Behind the Headlines – July 13, 2018

Behind the Headlines – July 13, 2018


– (female narrator)
Production funding for Behind the Headlines is made possible in part by: The WKNO Production Fund, The WKNO Endowment Fund, and by viewers like you.
Thank you. – The push for more women
and minority owned businesses in Memphis, tonight on
Behind the Headlines. [dramatic orchestral music] – I’m Eric Barnes, publisher of
The Memphis Daily News, thanks for joining us. I’m joined tonight
by Joann Massey, the director of the city’s
office of Business Diversity and Compliance, thanks
for being here again. – Thank you. – Leslie Lynn Smith is
president and CEO of Epicenter, thank you for being here. – Thanks for having me. – And Andre Fowlkes is
president of Start Co., thank you for being here. – Great to be here. – So we’ll start with, there’s
a lot going on in this space, and this effort of increasing
the participation of women and minority in business in
Memphis, with the city, with other
government organizations, but lets start with
the 800 Initiative, which is kind of what
compelled this show, but we’ll talk even more
broadly about things going on. What is, Joann,
the 800 Initiative? – The 800 Initiative is a
partnership with Start Co., Epicenter, CBU, and FedEx to
assist minority businesses in building capacity, scaling,
and growing. And those are businesses that already have
employees, that already have revenue, but they’re ready
for the next level. – And so those 800 businesses,
and maybe I turn to Andre here, are business that
already have employees, they’re not sort of
one-man, one-woman type shops, is that right? So why focus on
that size of business? – Absolutely, if you look at the
total number of firms here in the city of Memphis at
69,000, over 39,000 of them are African-American owned firms,
but only 800 of them have paid employees, and looking at the
continuum of support resources that are out there,
there are a few gaps. And we’re looking to fill some
of those gaps with some of the resources that are being
provided here through the initiative itself. – And so, am I right Joann,
that it’s about $500,000 in city funding that’s been proposed? – Yes, the mayor included in the
fiscal year ’19 budget $500,000. – And that’s in addition to,
is it a million that FedEx has pledged? – FedEx has pledged a million to
go towards grants and loans for those businesses, and then
Shelby County government has also pledged in their
fiscal year budget ’19 $500,000. – Ok, and Leslie, for people who
don’t understand what Epicenter does, and we’ll get back to
Andre to explain what Start Co. does too, what is Epicenter, and
what’s the role of Epicenter in this effort? – Sure, so Epicenter was
designed to be sort of the hub of the entire entrepreneurial
movement in Memphis to ensure that all of the resources that
are needed and necessary for entrepreneurs to thrive
in Memphis are available and clear and obvious. We work with partners like
Andre and Joann to ensure that entrepreneurs are connected to
them as and when appropriate, and that are system
boasts access to talent, technology,
customers, and capital. The reason this program is so
important is because one of our stated goals is to ensure
that participation in the entrepreneurial movement mirrors
the population of our city, and making sure that these
companies grow is a significant part of that. As Andre mentioned these
800 companies already have employees, which means
they’re poised for growth. And we know that companies that
have more than one employee have the potential of up to
nine times top line revenue, as opposed to those
without employees, so it’s a
significant economic focus. – How do you reach
out to the 800 folks? I mean is that part
of what’s going on, I’ll turn to you Andre. Is this effort
calling them on the phone, trying to email
them saying, “Hey, we’ve identified you, these
resources are available to you, come talk to us.”
