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Hatch contest leans toward white winners in majority black Detroit

From the rooftop event space on the Madison Building one night recently, downtown Detroit crackled with energy. The Tigers were playing next door at Comerica Park, iconic music man George Clinton and Parliament Funkadelic performed at Campus Martius and people jammed the streets, restaurants and outdoor bars. As darkness fell, the gilded tower of the Fisher Building glowed in the distance.

Excitement also built throughout the evening in the five-story Madison, the tech incubator and collaborative workspace. The building was filled with some of the most networked players in the central city’s new economy of cute shops, $2,000-a-month apartments and locally sourced restaurants. They partied as they waited to see who would win the sixth annual Hatch Detroit competition, the retail development contest that combines a made-in-Detroit attitude with elements of the TV shows “Shark Tank” and “American Idol.”

The prize is a godsend for any new or struggling entrepreneur: A $50,000 grant from Comerica Bank, along with legal, architectural, advertising and other technical assistance with a value that Hatch values at another $200,000.

Vittoria Katanski, Hatch’s executive director, said the city is bursting with entrepreneurial activity. “There’s so much excitement about really building independent retail,” she said. “It’s an opportunity for Detroit to emerge as a very unique place to shop and do business. You can feel the vibe.”

With its $50,000 prize, Hatch Detroit is not the largest program for ambitious startups -- Motor City Match, a one-year-old program administered by the Detroit Economic Growth Corporation, gives away $500,000 to multiple businesses four times a year.

Hatch is one among many such competitions, funds, boot camps and tutorials aimed at startups and small businesses over the past decade. But it’s the most talked about, partly because online voting plays a role in determining winners, and partly because Hatch winners and finalists tend to be fashionable lifestyle businesses run by plugged-in young people eager for a niche in the downtown renaissance.

The five previous Hatch winners were Hugh, the stylized housewares shop on Cass Avenue; La Feria, the Spanish tapas restaurant near Hugh; Batch Brewing; Sister Pie bakery and Live Cycle Delight, a spinning studio. Ten runners-up have opened brick-and-mortar outlets, and 16 Hatch alumni operate as pop-ups.

Hatch has another distinction that sets it apart from many other similar programs in Detroit: Its whiteness. It’s a characteristic that is difficult to ignore in a city that is 80 percent African American and where discussions about the lack of black participation in Detroit’s rebirth have been taken up by observers ranging from neighborhood development activists to Nolan Finley, the conservative editor of The Detroit News’ right-leaning editorial page who is white.

In 2014, Finley wrote: “It's like playing with dynamite to have black Detroiters looking out of devastated neighborhoods at a downtown bustling with hope and hopeful young people, and not seeing their own children among that hip crowd.”

No one disputes the idea that the new-found prosperity in some neighborhoods should be shared by all, including white entrepreneurs with a business to promote. But the frustration persists because the city’s recovery remains highly uneven.

As creative storefronts, new housing and intriguing pop-ups appear in Midtown, downtown, the east riverfront, Corktown, Eastern Market and Indian Village, many of the main thoroughfares in the sprawling city remain dilapidated. The schools struggle, crime hits outlying neighborhoods harder than the well-protected central city and large numbers of the best-paying jobs remain in the suburbs, beyond the city’s dysfunctional transit. Detroit is the most impoverished big city in America, with 39 percent of the population living below a poverty line of $24,008 for a family of four. The situation is further complicated by demographics: U.S. Census estimates show the white population is slowly increasing, while blacks continue to flee to the suburbs.

“Detroit’s has very low opportunity for people that live here. Not none, just very minimal,” wrote Eric Thomas, a black Detroiter and brand strategist at a Detroit marketing firm, in a May post on his LinkedIn page. The post was titled “Why I Hate Detroit,” and it went viral.

Few people would deny that the Hatch contest has given a boost to stores that enliven the city, but the issue of participation was on stark display at the Madison. The security guards were black, but the final four Hatch businesses – seven people in all – are white. The crowd was overwhelmingly white. Four of Hatch’s previous five winners were white, the exception being last year’s Live Cycle Delight, owned by an African-American woman. Of 10 runner-up businesses that have opened, two are black-owned.

