Talk of the Town: How Small Businesses Are Helping Cities Go From Bust to Boom

Economically devastated cities like Detroit and New Orleans are attracting entrepreneurs who see gold in ghost towns.
Freelance Writer and Editor, Self-employed
February 26, 2014

Sheri Crawley knew things would be different in Detroit. After successful careers in Chicago, she, her husband and their two daughters were all moving to Michigan in 2010 to help Crawley’s mother, who had recently been diagnosed with Alzheimer’s. Detroit, a bankrupt city with a 17 percent unemployment rate, a place so empty that a video of a reporter playing a round of golf through its abandoned city streets went viral in summer 2012, would be an entirely new challenge.

“As entrepreneurs, my husband and I knew we were going to have to reinvent ourselves with this move,” Crawley says.

 

Sheri Crawley

 

At least they weren’t alone. Though the city lost roughly 25 percent of its population over the last decade, in recent years the city has attracted a certain breed of optimistic entrepreneur. They might not get the city infrastructure provided by a New York City or San Francisco, but a dollar goes much further in Detroit than in the city’s coastal competitors. Office space alone is perhaps a tenth of the price. There’s less competition to get your startup noticed, as local media are far from inundated with pitches for the latest business to open its doors. And, of course, there’s the thrill of being part of a comeback story that appeals to the more romantic.

Crawley’s new path presented itself soon enough, when she saw her daughter Laila, 8, come home despondent from her new school in the Detroit suburbs.

“That was the first time she had been at a school that was predominately white,” she says. “Like it was maybe 1 percent African American. I saw a stark difference in my daughter’s personality, not being bubbly but withdrawn.”

Crawley’s daughter began to single out Pantene commercials, asking her parents to help make her hair long and blonde.

As the family tried to help their daughter through this identity crisis, Crawley happened to see an episode of Anderson Cooper revisiting dolls that were used around the time of Brown v. the Board of Education, designed to measure socioeconomic backgrounds. The tester would show dolls of different skin tones and hair color and ask the subjects which was the smart one, which was the prettiest and so on. Something in Crawley’s head clicked.

“My husband always called our girls ‘pretty brown girls,'" she says. "I Googled the website and no one had thought to put it together for a company name and that was that. Literally the very next day, someone tried to buy that name from me.”

 

pretty brown girls

 

The Crawley family started to manufacture Pretty Brown Girl, the kind of doll they thought would give their daughter a positive self-image, and Crawley wrote a children’s book celebrating all shades of brown. Like many of the startups flocking to the depressed and abandoned city, it didn't take too long before their business was booming and The Root, The Huffington Post, The Washington Post and Oprah Winfrey, among others, started noticing them.

But it wasn’t enough to have made it in Detroit. Crawley saw a city that needed her to give back. To that end, she started organizing local food drives with members of her local Pretty Brown Girls Club, an organization to empower young black girls across the globe by reinforcing their beauty and nurturing their self-esteem through workshops and mentoring panels. It has since grown into a national day of service, called International Pretty Brown Girl Day.

“This year we will have 800 girls coming to Detroit," Crawley says. "Just in Detroit alone, bringing in that many girls and building a convention, that’s something that can be a boon for the local economy.”

 

pretty brown girls meetup

 

From the Ashes 

In tough economic times, entrepreneurs feeling the pinch haven’t always been able to give back to their communities as much as they once did. At the end of 2008, roughly 60 percent of small-business owners said that the economic downturn had hurt their charitable activity, according to a study partially funded by the Chronicle of Philanthropy.

Recently, with more entrepreneurs popping up in the cities that were hit hardest by financial crisis, business owners have been finding creative new ways both to invest in the communities that support them and work community improvements into their business plan.

Chalkfly, a Detroit-based office and school supply e-commerce site, donates 5 percent of all sales to local teachers. And in one example of an entrepreneur drastically altering a city's landscape, Quicken Loans spent approximately $300 million in renovating office buildings in 2012 in an effort to lure people, startups and businesses like Twitter, Uber and Nike to downtown Detroit. Dan Gilbert, Quicken Loans' founder and chairman, has poured millions into revitalizing his native city through his various companies and business interests.

“Urban renewal always happens as a symphony of events, and part of the symphony is innovative, optimistic developers with the ability and willingness to transform historic properties,” Gilbert said in a 2013 New York Times profile. “But another part is a strong regional economy. You can’t fight the fact that Detroit is a de-industrializing market and it isn’t facing dramatic, positive transformation.”

Gilbert says he hopes companies like Nike will bring about that necessary change. But in cities on the brink, it’s often small businesses that gives back the most. Not only are smaller startups giving back to these communities by creating jobs, they’re also bonding with local charities and working on projects to improve their communities.