Is that what’s happening? – Absolutely. I mean,
a lot of these organizations that we’re talking about right
now, such as Epicenter, the City of Memphis,
Start Co., and many others, are already out there on the
ground trying to work with many of these minority businesses. This is helping to
intensify that even more. A lot of it is
boots on the ground, direct calling. Reaching out to them
through events and programs. And really trying to keep a
community of them fostering and moving forward. So a lot of it is just
the get in the trenches, and start finding them. – When we talk about
meeting with people, I’m going to shift
gears a little bit. The mayor, when Mayor
Strickland was elected, he’s been on the
show a couple times, you’ve been on the
show before Joann, talking about his desire to
increase the amount of city spending that goes to minority
and women owned businesses from when he took office
it was at about 12%, it’s up to what percent now,
and what’s the ultimate goal? – So as of the
previous fiscal year, we’re into our new
fiscal year now as of July 1, but we were at 21.33% of city
spending with minority and women owned businesses, and so, the
mayor’s committment is really a practice of creating
opportunities for businesses in city spending, but helping them
to leverage that to get more opportunities in
other public arenas, as well as in the private sector
which is very important for businesses to be able to grow. – And recently there was an
event at the Cook Convention Center, which is
kind of very simple, but actually I think it was the
first time that you all had done an event that way working
with potential suppliers. Talk about that event, I’ve
forgotten the name of what it was called, but–
– So it’s actually our We Mean Business symposiusm
is what it’s titled, and it’s the third symposium–
– Like I said, the third. – Yeah. [laughing]
Well it is the third time since the mayor took office in
2016 we’ve done it every year, but we’ve been able to build
upon it by listening to our business owners and asking them
what they need to help them to grow, and what they need to be
able to access opportunities and get information, and so the
symposium consisted of first a presentation of opportunities
within city government as well as quasi-governmental
agencies like MATA, Downtown Memphis
Commission and so forth. And then in addition to that
we provided a “At a Glance” of those opportunities book
that included everything from opportunities
with those agencies, also with Shelby
County government, and others who were able
to give us information. – And that was one thing,
what I was reading about it, there is government
spending in all these different sort of silos. So you’ve got the city,
you’ve got the schools, you’ve got county
government, you’ve got MLGW, is all that, is there an effort
to kind of coordinate all that through your office, or
does everybody just have their individual programs, how do
you all work and play nicely together in terms
of that initiative? – So from the
government standpoint, we have a consortium that was
developed actually out of the 1994 I believe it was, disparity
study that was done for Shelby County overall, and there
was some dispute on that, but there was a resolution
that developed that consortium. So when the mayor took
office, and in the last year, after we made some
progress, again, wanting to be the
best practices, we re-engineered
that consortium. Brought everyone
back together so MATA, MLGW, the Airport
Authority, Shelby County, and then we also brought in
the Memphis Medical District Collaborative Group,
to be a part of that. And so we have monthly meetings,
our next meeting is actually going to be at MATA’s
location this week. And then we will
meet about projects, and about
opportunities, and again, what the businesses need. So the symposium was
just a reflection of that collaboration. Like the
collaboration with Start Co., and Epicenter that we
have on our programming. – One more question and then
I’ll go to the other guests here, but I
remember at one point, and I think it was the last
time you were on the show, but I know the mayor
has talked about it, and I’ve heard it talked
about on other forums, that when he came
into office he wanted, there was frustration
among women and minority owned businesses, that you would get
certified with say the city, and you’d get that
approval and you’re certified, but then you’d have to go on an
entirely separate process with all these other organizations, all these other
government entities. Has that been streamlined? Is the certification that
it’s a woman owned business, or a minority owned business,
does it carry through to all the different
government entities now? – Actually it does. And so with our in-house
certification that we developed last May of 2017, and it’s free. You can become
certified with the city, you can become certified
with the County of the airport, but all those agencies
accept reciprocity so, for example, if you wanted to do
an opportunity with the downtown Memphis Commission, if you are
already certified with the city, then you are identified
to be able to participate. And then if you have
certification with the city, there’s just a short application
that you have to complete at the airport, and that
certification will reciprocate. And again, these
agencies are all free, the lists that we have are also
available to the private sector, so we have a lot
of companies that contact us and access our list. And I’m very proud to say, and I
think the last time I was on the show I think our list was
at about 300-plus or so. We’re over 500 now as of today,