Katanski, Hatch’s executive director, immediately acknowledged the competition’s diversity was a problem when asked about it. She said Hatch leaders are very aware of the issue and have taken steps to address it.

“We’re constantly discussing that,” she said.

Katanski mentioned the Hatch methodology of allowing any member of the public -- regardless of whether they live in the city -- to vote for finalists as one reason why diversity is an issue. Even so, she noted, this was the first year the four finalists included no person of color. Hatch selects the 10 semifinalists before people cast their ballots, and she said officials do their best to see that those businesses better reflect the community.

Among the Hatch semi-finalists over the years who failed to receive enough votes to advance to the finals, nine had African-American ownership; three were Asian and two were Hispanic.

“Our goal is to make sure that our top 10 (semi-finalists are) as diverse as we can make them. That’s our major push,” Katanski said.

Hatch this year hosted community workshops to help entrepreneurs improve their applications; officials reached out to community groups to publicize Hatch and interest residents in opening their own business. Hatch also has financed streetscape improvements in neighborhoods far from the downtown districts where young people are settling. The organization said it also plans to work with a diversity specialist in the coming months.

“It’s a year-long process, and we will be working this year,” Katanski said.

Nurturing entrepreneurs

Hatch started in 2011, a historic period in the rebirth and rebranding of downtown Detroit. That’s the year Quicken Loans founder and uber entrepreneur Dan Gilbert began his Bedrock real estate company and bought the Madison Building, the first of what has become more than 80 downtown properties under Gilbert control. Gilbert’s Opportunity Detroit promotional arm sponsored Friday’s Hatch event.

Hatch founder Nick Gorga, vice chair of the litigation department at the Honigman law firm said he saw the need for stepped-up retail when he returned to Detroit after working in Chicago, where he lived in the bustling and upscale Lincoln Park neighborhood.
“We wanted to create density,” Gorga said. “Part of what we are trying to do is to bring excitement to retail in Detroit. Part of what we are trying to do is shine a spotlight on the amazing ideas that are out there.”

On the Madison roof, more than 150 smartly dressed people drank local craft beer and sampled pork belly sliders, tostada almogrote and velvety Mexican hot chocolate ice cream from Hatch’s previous winners and runners-up in the food business. Members of the final-four teams mingled, nervously.

Hatch received over 150 entries this year. The staff, board members and volunteers -- development experts and Detroit residents -- whittled that down to 10 semifinalists, two of whom were African American. Just as notable, half of the final 10 wanted to open in neighborhoods outside of the thriving central core, including a bakery in Highland Park and a wine bar in northwest Detroit.

The public chose the four finalists and then again for the winner. Voting is conducted online and at community voting booths.

After the public votes, a panel of judges steps in. This year’s final four contestants -- a pottery studio, farm-to-table restaurant, women’s clothier and a massage spa – pitched their concepts to judges Friday evening at the Madison and answered questions.

“It’s really our vibe that sets us apart,” Taylor Bolleber, owner of Bird Bee, a “boho clothing” boutique, told the judges.

Gwen Meyer and Alison Heeres, of Coriander Kitchen & Farm, drew laughs and applause from the crowd when they burst onto the stage carrying plates of food and served the judges dinner.

Jenaveve Biernat, co-owner of Meta Physica Massage, assured judges she was there “to dispel the notion that self-care in a luxury.” She added: “We must take care of ourselves to take care of each other.”

Then the judges retired to deliberate.

And the winner is…

Hatch declines to release specifics about how many votes contestants received, or the judges’ role in determining the winner. So it’s unclear if judges have ever overruled the popular vote for the winner.

Most years, judges’ discussions last less than 30 minutes. This year, they took an hour and a half. The DJ lowered the techno music and Katanski revealed the winner -- Meta Physica Massage and Sauna, run by Biernat, 38, a massage therapist, and Anahi Hollis, 39, an interior designer. The crowd cheered as the women hoisted an oversized check emblazoned with the figure “$50,000.”

