How Wilmington is Helping Its Informal Entrepreneurs Grow Their Businesses
Phillip Berkaw
Economic Opportunity & Workforce Development
In September 2020, 45 cities made commitments to new initiatives to support inclusive economic development and innovation at the Kauffman Mayor's Conference on Entrepreneurship. NLC's City Innovation Ecosystems program collects and tracks these commitments in order to showcase successes, identify best practices, and connect peer cities that can learn together. Here we share the story of one city's work.
It was early summer and the Wilmington Strong Fund – a cross-sector initiative to provide grant relief to small businesses passed over by the Paycheck Protection Program – was almost ready. The grant-making criteria was settled, a marketing campaign to encourage applications was in motion, and the awards process was detailed and orderly.
There was just one problem: to receive a grant, business applicants had to be licensed by the city but many of Wilmington's entrepreneurs in greatest need were unlicensed business owners. "In that moment, we, as the city's economic development partner, realized how many of our black and brown entrepreneurs don't have that license," says Renata Kowalczyk, CEO of the Wilmington Alliance.
Renata's organization is laser focused on economic justice and closing the racial wealth gap between Wilmington's mostly white, affluent communities and its underserved, mostly Black and Hispanic communities. West Center City, where the Wilmington Alliance targets the majority of its current support, is by far the most distressed zip code in Delaware and is one of the most distressed in the country. One way this is illustrated is in the city's business ownership data: 92% of its Black-owned businesses have no paid employees and the average revenue of its Black-owned businesses is 1/6 that of its White-owned counterparts.
This inequality is why Renata made a commitment on behalf of the city through NLC's 2020 City Innovation Ecosystems program. She joined a cohort of five other cities, led by Samira Cook Gaines of Rising Tide Capital, that are building the supports necessary to license the businesses of at least 5 entrepreneurs by July 2021 with the intention of providing them greater support and more opportunities to obtain growth capital.
The benefits of becoming licensed, for most businesses, far outweigh the costs. Unlicensed entrepreneurs are less protected from litigation, bankruptcy, and breaches of contract than formal businesses. They also don't have access to the same lines of credit that allow businesses in the formal economy to grow.
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In that moment, we, as the city's economic development partner, realized how many of our black and brown entrepreneurs don't have that license."
Renata Kowalczyk, CEO of the Wilmington Alliance
Many of Wilmington's informal entrepreneurs operate food and hospitality businesses out of their homes. These entrepreneurs lack access to commercial kitchens, e-commerce platforms, and seed funding that would be crucial to expanding their operations, increasing their revenue, and hiring more employees. Kitchen incubators – usually consisting of a shared kitchen space and business support services – are one tool that economic developers have used to strategically promote the growth of food entrepreneurs' businesses.
After hosting community listening sessions with local food entrepreneurs, Wilmington began preparations to open a kitchen incubator in West Central City in 2019, with the hope of opening doors in 2020. Rather than building a brand-new kitchen as a handful of other major cities had done, the Wilmington Alliance decided they would pilot the concept utilizing a kitchen space provided by a local church. Launcher, a 12-week business training program, would provide free technical assistance to participating entrepreneurs and create opportunities to apply for a business loan after graduation. Renata also secured pro bono support from a private sector partner to revamp the church's kitchen appliances and is working with students at the University of Delaware to build an online ordering platform that will be free to use for graduates of the incubator.
All five of the incubator's first businesses will be unlicensed entrepreneurs. "These entrepreneurs have been away from the table and marginalized for so long that their intuition is to work outside of the boundaries." Renata says. "We're asking them 'what would it look like if you knew you belonged? If there was a place for you at the table?"
Although COVID-19 delayed its opening, Renata is optimistic about opening the incubator's doors in 2021 with enhanced safety measures.
Lessons from Wilmington
Listen to community voices. Informal entrepreneurs typically don't show up online or in city databases, making them a difficult group to survey. To gain a better sense of their needs and aspirations, Wilmington holds regular listening sessions with the community. These sessions are focused on building trust and inviting "truth telling" about what it is like to be an entrepreneur of color in Wilmington.
Pilot new initiatives before going big. Low-cost, small-scale pilots are an effective method for determining whether a promising initiative will have the impact its designers are hoping for. They help the city identify any problems in the policy before it receives substantial public funding. The Wilmington Alliance is piloting its kitchen incubator with just 5 food entrepreneurs in a low-cost space provided by Grace Church UMC, who also contributed to the project financially.
Build creative partnerships. Effective economic development organizations build cross-sector relationships in occasionally surprising places. Working with students at the University of Delaware on an e-commerce platform was a low-cost, high-impact solution that is one more incentive for entrepreneurs in the kitchen incubator to license their businesses.
Phil Berkaw is a Program Manager in the Center for City Solutions at the National League of Cities.
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