where people have been taking advantage of the free resource. – Yeah. Andre, let me back
up a little bit. Talk a little bit
about what Start Co. is, when it was started,
and what it does, and then we’ll come
back to this initiative. – Sure. Start Co. was
founded originally in 2008. The main focus back
then was really focused on high-tech, high growth. We felt that Memphis hadn’t been
participating in the innovation economy as much as we had hoped. And as a result of that a lot of
our jobs that we were producing weren’t more
advanced industry jobs. We’ve now expanded that scope,
and meeting Memphians where they are here in this community,
and are looking at civic enterprises,
non-profits, small businesses, minority businesses, through a
variety of different programs, and this program
with the 800 Initiative actually fits nicely into that. One of the things that we really
focus on is taking a lot of the entrepreneurs through
customer discovery process, testing for hypothesis
around their business, the problem, the
solution, the pricing, and also looking at
their go-to-market, and their behavior
fitting in with customers, followed by a
proto-typing or designing phase. Many times we have to adjust
with the economy that’s moving, and then that sets us up for
the business resource phase. Getting ready for investment
whether that’s equity financing, or debt financing to help
us grow and move forward. And so a lot of this is
about creating that village, as Leslie was talking about a
little bit earlier around these entrepreneurs to really move
them forward and for growth here in the Memphis region. – And you all run
accelerators in the summer, and through the
year, is that correct? – Yes, we’re a general operator
for many accelerator programs that are here, right now there’s
a summer of acceleration that’s happening, that we
do with Epicenter, Memphis Bioworks, and a few
others here in the community, that is focused on
verticals such as logistics, medical device, home services,
and now working with the new partnership of ServiceMaster, and then also
social enterprises. – So when you take
all of that experience, you talked about different
industries you mgiht work in and so on, is there a difference in
the way you shape programs that are focused on
minorities and women? Because again, we talked about
the 800 Initiative is existing businesses, that maybe have
been around for sometime, but just haven’t grown. So what have you learned from
trying to help somebody found a high-tech start-up to working
with an existing business and trying to help
them grow locally? – The answer is yes and no. So on one hand we feel that many
minority firms haven’t had the exposure that their
white counterparts have had. If you go back and look
at the disparity that sits in terms of
household wealth. Average household wealth of an
African-American here in Memphis is approximately $11,000 versus
their white counterpart having about $170,000.
Income, $30,000 versus $62,000. Education, only 17%-18% of
African-Americans actually have a bachelor’s degree. And many times they don’t
have access to the generational wealth, the access to social
capital and being able to build a good foundation to move
their business forward. And so because of that you have
to meet them where they are, and really help them think about
how they want to move their business forward, so there are
some challanges that they face that we try to bring
into the programming, but the root programming is
still the core of looking at the customer discovery process,
that experimentation phase I was describing to you and
getting them ready. Obviously there’s a more of
a focus with these existing businesses on debt financing
versus equity financing, we’re looking at
high-tech, high-growth. And so we have to also
bring in how we go after loans, how we provide access to capital
and grants, et cetera. And so there is
very many differences, but there still is that rooted
foundation that we focus on. – Is there also a thing, and I
don’t mean this as flippantly as it might come across, but is
there also a thing of a simple emulating people
who are successful? So as you said, if you have a
generation of African-Americans who haven’t built that wealth,
and haven’t started businesses, you’re not able to
model what you want to do. I know when I got an internship
at a small newspaper, I could look around and go,
“Oh, that’s what it is to be an editor, or a reporter.” So I had an opportunity
to kind-of just see it, and make it real
as a profession. Does that also play out
in terms of entrepreneurship and business ownership? – Very much so. When you think about the role
models that are being placed in front of the
African-American community, many times we’re about 10 to
20 years in terms of what we’re looking to do in terms
of our career paths. And so if you go back to
a number of years ago, sixties and seventies, it
was always get a trade, work a craft. When others were going
more professional services, accounting, lawyers, et cetera. Right now if you look at the
African-American community, it’s the
traditional jobs, lawyer, accountant, where
you see others now, technology,
innovation, et cetera, and so if you don’t see folks
who are pursuing these career paths, and understanding how to
use entrepreneurship as a means to grow wealth and move forward,
many times you resort to what you see in your own communities,
and the people that are around you, that’s why we’re
very big advocates of, even though we’re focused
on minority business here, we want to surround you with
diverse networks of people that can support
and grow your business so you can learn from them. – Leslie, how many
years in Memphis now? – Three.
