and Helps Companies Make a Difference in the World.
Past winners include Rebel Nell, a jewelry company that supports women transitioning out of homeless shelters; a greenhouse at Food Field, a 4-acre urban farm in central Detroit; and Detroit Food Academy, a nonprofit that provides young Detroiters with entrepreneurial experiences in the food system.
The average donation of $1,000 per project isn’t a lot of money in the grand scheme of things, but SOUP is part of a larger trend: Detroiters investing in each other and collaborating on how capital is allocated in their communities.
Beyond grass-roots efforts — including SOUP — wealthy citizens, community banks and foundations are investing in Detroit and surrounding areas.
The Kresge Foundation is a city-focused foundation based in Troy, a Detroit suburb. From 2013 to 2015, Kresge awarded 282 grants, totaling more than $184 million, for initiatives in the city. This charitable giving is paired with Kresge’s social-investment strategy, using program-related investments to make capital available at friendly rates to real-estate development, affordable housing and small-business lending.
In 2014, Ford Foundation made a 15-year, $125 million commitment to the municipal government’s Grand Bargain to help it out of bankruptcy, and JPMorgan Chase & Co. made a five-year, $100 million commitment to various rebuilding projects. The W.K. Kellogg Foundation, the John S. and James L. Knight Foundation, the Max M. & Marjorie S. Fisher Foundation, the Surdna Foundation, the Skillman Foundation, and a host of smaller foundations and funds have also been active in Detroit.
But it’s not always clear how much long-time Detroiters are influencing investment. Dan Gilbert, the billionaire founder of Quicken Loans, has spent $1.5 billion to acquire and develop nearly 80 buildings, most of them in the downtown area where he moved his company’s headquarters, amid much fanfare, in 2010. Quicken Loans now employs more than 12,500 people in Detroit, many of them new to the city, and definitely new to downtown Detroit. Observers credit Gilbert with sparking a broader conversation about the possibility of reinventing the city, but perhaps at the cost of raising rents and displacing existing residents.
Amplifying Detroiters’ Initiatives
The “Motor City,” or “Motown,” still boasts stunning architecture and world-class cultural resources. But from a 1950 peak population of more than 1.8 million, it’s now down to about 677,000. Race riots in the 1960s, the “white flight” that followed after interstate highways plowed through once-vibrant neighborhoods, a perpetually corrupt political system, and the slow decline in the U.S. auto industry effectively gutted the city. The 2008 financial crisis was the final blow, driving down already low housing prices and wiping out what little remained in savings and home equity.
Today, about 40 percent of the city’s residents live below the federal poverty line. The median income is about $26,095, compared with Michigan’s median income of $49,087. Nearly half of Detroit’s adult population is functionally illiterate, mirroring the fact that 47 percent of the city’s working-age population is not in the conventional labor force.
In July 2013, Detroit went through the largest municipal bankruptcy in U.S. history, forcing the city to adopt extreme budgetary reforms that continue to have an effect on the city today. But Detroit emerged from bankruptcy in December 2014, faster than many had anticipated.
Back in 2007, 10 foundations joined forces in the Detroit area to create an ecosystem for Detroit’s entrepreneurs. They called it the New Economy Initiative (NEI).
“This area had been reliant on a few large employers,” says Pamela Lewis, CEO at NEI. “The foundations bet on entrepreneurship. The best way they could use their grant dollars was to reintroduce the Southeast Michigan community to generating income through entrepreneurship.”
NEI pools foundation funding to make grants to support organizations that provide technical assistance, networking and small-business loans for Detroit entrepreneurs. As of October 2016, NEI had awarded $96.2 million in 259 grants to organizations supporting entrepreneurs.
In its early days, NEI focused largely on high-tech. The push came from the top down — from foundations, various initiatives from the Michigan state government, and others who took the view that the tech sector represented the future of the economy. “But we learned that in a lot of cases, when you focus just on high-tech, you are leaving much of the community out. So we decided not to focus on just one sector,” Lewis says.
NEI’s shift to support a more accurate representation of Detroit entrepreneurs is embodied in the NEIdeas competition. Instead of startups, NEIdeas rewards “been-ups,” business owners who have been in operation for at least three years and who have ideas on how to contribute to economic growth. Launched in 2014, the competition awards $10,000 each to 30 businesses that gross less than $750,000, and awards $100,000 to two larger businesses.
NEI deployed an outreach effort for NEIdeas that included a street team knocking on doors and making connections. They placed 17,000 door hangers on small-business storefronts throughout the city. They also deputized 27 organizations, including churches, community-development corporations, nonprofits and libraries, to serve as ambassador locations where interested entrepreneurs could find more information and fill out the NEIdeas application.
