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Bringing back neighborhood prosperity

by Meredith Erlewine

December 1998

Start-up by start-up, job by job, one of Denver's lowest-income neighborhoods is steadily becoming an urban hub of entrepreneurship

For more than a decade, the Denver Enterprise Center (DEC) has been helping residents of one of Denver's highest unemployment areas create new companies, jobs and wealth at an impressive rate. The incubator has won many accolades from the city of Denver, and this year NBIA presented DEC its Incubator of the Year award in the special focus category. But the picture wasn't always so bright.

In 1987, Denver's historic Curtis Park neighborhood was riddled with boarded up buildings and weed-filled lots. The unkempt surroundings meant low morale, few jobs and lost hope for many in the community; neighborhood residents were hardly in an entrepreneurial state of mind. But Denver's city officials had a hunch that the neighborhood was just right for entrepreneurship the –blight was just a veneer over an area primed to be a hub for business.

"Historically [Curtis Park] has been one of the highest unemployment areas in Denver, but it's on its way back up. And the incubator has had a lot to do with that," says David Gonzales, DEC's executive director. Even though Curtis Park comprises the city's largest Hispanic- and black-populated communities, Gonzales emphasizes that DEC is a "mixed-use" rather than "minority" incubator. "We do have a special emphasis on encouraging minority and women business development. We would be negligent if we didn't, in our neighborhood. But we are not an entitlement program," he says.

DEC took on a wide mission. In addition to assisting manufacturing, technology, mail-order and professional service companies, DEC also boasts a 7,900 square foot kitchen incubator that is known throughout the industry as the facility by which all others should be judged. DEC operates at 100 percent occupancy for light manufacturing space, 92 percent for office space and 100 percent in the kitchen. To date, current clients and graduates have created 116 businesses and more than 1,000 jobs.

An economic heads-up

Denver's prosperity made it a slow learner when it came to economic development. "I'd have to characterize Denver government's approach [to economic development] in the late 1970s and early '80s as laissez faire," says Bill Lysaught, deputy director of small business development at the Denver Mayor's Office of Economic Development (MOED). The approach was so laid back that Denver did not even have an office of economic development until 1985. "Back East, city governments were gearing up economic development in the mid 1970s. This hadn't taken place in Denver because things had always been pretty good," Lysaught says. And things were pretty good – until Denver experienced a bust in the oil and gas industries, and jobs and money evaporated. Community and government leaders realized the city needed a more diversified economy. "Denver, for the first time, began to hustle businesses," Lysaught recalls.

City officials identified business incubation as a viable option for creating new jobs. In 1986, the city and county of Denver selected a building – a 64,000-square-foot facility formerly owned by Goodwill Industries – and purchased it with a loan of $1 million from the city's Economic Development Agency. They picked Curtis Park, about 12 blocks from downtown Denver and close to the city's libraries, business district and premier shopping and cultural centers, because the neighborhood had once been one of the city's most affluent areas. Local leaders were confident they could revive it.

Not everyone saw it that way. The neighborhood was perceived as unsafe, and some warned that businesses would be wary. "But it was necessary to locate [DEC] there," Lysaught points out. "One of our main objectives was to impact low-income neighborhoods, and you don't accomplish that by building a facility in the suburbs. So we chose a boarded up building in one of Denver's worst neighborhoods."

The U.S. Department of Commerce supported a $1 million Economic Development Administration grant for site renovation, and the facility opened in July 1987. A nonprofit group, the Denver Urban Economic Development Corp. (DUEDC), formed to act as DEC's day-to-day management team. That group hired DEC's staff and still serves as the incubator's board of directors.

Although there was some grumbling about the incubator's location, few local leaders thought there would be a lack of start-ups. "It was a gut feeling supported by start-up statistics," Lysaught recalls. "Denver has always had a high per-capita ranking on business formations. I attribute that to our young population. There's a tremendous amount of independence here – people who have moved here from all parts of the world to try something new out West."

The facility operated at about 50 percent occupancy for the first couple of years, and even though the ball got rolling slowly, "[it] really didn't take too much effort to convince entrepreneurs to move in. [DEC and its] resources early on were embraced by new business start-ups as the place to go to start a business," Lysaught says. At least half of DEC's clients for the first two years were minority-owned firms. "The center was utilized aggressively by minority- and women-owned firms from all over Denver, who felt comfortable [in Curtis Park,]" Lysaught explains. As more and more successful firms began to emerge from DEC, entrepreneurs began to recognize what the center had to offer.

