Initiatives

While the percentage of minority-owned businesses in Seattle is slightly better than the U.S. average, a closer look reveals deep inequalities. Nearly three-quarters of the city’s minority-owned businesses belong to people who identify as Asian. While the roughly 15 percent of Seattle’s residents who are black or Hispanic own just 5 percent of the city’s small businesses. Members of these communities who want to become small business owners face an uphill climb. They consistently encounter difficulties getting access to credit, and existing small business support services are not sensitive to their beliefs, language, or culture. A network of culturally appropriate minority business accelerators in Seattle would help even the playing field by providing meaningful assistance to entrepreneurs of color. The accelerator would ease problems with access to capital by offering targeted investment and credit. It would simplify the process of getting a business off the ground by providing training, mentorship, office space, market development, and opportunities for networking.

In Seattle, the non-profit Ventures has been operating a micro-business incubator for years, targeted at low-income residents, including a program for Latino entrepreneurs. Since its founding, Ventures has served nearly 800 low-income clients, about 65 percent of whom are people of color. Ventures’ most recent survey showed that about 30 percent of its graduates started a small business within two years, and that the survival rate for those businesses was higher than the national average. Working with Ventures to provide basic infrastructure and support, we could establish a network of minority-business accelerators in key neighborhoods where there are opportunities to develop strong communities through minority entrepreneurship.

Small and medium sized businesses in our communities, and the social and economic contributions they make are at risk because their owners are are part of the “Silver Tsunami” of aging baby boomers. Most privately-held businesses an agreement for what happens when their owners retire. Indeed, for business owners over 50, a full 7 in 10 don’t have succession plans. Few family-owned businesses succeed to the 2nd generation (only 15%), with only 5% succeeding to the 3rd generation. Those that do not close are often sold to out-of- state buyers or private equity firms that may relocate jobs or the entire business. In the absence of succession planning, communities across the country lose not only vital businesses and jobs, but also lose jobs in businesses that are locally owned and controlled, and that contribute greatly to a community’s financial well-being.

We can harness and coordinate existing resources to support the retention of businesses at risk of closure. By helping finding owners that are retiring define and implement a succession plan they can realize value from their asset.  Moreover the community retain the business in the community and the next generation of employees or other owners can attain equity in a local enterprise. It starts with data collection to understand who will be making the transitions, requires outreach and engagement to put together the right people, and can flourish if we build a network of stakeholders that to develop the model.

Locally owned businesses keep more money circulating locally, contribute more to local not-for-profits and schools, and contribute more to a community’s vitality and character than national chains. And yet some businesses strive to go beyond local and are also exemplary community stewards, operating for maximum community benefit.  They hire from communities most in need and provide fair wages, benefits, and advancement opportunities to their employees, they minimize their environmental impact, they source from natural, organic, local, and/or fair trade vendors whenever possible, and the owners and employees are active civic contributors. While many local businesses owners may aspire to running a “good businesses,” it’s not easy or obvious how to do it.

A Center for Good Business could provide the resources, training, and business development opportunities to help local business owners design and grow their businesses for maximum community benefit, and reward them for doing so. It may leverage existing certification and assessment programs (e.g. JUST, B-Corp, Envirostars, Co-ops), including sector-specific certifications (e.g. retail, food service, manufacturing). Businesses that achieve multiple certifications or awards addressing a range of community benefits (environmental, social, economic, civic) would be acknowledged as “All Stars.” The Center could develop partnerships with anchor institutions, local government, and others to establish “preferred vendor” status for All Stars, and spotlight them throughout the community as inspiration for other business owners.

From breweries to bike shops to local services, local businesses go a long way toward diversifying our economy, and making Seattle’s neighborhoods the vibrant places they are. Yet the owners of these businesses often struggle to access the capital they need to keep up and scale up. Banks don’t make money from the small-scale loans these businesses need, and therefore rarely make them. If business owners don’t have access to other sources of wealth, obtaining investment can be a serious obstacle. This is especially the case for owners from traditionally marginalized communities, who have the least access to capital.

