Andrew White: I want to welcome you all here, and I want to thank Jonathan Bowles and Neil Kleiman and Tara Colton of the Center for an Urban Future for doing most of the hard work to make this morning’s program happen. I’m sure you’ll find it more than worthwhile. I wanted to tell you about a couple of things coming up at the Milano School. One is on March 30th – for much of the day, we’re going to have a conference here on U.S. Mayors and Innovative Leadership – featuring Mayor Bloomberg, Mayor Gavin Newsom of San Francisco, Mayor Kay Barnes of Kansas City, Mayor Tom Murphy of Pittsburgh, the newly-elected Doug Wilder of Richmond, and former Governor of Virginia, and former Philadelphia Mayor and Pennsylvania Governor Ed Rendell, along with some journalists and academics, commentators and so on, to try and dig into what it means to be, on the one hand, an innovator or a technocrat or a city manager kind of mayor, versus a more political mayor, and whether you can be one and the other at the same time. So, I hope you’ll join us for that. There’s cards out on the table for information about how to RSVP.

Secondly, on April 7th, which is a Thursday morning, we’re doing a program on affordable housing in New York, with Commissioner Shaun Donovan of the Department of Housing Preservation and Development, and a couple of community development leaders, as well as an executive from Bank of America, which has done some recent, interesting investing in affordable housing in New York.

So, just to start things off this morning, I wanted to say a couple of things – a little bit of which some of you might have heard me say before, if you’ve been to these programs. This is an era now where, in Manhattan, all around us, particularly downtown, it’s beginning to look more and more like a mall sometimes. We see a lot more franchises, a lot more national stores, national chain stores. So you might think it’s a bad time for small business, although some small business people are deeply involved in that type of business as well. But, all you have to do is go to the outer boroughs, and you find that, starting in the mid-1990s, this was a time of incredible entrepreneurship in the outer boroughs. This was a time of wholesale change, coming out of a period of really steep decline in a lot of neighborhoods, in Brooklyn and Queens and the Bronx. You know, immigration, community revival, city investment in housing, but most of all, the entrepreneurship on those commercial strips in the outer boroughs really regenerated the city, much of the city.

So I like to look at that as the evidence that it’s not so much government policy, though government policy makes a big difference. It’s the agency of communities. It’s not so much just criminal justice enforcement, crime enforcement. It’s the people investing in creating businesses and trying to spur something in their neighborhood. It’s people in their schools, as well, and the parents working in youth programs. It’s a lot of stuff happening in neighborhoods, it’s not just – so many of us tend to look from outside at what government can do to turn it around, but it works both ways, and I think that’s a lot of what we’re going to talk about today. Jonathan is going to emcee and moderate the discussion, so I will turn it over to him. Jonathan Bowles is Research Director of the Center for an Urban Future. Jonathan?

Jonathan Bowles: Thanks, Andrew, and thanks to the New School and Milano for hosting this event, and this forum series. I also want to thank Citibank, which has been financially supporting this forum series that we’ve been putting on. And, usually Marc Jahr from Citibank is here to say a few words, but he couldn’t make it this morning. While I’m on the subject of the Center’s forum series, I want to quickly mention that our next event, on April 6th, we’ll be having an event titled “The Boroughs Outside of Manhattan As An Engine for New York City’s Future Growth,” and we’ve got some great panelists lined up, and you’re all certainly invited to that event. We have some information about it in your packets today, so please sign up or go to our website – www.nycfuture.org - to find more information. That will be right around the corner at the New School’s Swayduck Auditorium, on 5th Avenue between 13th and 14th Streets.

Last year, the Center for New York City Affairs and the Center for an Urban Future held a really interesting discussion about tapping New York City’s immigrant entrepreneurs for economic development. And, as Andrew was saying, it’s such an important issue, we’ve seen – with immigration, and entrepreneurship goes so hand in hand. You know, I think, at the Center, we’re really focusing on areas of growth for the future, and I think that beyond just the growing immigrant populations we’re seeing in the city, I think we need to really talk broadly about the entrepreneurial vitality of New York City’s neighborhoods. We see so much creative and entrepreneurial talent all around the city, and I think that we’re just asking the question here today: how can New York City tap into this entrepreneurial vitality even more than we already are? So, without further ado, let me introduce our really distinguished panelists. We’re happy to have them all here today.

