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Detroit is a city that has undergone a number of crises in recent memory. It has suffered from the long and painful departure of its auto industry, mismanagement of city funds resulting in a 2013 bankruptcy, and decades of “white flight” to suburban communities. The cumulative result has been a norm of underfunded neighborhoods and economic instability.
There has been a rise of entrepreneurship in response to these struggles. New business has been heralded as a way to boost the economy and revitalize the city. Women are a big part of the mix: American Express’s “State of Women-Owned Businesses Report,” released in September 2019, found that “the number of women-owned businesses in metro Detroit more than doubled from 157,090 in 2012 to 358,507 in 2019, representing the largest jump among the top 50 metropolitan areas in the country,” according to Crain’s Detroit Business. What’s more, while the number of women-owned businesses grew nationally by 21% from 2014 to 2019, the numbers for African American/black women grew even faster, by 50%. And as of 2019, the report notes, “women of color account for 50% of all women-owned businesses” in the U.S.
Through a multiyear qualitative study of black women entrepreneurs in Detroit, we are examining how founders in resource-constrained environments pursue entrepreneurial activities. At its core, our investigation tests the assumption that insights gleaned from Silicon Valley entrepreneurs transfer to all contexts.
We have found that entrepreneurial activities in Detroit are seen by locals through the prism of the “Detroit hustle” — a long-held mantra unique to the city that defines people’s entrepreneurial energy and approach to work. We seek to understand why this is the case.
Our preliminary findings demonstrate that how individuals approach entrepreneurship in resource-constrained environments, as compared with affluent ones, might not be the same. Mirroring the social disparities that exist in the U.S., our study illustrates how the accessibility and use of material resources within an entrepreneurial ecosystem can shape the experiences of its members.
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Why Context Matters
Detroit offers a unique opportunity to observe how a majority black entrepreneurial population navigates the lack of resources accessible to it.
Entrepreneurial ecosystems represent the ongoing exchange of resources, reciprocal relationships, and connections between entrepreneurs, entrepreneur support organizations (ESOs), and governing bodies within a defined city or region. Research by Claire Leitch, Richard Harrison, and Maura McAdam has shown that these ecosystems operate and affect entrepreneurial activities differently based on their environments and the characteristics of the entrepreneur.
Most of what we as a culture know about entrepreneurship — and have seen through high-profile success stories of business founders — has come from environments that have high levels of human, social, financial, and physical capital in thriving ecosystems. We know less about how success stories emerge in the face of multiple forms of structural inequalities and marginalization, such as those experienced by black women in the U.S.
We set out to build research on how ESOs can create inclusive ecosystems for black women entrepreneurs in resource-constrained environments. Given that they are well represented in Detroit’s entrepreneurial ecosystem, we examined how ESOs, such as startup incubators and venture capital organizations, provide resources that enable these entrepreneurs to flourish.
In the first phase of our study, which was supported by the Batten Institute for Entrepreneurship and Innovation at the Darden School of Business, we collected qualitative and observational data of Detroit’s entrepreneurial ecosystem. We completed 32 semistructured interviews with entrepreneurs, members of ESOs, and city officials, and conducted observations in the city for three months. We attended AfroTech — an annual gathering of black techies, startups, and entrepreneurs — and the International Business Innovation Association (InBIA) conference on creating inclusive entrepreneurial ecosystems.
Our aim was to inform our understanding of structural practices that might create differential access and use of resources, status, and power. In other words, our focus was on understanding how Detroit, as a resource-constrained context for entrepreneurship, shapes how founders engage in entrepreneurial activities.
Our preliminary findings point to two interrelated insights.
There Are Pros and Cons to Resource Constraints
The first insight is that there are positive and negative aspects to working in resource-constrained environments.
Positives include low barriers to entry and the availability of new resources by virtue of the city’s revitalization efforts. Since the early 2010s, news outlets have been reporting on overtures being made in Detroit to entrepreneurs, which include incubators such as TechTown that make physical space and social support available.
One of the leaders of TechTown expressed his desire to create an inclusive coworking space, in part by removing barriers to access. “Lots of the entrepreneurs can’t get here [to TechTown]. So we are trying to be more intentional about being in neighborhoods and working more directly with people as opposed to saying, ‘Come to this big fancy white building next to a university and a health system.’”
Negatives to working in resource-constrained environments include the smaller number of customers in the geographic area who can afford high-end products and the herculean effort needed to successfully market a product or service outside the immediate social context.
Additionally, a profound differentiator between the often well-off, mainly white male founders of Silicon Valley and the less wealthy, often less connected black female founders in Detroit is family wealth. In Silicon Valley, a common source of funding is family connections; this funding route is so common that even banks offer a step-by-step guide for asking family and friends for startup capital. In Detroit, the entrepreneurs with whom we have spoken tend to be the first in their families to graduate from college or obtain a graduate degree. Few, if any, see family and friends as possible sources of investment.
Entrepreneurs Always Expected to Have a ‘Side Hustle’
The second insight from our research is that starting a business in this resource-constrained environment seems to emerge less as a choice than as a necessary, alternate way of meeting financial responsibilities.
One woman we spoke with put it this way: “When I say I didn’t understand entrepreneurship, I mean … it was something about the mindset and mentality of Detroiters. It was like, you had a job, but you had a side hustle. And if you didn’t have a side hustle, you were in the minority. It was like everybody had a job and a side hustle or two.”
The women we spoke with expressed a resolute belief that they would have to work, whether as an entrepreneur or inside of an organization — or both. As one respondent shared, “I knew I would always be working. Black women have always worked, even as mothers and wives.” Rather than seeing work as a choice, we heard from black women entrepreneurs that their assumption was always that work would define their life and identity.
Other participants in our study described their hustle as coming from a strong sense of obligation to “give back” to the local community. A founder of a yoga studio told us that she started her enterprise “because I saw a void in the wellness opportunities for people in Detroit.” Her community, she said, is black people in the inner city — “not just those who are privileged enough and lucky enough to afford yoga.” Her desire, and challenge, is to reach children, grandparents, people with disabilities, “people from all different walks of life … who might not have access to wellness.”
Another respondent noted, “I always want better for Detroit. I love Detroit. That is what molded me to the type of person I am, and I just want to make sure that when I make it, that I can help the city.”
Within the coming months, we have a unique opportunity to conduct a natural, ethnographic experiment in the second phase of data collection. In October 2018, Backstage Capital opened an accelerator in Detroit. Backstage Capital focuses exclusively on early seed funding for women, people of color, and LGBTQ founders, and has invested $100,000 in select companies for 5% equity.
In this second phase, we aim to observe how the presence of this new resource will affect the development and growth of businesses owned by black women in the metro Detroit area.