Yet many local businesses have customers, neighbors, and friends who would love to invest in them! But it’s not easy to do so. Consequently, of the $70 billion that Seattle-area residents hold in long-term savings, almost none of it is invested in our local economy.

Residents of Seattle need a platform that helps them directly fund businesses in their own communities. This more democratic system of financing will give residents a stake in the businesses they want to see thrive. For business owners, this solution would drastically improve access to the investment capital they need.

From 2013 to 2016, Community Sourced Capital provided nearly 100 loans totaling about $2 million to local businesses. Funded businesses include breweries, restaurants, and even a company that farms insects for fertilizer. Community Sourced Capital redirects local money toward the businesses Seattleites want, while encouraging participants to think about money in terms of building relationships and community value. There is a powerful opportunity to build on Community Sourced Capital’s model and scale it up so that it can redirect significantly more money and transform the way small business is funded in the city.

There is a systemic financing gap that keeps communities that have low financial wealth and stability from building assets through entrepreneurship and small business. Also, wealth people with average sized savings are currently unable to investment in their own communities in order to build wealth for the whole.

Through a community loan fund for lending to small local business owned and/or operated by people from communities color, people other incomes, women, worker owners and others, we can intentionally fill the financing gap for high-risk enterprises that have high community benefits. A loan-loss reserve fund could be established by a local foundation. The goodwill and connection built through many local investors creates stronger resilience and balance the value of the capital loss through investments in riskier businesses.

A platform for local residents to own and finance community-serving real estate projects, both housing and commercial,  provides to local communities a vehicle for investing in projects they want in their communities, and makes those projects responsive to the community’s vision, like  affordable space for small community-serving businesses. Direct community member investment in local projects will diversify the sources of project financing, give local communities more power to support/attract development they want in their communities, and can provide a small return on their investment. It will make local development more community-driven and provide options other than investing in Wall Street companies we don’t know and that are difficult to hold accountable.

Leveraging the experience from Sam Farrazaino’s Equinox Studios, we can develop a model and support socially conscious property-owners, developers, and investors to enable commercial tenants of a building to earn ownership in their building.

At Equinox Studios, each dollar of rent buys the tenant a share in the holding company, which is set up as a Washington State Social Purpose Corporation. There are many benefits of this model.  It creates shared ownership between the original owner/developer/investors with the tenants that occupy the building, it reduces vacancy rates, which means higher returns (or potentially lower rents) for the owners, and less time/expense spent seeking new tenants; and it stabilizes rent for the tenants since the building won’t be sold out from under them.   As owners, tenets have a say in rent rates which can counter commercial displacement). It also ensures a diverse economic base, by securing long-term space for lower margin sectors (e.g. non-tech) and ensures minimal financial, administrative, or liability burden for the tenants as owners. Should a tenant leave, the model provides a transferable asset (the stock) back to the company, or to existing or new tenants and it can provide annual dividends to shareholders, and potential payout after a capital refinance.  This model works best in sectors where tenants are likely to stay put for a while (i.e. they won’t quickly grow their space).

While it’s common knowledge the cost of housing has skyrocketed in our area in recent years, the impact of rising land values on local, small businesses and the communities they serve has less often made the headlines.  Seattle is fortunate to have number of public and not for profit developers, but affordable and stable commercial rents are still in high demand. At the same time, private commercial spaces in new developments can go unleased for long periods of time. Overall the response has not been coordinated or scaled to the level of the challenge, leading to displacement and closure of small business.

By securing, holding, and managing real estate; building and maintaining land trusts; and providing programming to support ownership and equity, a city-wide Community Development Authority (CDA) can create ways for residents and businesses to stay and thrive in place. Public Development Authorities are special purpose quasi-municipal entities that can be established for a variety of public purposes for which a city itself is not well suited.  A citywide PDA focused on securing commercial land and property for the purpose of community economic revitalization and stability (thus a “Community Development Authority”) would undergird and support efforts of multiple agencies and developers, funding-streams, and strategies. Core to this solution is the CDA’s ability to raise funds, to create and administer a Commercial Land Trust to enable and preserve ownership at the neighborhood level, and to be a master-lessor that could make difficult to lease space available to businesses in need.