Around 1,600 small businesses from every corner of Detroit have applied to NEIdeas so far. Applicants included barbers, manufacturers, mechanics, bakers and people from a dozen other business sectors. In 2015, 70 percent of NEIdeas winners were minority-owned businesses, 64 percent were women-owned businesses, and 53 percent were both women- and minority-owned businesses. Since 2014, 64 businesses have received a total of $1 million in cash prizes.
Perhaps more importantly, through the annual application process and in ongoing communications with applicants, NEI has been able to listen more closely and become more responsive to the needs of been-ups. It’s made a difference, directing NEI resources to organizations and programs that are more closely connected to Detroiters who stayed put through the city’s economic troubles.
“Compared with when Detroit SOUP started, I think there’s a lot more resources now for people to start small businesses,” Kaherl says. “It’s so exciting to watch. You can see how people are taking their time, being smart, trying not to take on too much debt, trying to do a thing that they think the community deserves.”
When life and business partners Kirsten Ussery and Erika Boyd decided to open Detroit Vegan Soul in September 2013, they had to scrape together $50,000 to renovate a vacant restaurant space.
“It was very hard to get capital for our first restaurant,” Ussery says. “We weren’t able to get any traditional financing.”
Ussery, a former public-relations professional, took on side PR projects to help pay the bills. Boyd’s mother chipped in. They got a small grant from a local neighborhood association and used savings from their vegan catering business.
They launched their restaurant and then won $10,000 in the 2015 NEIdeas competition, which Ussery and Boyd used to expand their catering capacity by purchasing a vehicle for deliveries.
Business has been good — demand for vegan food is brisk in northeast Detroit. This year, just three years since opening their original location, Ussery and Boyd decided to open a second location. Unable to secure a loan from a traditional bank, they were referred to the Detroit Development Fund (DDF), an NEI grantee. DDF also launched an Entrepreneurs of Color Fund in July 2016. Ussery and Boyd were able to secure a loan from DDF and plan to open the second location in early 2017.
“We’re working to have build-out done by Christmas, and have the grand opening after the New Year,” Ussery says.
The $6.5 million Entrepreneurs of Color loan fund provides loans and lines of credit to Detroit-based neighborhood businesses that are either owned by minority entrepreneurs or that hire primarily minority employees. Capital for the fund was provided by JPMorgan Chase & Co. and the W.K. Kellogg Foundation.
Getting Real About Community Development
In 2013, Sonya Mays was an investment banker, living in Brooklyn, New York, and traveling the world overseeing multinational mergers and acquisitions. When Detroit declared bankruptcy, she felt an irresistible urge to return to the city where she was born and raised, and where her parents and most of her family still lived.
She returned to serve on Detroit’s emergency management team — her first job in government, and a crash course in public-private partnerships.
When the city’s bankruptcy was resolved, Mays founded Develop Detroit, a nonprofit real-estate development company focused on building multifamily rental properties, preserving existing affordable units, and adding new units outside the core of the city.
Develop Detroit has a zero-displacement policy. “If we buy a property, we are first and foremost going to do everything we can to preserve the current residents’ ability to live in that property,” Mays says.
Develop Detroit’s first building acquisitions included Marwood Apartments, a 53-unit property at 53 Marston Street, just northwest of Detroit’s central business district. They needed to buy quickly before it was gobbled up by a commercial developer.
“Once it went on the market, we quickly figured out it was a gorgeous building and that it would have been a candidate for a different type of developer to ride the wave of rising rents,” Mays says.
The building cost more than $2 million to acquire with financing from Capital Impact Partners, a national Community Development Financial Institution (CDFI) based in Arlington, Virginia.
CDFIs might be the best-kept secret among impact investors in the country. The U.S. Treasury grants CDFI certification to credit unions, community banks, venture funds, or nonprofit loan funds, such as Capital Impact Partners, on the condition that at least 60 percent of their lending goes into low-to-moderate-income neighborhoods or benefits low-to-moderate-income households. As of June 2016, more than 1,000 federally certified CDFIs were in operation, with more than $108 billion in assets.
Capital Impact Partners first started making community-development loans in Detroit 10 years ago and have since made about $150 million in loans, including more than $30 million in 2015.
“They’ve been a great partner to us, and we plan to lean on them heavily,” Mays says.
As capital continues to stream into Detroit, perhaps the most interesting story will be to what extent residents can direct those investments and their future as a city. Through Detroit SOUP, NEI and Develop Detroit, the city’s residents are showing that with even some small measure of control over their own destinies, Detroiters are playing a vital role in bringing their own city back.
This article originally appeared in the Winter 2016/2017 issue of B Magazine as part of the issue’s Impact Investing Special Section. For more, read the issue’s history of impact investing, which includes links to the rest of that special section’s coverage.