The incubator's first executive director, Rick Garcia, helped the incubator through those initial growing pains. "Rick clearly was the director during the most difficult time," Lysaught says. "There was no real knowledge about what incubators were in Denver, and everyone had different definitions about what economic development was. Rick had a very challenging assignment in the mid-'80s to juggle all of the questions about incubation, where it fits in, and why to locate [an incubator] in a low-income neighborhood."

When Garcia left DEC in 1991, the incubator's start-up phase was winding down, its reputation was established and it was ready for the next stage of growth. Gonzales was primed to accept the challenge. "His enthusiasm after the start-up period was just about over was the perfect match to take [DEC] to the next level of success," Lysaught says.

Much of that success can be attributed to the addition of the Kitchen Center in 1996. The idea for the commercial kitchen came about after Gonzales received many inquiries from potential entrepreneurs who were interested in starting food-service businesses. Since commercial food products must be produced in a licensed facility, many culinary businesses are dead in the water when an entrepreneur discovers the associated costs. The concept interested local government officials. "We'd done surveys in the low-income neighborhoods and found that a lot of part-time food businesses were supplementing low-income families. The city knew that the food industry could help a lot of people provide for their families," Lysaught says.

The University of Colorado at Denver's Community Development Corp. contributed a feasibility study, which indicated the kitchen had excellent chances for success. Construction of the kitchen, which is located within DEC's 72,000-square-foot facility, was paid for with grants and loans totaling $1.4 million from the US West and Boettcher foundations, the Department of Commerce and the city of Denver. The facility opened in August 1996, and by October of that year was at 100 percent capacity.

Client assistance

While DEC's staff is close to the national average (DEC has three full-time staff; the average is just under three), the 72,000-square-foot facility is twice the size of most incubators. DEC's challenge is not attracting entrepreneurs, but serving a full house of them with a comparatively lean staff. Gonzales is the incubator's primary fundraiser, landlord and public relations person. He, along with Kitchen Manager Efrain Vitela and Administrative Assistant Terry Montoya, comprise the incubator's 24-hour emergency maintenance staff. Vitela handles the day-to-day operation of the kitchen incubator, and Montoya is responsible for keeping DEC's books, providing secretarial support, and scheduling use of meeting and conference rooms. She also provides technical assistance to clients when she can. Gonzales handles the bulk of the main incubator's client assistance, including assessing clients' needs and putting them in touch with DEC's host of service providers. He also is responsible for screening and selection of all nonkitchen clients.

When screening clients, Gonzales is open to any solid idea. Although DEC's emphasis is on serving minorities and women, Gonzales is interested in serving any entrepreneur with clear potential for success. What he is not interested in is someone who expects help simply because he or she is a minority. "I've had people come in and say, 'What are you going to give me if I start my business here?' And I say, 'Nothing – we will assist you to assist yourself.' We teach people how to fish, we don't give them a fish," Gonzales says.

Potential DEC clients are required to submit a two-page application and a business plan, participate in an hour-long interview and provide a list of references – which Gonzales always checks. "My determination is subjective but based on lots of experience. It is at this point that I assess what the clients' perceived needs are as opposed to the needs that are quite apparent based on the business plan and the personal interview," he says.

DEC is closely connected with Denver's business and legal experts and nontraditional funding sources. After Gonzales assesses areas in which a client needs help, he may refer that client to technical assistance providers such as Colorado University's Business Advancement Research Center for market research or the MOED Revolving Loan Fund for capital. Gonzales also conducts an ongoing poll of client issues and questions, and notes concerns and topics they come to him to discuss. He then brings in volunteer experts in those fields to provide on-site training.

The MOED Revolving Loan Fund, initially capitalized in 1979 with $300,000, has provided more than $70 million in financing to start-ups. DEC clients and graduates alike have used the fund, including current client and NBIA award winner in 1997 R.A.M. Sports. R.A.M. is preparing to graduate to a 25,000-square-foot facility, and the loan fund is helping to finance the move. "They're moving right around the corner [from DEC], which is a good example of how people get into the core of Denver and begin to feel comfortable with the neighborhood, and the worries about crime are invalidated," Lysaught says. R.A.M. Chief Financial Officer Randy Jones says he's keeping the company in the neighborhood because there is a good labor pool and he wants to give back. "The city of Denver has been very supportive of us, and we want to continue to participate in the economic growth of this part of town," Jones says.