Meta Physica currently provides massages in a small Midtown studio. She and Hollis are engaging businesspeople who combine talk of “price points” with the detoxifying benefits of the massages, saunas, juice bar and herbal apothecary they plan to offer when they move to the second floor of a 90-year-old building at Trumbull and Bagley in Corktown.

The spa’s victory illustrates another Hatch conundrum: Hatch founder Gorga wants retail density, but their business, however unique to Detroit, will further strengthen one of the city’s most thriving neighborhoods while other neighborhoods are dying for stores.

The building on Trumbull, and an adjacent structure built in the 1870s, are owned by Brian Mulloy and wife Stacy Mulloy, who recently moved into an upstairs apartment. The buildings are home -- or soon will be -- to a barber and beauty shop, a restaurant selling sustainable sushi, a local-products grocery and a clothing and home décor boutique. The Mulloys also have plans to build two more buildings on their property.

“The demand is crazy,” Brian Mulloy said. “For every spot that is occupied, I have two or three businesses on the waiting list. It’s ridiculous.”

Biernat and Hollis say they will combine the Hatch grant with a loan and personal savings for a total investment of between $112,000 and $120,000. Work will start soon, and they hope to open in Corktown early next year. They said they plan to hire about 10 employees, all Detroit residents, and massage therapists will earn half the price of a massage, which will run about $60.

Biernat and Hollis have many friends who are running businesses in the city, and their passion for Detroit burns brightly. “We’re trying to activate this whole corner,” Biernat said.

Working for diversity

Hatch says 14 alumni -- winners and runners-up -- have opened storefronts, creating more than 80 jobs and investing $2.5 million in Detroit and Hamtramck.

Katanski insists Hatch wants to improve its metrics on racial diversity, and Aubrey Agee said he believes her.

Katanski reached out to Agee, who works with entrepreneurs at Wayne State University and was part of the panel that winnowed the Hatch contestants to 10 semifinalists, for help in making Hatch contestants better reflect Detroit.

Hatch’s lack of diversity “is a true frustration to” Katanski, Agee said.

Agee, who is African American, said Hatch suffers from an image that it exists only for “folks from the suburbs, or the new gentrifiers – I hate to use that word – people who have moved into the city.”

He said Hatch could do better in finding a broader range of candidates, but he emphasizes the need to spread the word among Detroiters that they can vote for candidates who want to open stores in outlying neighborhoods.

“What we really need to do is activate our communities,” said Agee. “We need to get the local neighborhoods to understand that they need to back their business folks in the competition. They need to support them, both with the votes on line and the votes in person.”

Other Detroit organizations that help entrepreneurs have managed to find a diverse group of clients.

April Jones Boyle, founder and executive director of the four-year-old Build Institute, which helps entrepreneurs turn their ideas into businesses, said: “We’ve had over 700 people take our classes. Seventy percent of our students are women, and we have someone from every zip code in the city.”

Mayor Mike Duggan has encouraged outside entrepreneurs to start businesses in the city, but he also is careful to note Detroit “has a commitment to creating a comeback that includes all Detroiters,” as he told the Democratic National Convention in July. In reporting on grants by the city’s Motor City Match, which uses federal grants to help businesses and landlords, Duggan told reporters nearly 70 percent of applicants were African American, and fifty percent were women of color.

Linda Forte, senior vice president for business affairs at Comerica and a veteran development official in Detroit, was instrumental in getting the bank to fund the Hatch winner for the past five years. Forte, who is also Comerica’s chief diversity officer, said she and bank officials loved Hatch’s focus on building independent retail in Detroit neighborhoods.

“I thought it had a tremendous opportunity for a ripple effect,” she said.

Forte too said the overall diversity of past semi-finalists and finalists is better than this year’s all-white final four would indicate.

One problem she sees goes well beyond Detroit: the deficit black businesses in general have in securing necessary funds. Hatch judges might see a potential problem in getting some black businesses open, she said.

“It’s no surprise that we have businesses that are owned by more diverse individuals that are maybe a little behind in capital development,” Forte said.

In any case, Katanaski said Hatch is serious about diversity, and has plans to do better.

“It’s definitely something that we are active about and are incredibly interested in continuing and moving that forward,” she said.

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