Joint Ventures: Microfinance Funds Support Entrepreneurs in Public-Private Collaboration

Joint Ventures: Microfinance Funds Support Entrepreneurs in Public-Private Collaboration

Microfinance is touted as a means for low-income families to create economic opportunities for themselves and work their way out of poverty. But to have its greatest impact, microfinance must be coupled with high-quality business education and technical assistance to prepare aspiring entrepreneurs for the challenges of business ownership. Although many university or college-based small business development programs offer business training and technical assistance, there is often a big difference between the needs of low-income entrepreneurs and those of more mainstream small businesses, making it difficult for one program to serve both populations. An innovative new collaboration in New Jersey —funded by HUD’s Hispanic-Serving Institutions Assisting Communities (HSIAC) grant and leveraged with additional private-sector funds—is confronting the need for a continuum of entrepreneurial services for businesses at different levels and may point to a good model for other communities seeking economic revitalization through entrepreneurship.

In 2004 Harvard graduates Alfa Demmellash and Alex Forrester co-founded Rising Tide Capital (RTC ), a nonprofit that empowers underserved communities through entrepreneurship. Their vision led to the creation of the Community Business Academy (CBA), a hands-on class that teaches aspiring entrepreneurs the nuts and bolts of starting and growing a business. Entrepreneurs from low-income backgrounds are able to take the 11-week course and, as alumni, gain access to RTC’s extensive Business Acceleration Services offerings, which provide year-round support on topics ranging from bookkeeping to website design.

RTC reports the average CBA participant is a 39-year-old mother of two children who earns less than $33,000 per year. Of the 431 CBA graduates, 193 are in business today and an additional 177 are in the planning stages of establishing a business. Those that are in business saw their average business revenue increase 80 percent within a year of working with RTC. These efforts have not gone unnoticed. In 2009 Demmellash was selected as a CNN Hero and was invited to the White House, where she was recognized by President Barack Obama.

“Imagine if [RTC] could help 500 or 1,000 or more organizations ... all across America,” President Obama told reporters during a White House speech on innovative nonprofit organizations. “If we empower organizations like these, think about the number of young people ... whose lives we can change, the number of families whose livelihoods we can boost.”

Buoyed by the national recognition, Rising Tide Capital has continued to develop innovative ways to increase its scale and improve its services to support aspiring entrepreneurs on their journey. One such innovative collaboration was with HUD, which in 2010 jointly awarded New Jersey City University (NJCU) and RTC a 3-year HSIAC grant for $599,916.

The grant not only supports RTC’s CBA and Business Acceleration Services but also connects local business owners to NJCU’s in-house Business Development Incubator (BDI). Each year four CBA graduates are selected to join the E2 (Enterprise and Economic) Incubator Residency Program. Participants receive one year of office space at BDI that includes rent, utilities, and cleaning services as well as the support of a paid NJCU intern for two semesters who acts as the entrepreneur’s first employee — an award valued at $12,000.

Although today Mona Fitch-Elliot is the CEO of a successful business, 2 years ago she was at the end of her rope. When she was laid off from her teaching job, Fitch-Elliot enrolled in the fall 2010 CBA, hoping to gain the necessary skills to start her own business. Throughout the course she worked with business professionals to hone her idea for creating an educational company to promote literacy.

In February 2011, after completing the CBA, Fitch-Elliot and classmate Jorge Diaz were the first entrepreneurs selected to join the E2 Incubator Residency Program at NJCU. Since then, two other entrepreneurs have followed in their footsteps: an international cosmetics salesman, and a cooking-event planner, both graduates of the spring 2011 CBA.

“Joining the BDI community is more than I could have ever hoped for!” said Fitch-Elliot. “This opportunity assures that my company, Excite Write Education Services, is more than just a pipe dream. The residency has helped propel the development of the business forward and provided a great foundation.”

BDI has received a lot of attention, especially from NJCU’s international visitors. There is talk of replicating the program nationally and even internationally. “Because of the support of the U.S. Department of Housing and Urban Development, we are able to provide deserving entrepreneurs with an amazing opportunity to really jump-start their businesses — an opportunity that they would otherwise be unable to afford,” said Forrester, currently RTC’s chief operating officer. “When the public and private sectors work together to support local entrepreneurs, we can facilitate the kind of job creation and economic opportunity needed to make the American Dream real for everyone.”