In our area, 4Culture (King County), the Pike Place Market, and Capitol Hill Housing are all PDAs. But while there are plenty of PDAs doing specific work in affordable housing or historical preservation, there are few that are focused citywide and for the purpose of supporting the local economy. This Authority would use real estate development and management, formation of community land trusts, and programming to enable people to rise out of poverty and thrive in a growing, rapidly gentrifying city.

As local businesses stabilize and grow, they employ more local people, keep more money circulating locally, provide opportunities for employee-ownership, build community wealth, and generate new spin-off enterprises. But relatively few get to this mature stage. Having a handful of bigger, reliable customers, in addition to many small customers helps move businesses from tenuous to stable. But getting these bigger customers isn’t easy.

Meanwhile, Seattle has many large “anchor” institutions that together spend hundreds of millions of dollars on goods and services, some of which is spent locally, but most of which is contracted to large national firms. That money flows out of our economy, depriving our communities of many benefits, and doesn’t come back.

By leveraging the power of anchor institutions, we can work at both ends to grow the middle. Seattle has many institutions large enough to contribute to a more inclusive economy, including universities, hospitals, municipal governments, large nonprofits, and mission-aligned for-profit companies.  They are called “anchor institutions” because they are strongly connected to their hometown by mission and investment. That gives them a strong stake in the city’s future well being. By hiring, purchasing, and investing locally, anchor institutions in other cities have been able to shift hundreds of millions of dollars toward local businesses, especially those owned by under-served populations.

In Cleveland, Ohio, a consortium of three anchors committed in 2008 to give more of their business to local firms. When it turned out those businesses lacked the scale to handle big projects—imagine the laundry needs of several hospitals—the consortium launched a network of worker-owned cooperatives (Evergreen Co-operatives) including a commercial laundry, a solar power company, and an urban farm. Organizers estimate that the co-ops employ about 500 people—roughly half of who own a stake in their employer.

Seattle has a wealth of anchors—the University of Washington alone spends $5.7 billion a year on goods and services. Emerging initiatives like Seattle Sewn are bringing for-profit apparel anchors together to talk about equity and local hiring. That work sets the stage for a potential Seattle anchor plan.

A people’s economy requires accountability to communities, especially those with the least power and the greatest barriers to opportunity.  While many communities want accountability, not every community is organized collectively around their vision of the economy and development. Moreover, the organizing bodies that do exist are not scaled to match the strength of prevailing economic trends or better-resourced development interests. Without the input and leadership of the people most impacted by the current economy, local economic development will reflect the interest of those with the most money, influence, and time.

Every major development project in Seattle has the potential to create substantial and lasting positive economic benefits for the communities where they reside. Community Benefits Commissions across the city can form a backbone to work for community benefit agreements. Organizing communities through the commissions can achieve benefits such as priority hire during construction, affordable commercial space during completion, and amenities benefiting the local environment and people.  These community-driven bodies, linked together in a network, must be accountable to area residents and prioritize equitable participation from people of color, people with lower incomes, and immigrants and refugees. Community Benefits Commissions create ways to articulate community needs, which also helps developers save time and money. Projects can get community support from the beginning, rather than opposition, and are more likely to have a thriving customer based when they are ready to open.  Beyond property development, commissions can develop initiatives and recommendations that address all facets of a People’s Economy, and working together, ensure they get implemented.

We have already started to see the power that organized communities can achieve from development projects in Seattle.  The Southeast Economic Opportunity Center is an example of a project that emerged out of the community getting together and deciding what they want in the Othello neighborhood.  In the Central District, the recently announced 23rd and Union development at the Midtown Center reflects the best of what happens when the community, in this case organized by Africatown, gets together to decide what they want and build the power and partnerships to realize their vision.  For Africatown, one hope for the development is space to incubate small, black-owned businesses. In other cities, community organizing efforts in areas like Dudley Street Neighborhood Initiative in Boston and PUSH Buffalo, have gained significant powers to shape development.