– Three, ok. Your thoughts, three
years in, and having joined, and working with other
groups that were already here, and then bringing in
and firing up Epicenter, on the world of start-ups,
and the support system, the people who are
trying to start businesses, but also the support system,
or lack of support system around them? – I think there is a robust
network of willing partners, right, so we’ve moved
actively to engage with them. Try to bring additional
resources into the work, and fill a host of gaps
across the continuum, which both of my
colleagues here have mentioned. A significant one of those gaps
that we’ve identified repeatedly is access to capital. So Andre just talked about how a
lot of these firms are going to need access to debt financing,
and there’s not a lot of debt financing that
sits in-service to black owned or women owned businesses. – Sits in-service to,
what does that mean? – Will actually make loans to
black or women owned businesses. And so one of our primary
focuses at Epicenter is to identify the gaps across the
community and try to find sort of system wide solutions
that solve for those gaps, and scale those to serve a
broader population of people. In addition to that, we’re
trying to change behaviors. So you talked a lot
about role modeling, and barriers to entry for
black owned businesses. We need to change the way we act
and respond to those businesses and stop sort of throwing up
barriers or making excuses around a lack of participation
and actually just sort of build ramps onto participation. One of the things we recently
announced with these folks in the room and others in Memphis,
is a new $15 million small business loan pool that will
fund a lot of these businesses that we’re working with. They’ll lend in shorter
trends than banks for instance, at prices that are affordable
and not overwhelming for small businesses, but they’ll also
do those loans quickly and efficiently, so small business
owners can sort of activate against contracts that they
have opportunities to pursue. And that’s really fundamental
when you’re helping businesses think about scaling and growing
that you get them access to the capital that they
need to execute that. Because it’s very frustrating to
build a business into a sort of potential space of growth and
then have that be met with a whole series of barriers
that prevents that growth. – So that $15
million came from where? – We raised that money locally,
and a series of banks invested in that pool. Pinnacle Bank,
First Tennessee Bank, and Regions Bank
are all participating investors in that fund. We partnered with Pathway
Lending to distribute those dollars here locally, and
they’re housed with us in Cooper Young, and we’ve
already seen, we’ve had two sessions with
potential borrowers, we’ve seen over 200 folks
come out and show enthusiasm and interest. – Am I right that studies and
surveys show that so many small businesses start in the end,
basically by people maxing out their credit cards, and
maybe doing a home equity line? It’s a huge percentage of
small businesses and it’s, I would think that it’s a great
story when you see them profiled in be it the Daily News,
or some other place, and they become
very successful, and they say I started
on credit cards. But for every person who
started on credit cards, and succeeded,
there’s got to be a whole lot of people who didn’t. Is that part, I’m
off on a tangent, but it is interesting to me,
this whole idea of how people get this started when you’ve
got a very risky idea and an unproven idea, and traditional
banks may be very wary of lending to you, so people turn
to pretty high-priced, expensive start-up capital
like credit cards. – I do think that’s a
common theme that we see. I think one of the things
that Andre and Joann have both mentioned are sort of the access
to resources in the specific populations we serve. And how significantly higher the
risk for those populations is in taking those types of efforts
to capitalize their businesses. We come at this work with the
fundamental belief that all people are worthy of investment,
and have a right to access to resources that is equal
to all of their counterparts in a community. And so we should make access
to capital easy for everyone. Not just a select group of
people and take people out of the need to do those real high
risk things that for certain people in our community can be a
devastating financial decision. – If you go back to
what Andre was saying, if you’ve got African-American
families with a net worth in the $10-11,000 range, and in
general white families more in $150-$170,000 range, let’s say
you need $10,000 to start this business, and you’ve only
got $11,000 in net worth, you’re putting your
whole existence at risk, versus, I’m not saying
$10,000 isn’t a lot of money, but if it’s $10,000 out of
$170,000 you’re not putting everything at risk. Very simple Eric-math, but
that’s got to be a factor. – Absolutely. It’s estimated that it requires
$15-$25,000 to really start thinking through your
business and getting it to the starting line. And so you immediately start
burning through resources as soon as you start
down that path. Meaning time and money, and it’s
not as if they come out of the gates saying I’m going
to use my credit cards to fund my business. Many of them are moonlighting. They have day jobs, and they’re
starting to build this business while they’re moonlighting, and
they start using their personal credit cards to
just pay for things, coffee meetings,
proposals, et cetera, et cetera. But you’re correct, the other
side of it in terms of household wealth is the amount of
debt that’s sitting there, because look at the net factor
of debt versus real assets. So they’re already
leveraged quite a bit, plus, they’re trying
to start the business, and that’s why one of the core
areas of what we’re trying to look at here is how do we get
some of those folks who are moonlighting to shift over
to having a company that has paid employees. And sometimes this access to
capital that Leslie is talking about, helps them to
make that transition. – Back to the 800 Initiative,
Joann, what would be success? What are your goals for working
with those 800 businesses, what sort of
increase in employees, or increase in output?
