From the Good Ideas File: Excellent criteria for deciding what small businesses to invest in (from the Downtown Project, Las Vegas)

I’ve written a lot about the Downtown Project in Las Vegas lately, both here and on Wiseeconomy.com, and there’s more yet to come.  For me, it’s a fascinating new approach to urban revitalization — more comprehensive, more high-touch, and, most surprisingly, in many ways more accessible for organizations that lack their deep pockets than you might expect.

One small bit that I though represented a particularly fine candidate for the Good Ideas File were the criteria that the organization uses to identify small businesses that will get the organization’s support, including affordable space, advising, etc. I hadn’t seen these anywhere, but I heard them during a “tour” of the Downtown Project (I posted about this on Instagram).  I thought these were particularly good criteria for any kind of support, investment or incentives programs.  Some of these are a little harder to quantify than others, but if you are trying to use your limited resources to reposition a district or change perspectives or create the kind of place that people want to invest in (and these are the Downtown Project’s goals, much like yours), then you could do much worse that to use these as a yardstick.

The points in bold text below are what I am told are the official evaluation criteria.  The italics represent my attempt to explain what I suspect that these mean and my own commentary as to why they matter in this context.

  1. Execution and Sustainability – We invest in business models with operators that can execute.  Even though the Downtown Project has the financial bandwidth to absorb some losses, they’re not looking to create permanent charities.  People who can run successful businesses often have trouble getting off the ground because of the costs of start-up, but what you don’t want as an organization is to end up having to subsidize a business that cannot make it on its own.  That’s an opportunity cost in terms of money that could be used to get other good businesses off the ground.  A lot of small business programs make the mistake of selecting on the basis of need, not potential to execute with a little getting-over-the-hump assistance.
  2. Passion – The small businesses operators we invest in live to further their passion, and their businesses provide them a medium to do so.  Small business operation, whether it’s a deli or a salon or a tool and die shop, is hard, often frustrating, often scary work.  If you are investing in someone who doesn’t have the fire in the belly for what they’re doing, it’s going to be very hard for them to pull through the tough spots.  And even your money might not make that happen.  In a lot of governments and organizations, we underestimate the power that our money will have in the face of burnout and exhaustion.
  3. Collisions – Businesses that provide a space for people to meet and interact in a way that promotes new relationships and stronger ties within the community.  This is the most interesting one on the list to me, because it speaks directly to why the kinds of  small businesses that we have historically overlooked as not “really economic development” actually matter a great deal to the overall economic health of the community.  There’s a lot of research that indicates that new ideas and new solutions grow out of interactions and relationships between people — and this is something that the Downtown Project understands better than any organization I know of.  That coffee shop or record store or deli isn’t just another thing — it’s a potential economic incubator, it’s a seedbed for new products and new businesses, because it’s a place for people to “collide.”
  4. Unique or the best – Downtown Las Vegas is a place to experience new things, and the small businesses we invest in differentiate themselves with unique qualities not found in many of their counterparts.  Wise Economy readers have heard me say ad nauseum that That Which Makes You Unique Make You Valuable.  If you’re trying to create value in a place, particularly a place that is starting from some disadvantages, there’s no point in duplicating anything else.  We are oversupplied as a nation on pretty much every broad category of retail and service.  If you’re going to invest your scarce resources, invest in something that isn’t just trying to grab a piece of existing market share, or trying to win customers by being the cheapest, because they will lose. Put your money in the business that is doing something unique in its market.  That’s the value proposition.
  5. Story Worthy – The small businesses we invest in have a story all their own, and each of our businesses contributes to an eclectic mix of narratives in the Downtown area.  This might be the hardest one for planners and non-marketing types to get their heads around.  Again, if you’re trying to create new value in a place, you’re probably fighting against an old “story” — you know, that part of town is dangerous, dirty, unpleasant, nothing good there.  Facts and figures (the usual local government/community organization stock in trade) are well and good, but they don’t always change people’s minds because we relate to stories with a different part of our brains than to facts.  Show me a place that has turned around, and I will show you where and how the “story” of the place changed — sometimes by luck, but usually through conscious effort (click here for an audio explanation of the Cincinnati Story Project — one of the best efforts of that type I’ve seen anywhere).  So if you’re going to invest scarce resources, invest them in a business that can help you change the story.  

My deep thanks, again, to the Downtown Project for sharing these great criteria.

 

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