The Giving-Back Boost

“The crossover between entrepreneurs and the nonprofit sector has absolutely boomed over the last few years,” says Michael Oxman, managing partner at No Margin, No Mission, a national consulting practice that helps nonprofits develop earned income business strategies to increase their margin and expand their mission. “There are a number of organizations in places like Detroit to some of the Rust Belt cities and Hartford, Connecticut. Lots of spots in California that have been hurt economically have seen that [crossover] happen."

 

Michael Oxman, managing partner at No Margin, No Mission

 

“The reality is that out of tough times comes new opportunities, and new opportunities typically result from bright entrepreneurial minds looking for a new way or better way to deliver their mission," Oxman adds. "That’s critical to doing business. And often in those cities, those entrepreneurs are going to be the same people you see get involved on the boards of organizations that are crucial to helping rebuild a community’s culture and economics.”

Crossover between the startup sector and local nonprofits and charities in economically decimated cities has been a boon for No Margin, No Mission.

 

Crossover between the startup sector and local nonprofits and charities in decimated cities has been a boon for No Margin, No Mission.

 

“We’ve seen so many companies getting involved in their communities over the last five or six years and we’ve built a very unique and busy consulting practice around that,” Oxman says. “Everyone, especially in these cities that have seen their economies devastated, is focusing more on the entrepreneurial side of revenue generation. No one can be overly reliant on traditional sources of funding today. You have to look at monetizing all your products and services. So entrepreneurs are getting involved more with nonprofits and charities, and at the same time nonprofits are learning from these companies and taking lessons on how to monetize products or services so they can serve their communities.”

Making a Profit in a Ghost Town

Though many companies have a philanthropic bent when choosing to operate in economically devastated cities, it often just makes plain good-old business sense to set up shop there. Take Kansas City, Missouri. Not long ago, the city was struggling against the same market woes and diminishing revenue sources that had plagued the towns Oxman was seeing a crossover business/nonprofit boom in. Though not emptied to the level of Detroit or Pittsburgh, with roughly 18 percent unemployment, the city’s urban core was largely empty in the early aughts and the inner city population was regularly declining. But the lucky stroke of becoming the testing ground for Google Fiber in 2012 has led to a mini tech boom of innovators looking to take advantage of the high-speed connections. Today, locals are referring to the city as the Silicon Prairie, and the most recent census shows the population has grown while the state’s other metropolis, St. Louis, has seen a steady exodus of minorities and working class families. 

 

Google Fiber

 

In September, Web hosting company Arsalon Technologies announced that it would provide free Web hosting services for one year as part of an initiative to attract IT entrepreneurs to the midwestern metropolis. It was joined that same week by a local health care initiative launch spearheaded by local companies Sprint and Techstar.

“We want to give back to the growing tech community in our hometown,” said Arsalon Technologies co-founder Gary Hall in a statement at the launch. “Our growth and success stems from the support of local businesses, and it’s exciting to see the creativity these companies bring to the market.”

Though more widespread in practice, increased crossover between the private and public sectors was a strategy New Orleans learned even before the 2008 financial crisis. The city had been well in decline since the late 1980s, losing both businesses and population. Then Hurricane Katrina struck in 2005, intensifying the problems that had come before. 

Attracting startups was an important strategy for bringing a partially abandoned city back to life. Rob Vitrano, an entrepreneur and founder of Naked Pizza, was one of several local businessmen who sent out invitations for startups to come to the city and take advantage of a clean slate. At a certain low point, just being an entrepreneur is giving back to the community by creating jobs where there once were none. Over the last 16 months, Idea Village, a nonprofit to encourage entrepreneurs, reported helping nearly 1,000 New Orleans startups get capital, support services, mentors, and access to business experts and private investors.

There’s measurable proof that simply attracting these entrepreneurs is improving life for New Orleans residents. Population growth, though still roughly 25 percent smaller than its 2000 figure, according to the U.S. Census, is slow but steady. And as of 2012, the Big Easy had reportedly recovered all recession-era losses and jumped to 1 percent above the city’s 2008 employment level while the national average stayed at 2 percent under.

"When your city is closed for six months, you make some decisions about who you are and what matters. You’re faced with a choice to retreat or revolt,” Vitrano said in a 2013 Inc. talk. “What we saw out of it was that people who stayed wanted to revitalize the city in a way that’s very different from how business had been conducted in the past.”

That clean slate, attractive to business owners who are constantly looking to build something better than what came before, may be just what these cities need.

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Photos: Getty Images, Pretty Brown Girl, No Margin No Mission, Google