Companies' willingness to remain in the neighborhood after graduation may be a result of the family values that are encouraged at DEC. Clients are expected to interact and work toward the common goal of success. "If you want to be alone, DEC is not the place for you," Gonzales says. The incubator's family atmosphere is nurtured by company-to-company networking. "That is, I think, the strength of the incubator," he says. Companies that are on a roll help those that are just starting, and everyone becomes aware of how hard their neighbors are working to have a chance at success.

The open communication, Gonzales says, also helps with issues that are unique to DEC because of its location and special focus. DEC has many businesses run by African Americans, Hispanics and Asians. Since the neighborhoods surrounding DEC are fairly well separated by their ethnic makeups, people of one ethnicity are not necessarily accustomed to working closely with others from a different background. Gonzales says that when his clients see a neighbor client of a different race working hard, it helps to dispel stereotypes and prejudices that exist and have existed in Denver's communities for years.

Once a month, all clients gather at DEC for a lunchtime meeting and training session, The Lunch Bunch, where they are treated to a catered lunch and a presentation by an expert in a field such as marketing, cash flow, management, law, trade and export issues, accounting or graphic design. If, after the lunch session, a client indicates a need for further assistance with the featured topic, Gonzales will schedule a one-on-one meeting for that client. Juan Gutierrez, president of client company B&C Electronics, pursued follow-up meetings with a tax attorney and an accountant, who provided their services for free. According to Gutierrez, the company-to-company interaction that takes place at the lunches is invaluable. "I think the most helpful part of the meetings is being able to talk about experiences with other companies. We feed off of each other's past experiences," he says.

Gonzales insists that DEC clients attend Lunch Bunch sessions for two reasons: He wants them to get the information and to interact with one another. "When people eat together it changes the way they work together," Gonzales says. The lunches are catered by Kitchen Center clients and are organized by Vitela. "We comp the kitchen hours as a way of encouraging growth and hire the clients at their full rate. This helps our start-up companies gain confidence," he says.

DEC clients have nearly unlimited access to Gonzales, and he often feels like he's a one-man band. He is always there, spending as little time as possible away from the incubator. "It would be very easy for me to be out in the community politicking, which would help the incubator in another way. But then things back here could go to seed. I need to determine what it takes to keep this place running well and be here to see that it gets done. With a facility this large, if a freight elevator breaks during the course of a shipment and I can't be reached, that's a major emergency," he explains.

Because Gonzales is responsible for a large percent of what goes on at DEC, he is often the proud recipient of praise when the incubator wins awards and media attention. He is quick to point out, however, that when things aren't going so well, "it's still a one-man show," and he is accountable to everyone for everything.

Looking to the future

Gonzales' plans for DEC reach beyond the incubator to Denver's entire small business community. DUEDC owns a facility adjacent to the incubator called Epworth Church, which was built in 1915 and is a neighborhood landmark. The church has been vacant since 1985, and Gonzales wants to turn it into a conference and event center for small businesses and nonprofits. "[It would be] a state-of-the-art facility that would provide all of the amenities that businesses need for conferences like fiberoptics and teleconferencing. Plus, we'd provide catering from the kitchen incubator at a below-market rate in a top-class facility," he explains.

Gonzales envisions anchoring the building with a one-stop career center that would offer employment training, microlenders and other career center entities that are currently scattered all over the city. If brought to fruition, the Epworth project would make DEC the center for small business information, development and assistance in Denver. It would be a big project, and costly, but it's not out of the question. Denver is in the middle of the application stage for federal Empowerment Zone designation, through the Department of Housing and Urban Development (HUD), and Gonzales says DEC is "smack in the middle of that area." That designation would bring with it $100 million for the city to use over a 10-year period to address issues related to employment, education and business development.

Even if the Empowerment Zone designation isn't awarded, the future continues to look bright for the Curtis Park neighborhood. Denver has received a $26 million HOPE 6 grant from HUD, which will be used to (among other things) tear down housing projects in the Curtis Park area and build single family housing. "We're working closely with that to provide self-sufficient employment opportunities," Gonzales says. "The fact that all of this is happening at once is incredible."

Kitchen Center client Lori Cordova of Catering by Lori Cordova arranges a dish for a client.

An employee of DEC client company Main Street Pedi-Cabs builds a human-powered taxi.

Keywords: best practices, kitchen incubator, social entrepreneurship

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