How do you measure success? – So we developed
those goals as a team, and so Andre and Leslie
can speak on them too, but fundamentally we’re looking
at serving out of that 800, identifying 50 of the
businesses over a 3-year period, that we will serve, and
hopefully those that have employees already, taking them
to the next level of increasing their revenue by $50
million over that 3-year period. And then also, out of
that, and Andre mentioned, there’s 49,000 or so
African-American businesses in this community,
and out of that only 800 of them have employees. Well out of that remaining,
we’re looking at taking 200 of those and least getting them to
this state of having employees. So we’re moving 50, and then
we’re moving 200 of them from that other number. And Andre can
speak to more of that. – How do you measure success? – Right, I mean, to add to what
Joann was talking about here, out of the 800, we’re
looking to identify 50. The 800 right now are averaging
about $626,000 in receipts annually a year. And we’re looking to find 50 of
them and double their revenue over a 5-year period,
which is going towards a $50 million goal. At the same time
out of the 39,800, we’re looking to identify 200
who can go from without having paid employees to
having paid employees. We notice that there are several
out there who are moonlighting, like we talked about,
already doing $100,000, $200,000 in revenue, but
they have all 1099 contractors working for them. And so we’re trying to get them
a little bit more stabalized. I think the other piece of this,
in addition to the $50 million net revenue goal, over
this 5-year period is, we’re going to need
more access to capital. So it’s approximated
in this initiative, can we get $32 million in debt
and equity financing to support this portfolio of businesses
that we’re working with, because that capital
is going to be needed. So as Leslie had mentioned with
the $15 million Pathway Loan fund that they have created,
this particular plan has a $2 million loan fund, that will
sit in there to help these businesses move forward. But we’re going to need a lot
more than that to move this down the road. So those are just a few of the
goals that we’re looking to hit and milestones to make
this a successful effort. – CBU is a part of this,
someone may have mentioned it. Can you address what
CBU is doing as part of this initiative? – Yeah, so CBU stepped forward
to be the host physical and intellectual location
for this initiative, and will provide a series of
support services to the program. As Andre talked extensively
about meeting entrepreneurs where they are and making sure
that educationally we’re filling their gaps in knowledge
around things like financial statements, or
marketing, or communication. We’re looking to CBU for
some of that curriculum. We’re also really focused
on creating a center around inclusive entrepreneurship on
their campus to be a thought leader in the community around
the relevance and importance of naming the
opportunity here locally, and they’re a full
partner in that regard. We’re also looking at a whole
variety of other degree and certification programs that may
help these small business owners advance the growth of
their business locally. – Just a couple
minutes, go ahead. – Yeah, and so Eric, we’re
really excited because as CBU is looking to transition and
build their brick-and-morter innovation center
on their campus, the satellite services will
come out of Universal Life, and so as a partner we’ve
offered up Universal Life and that space to be the incubation
of space for the 800 Initiative. – For people who don’t know,
when you say Universal Life, it’s a building downtown, if
you’ve ever been to a game, a concert,
anything at FedEx Forum, and you’re coming
west, it’s a beautiful, it was a blighted, abandoned
building for as long as I’ve lived in Memphis I think,
that recently re-opened, talk quickly about that. – Right, Universal
Life company as it was, was founded by Dr. J.E. Walker
and they actually shuttered their building I believe back in
the ’80s, so the building sat dormant for 17 years,
built by African-American architect firm
McKissack and McKissack. And so the city has invested
along with Self+Tucker to renovate this building, and
we’re moving our business development center currently
located at 555 Beale in there where all of the city’s
programming for business development support and working
with our partners will come out of that building, and
it’s going to be fantastic. State-of-the-art training rooms, and it will be accessible
to the community. – And anyone who’s listened or
wants to know more about 800 Initiative they should go to? – They should go
to www.the800.org. – Ok. Thank you for being
here, Andre, Leslie, thank you all, And
thank you for joining us, join us again next week. [dramatic orchestral music] [acoustic guitar chords]

Author:

Leave a Reply

Your email address will not be published. Required fields are marked *