Let me first start with William Thompson, who is the New York City Comptroller, as you all know. Mr. Thompson became New York City’s 42nd Comptroller on January 1, 2002. A lifelong resident of Brooklyn, he is the son of a judge and a teacher, and the proud product of the New York City public school system. He has used the powers of his office to aggressively safeguard the city’s finances, seeking out savings and rooting out waste. His audits of city agencies have uncovered $90 million in savings, including more than $22 million in Medicaid reimbursements unclaimed by the Department of Education and almost $4 million in fines uncollected by the Taxi and Limousine Commission. Also, under his watch, the amount of money collected for damage done to city property rose dramatically. He led the fight to protect the City’s Meals-On-Wheels program, and his battle against the proposed bus and subway fare hikes forced the Metropolitan Transportation Authority to open its books to the public. He alerted New Yorkers that the federal government was failing to make good on its promise of aid in the wake of the September 11 terrorist attacks, challenged the city’s inequitable plan to reduce trash collection in some boroughs and was a leader in the successful campaign to fully reinstate the city’s recycling program. Through his Community Action Center, he has helped more than 40,000 New Yorkers with problems regarding city services. As custodian and investment advisor to all five of the city’s pension funds, he manages a combined portfolio of more than $82 billion. In this role, he has invested hundreds of millions of dollars in affordable housing and commercial real estate in New York, helping increase housing and job opportunities within the five boroughs.

Next to him, Lisa Fortunato, is the founder and president of robbie dawg, a Red Hook-based manufacturer of handcrafted organic dog biscuits. Fortunato, also known as Robbie's mom – I think you can imagine who Robbie is – started the company in August of 2003 in a 200 square-foot kitchen and has since expanded to a 2,700 square-foot loft in Red Hook, with an open production floor and showroom. Fortunato was previously the Director of Annual Giving for the Berkeley Caroll School, the Director of Special Events for the NYC Fire Museum, and Director of Marketing & Graphic Design at Urbitran, Associates, a civil engineering firm. Fortunato has a degree in Art History from Fordham University.

Next to her is Etu Evans, the founder, president and chief shoemaker of Etu Evans, LLC, a company that was established in 1993. Initially, his company began designing millinery and jewelry, but has since expanded to include footwear, handbags and small leather goods for men and women. He has been hailed by Footwear News as the Prince of Luxe footwear and accessories, he was chosen by Ebony magazine as one of their leaders of the future, and Black Enterprise magazine hailed his boutique as one of their top places to frequent in New York. He was also selected for a TONY Shopping Award from Time Out New York and is the current recipient of the Crain’s Small Business of the Year award. His footprints can be traced from Planet Harlem down to Madison Avenue, and his designs were heavily influenced by his grandmother Queen Esther’s vibrant collection of shoes, hats and jewelry. A graduate of Columbia University, SC State University, and the Fashion Institute of Technology in Accessory design, he also studied footwear and marketing at New York’s Parsons School of Design. Currently, he is an Adjunct Professor in the Fashion department at Berkeley College in White Plains. He previously served as an adjunct professor at Medgar Evers College and as assistant director of The Institute for Youth Entrepreneurship.

Next, Brian Singer has been the program manager of CAMBA Small Business Services for five years, providing training, consultations and micro-loans to entrepreneurs in Brooklyn. He has over nine years of economic development experience, seven years in micro-enterprise work and two as a Peace Corps volunteer in East Africa, teaching high school math. He also brings the perspective of being an entrepreneur himself. He has started three businesses. He holds a BA in Economics, Political Science and History from Buena Vista University in Storm Lake, Iowa, and an MA in Social Change and Development and International Economies at Johns Hopkins School for Advanced International Studies, with a focus on small business development.

Nigel Pearce is currently the CEO of Finance NYC, a New York City-based merchant bank and private equity firm that focuses on early stage and emerging businesses. He formerly served as director of business services for the Queens County Overall Economic Development Corporation, where he designed and implemented an Entrepreneurial Center with financial loan packages tailored to meet the needs of strategic and management consulting firms. He is also the principal instructor for ITAC's Fast Trac High Tech 12 week program, which focuses on business skills development for CEOs of High Growth Technology Firms. He has 15 years of experience working for banks and financial institutions. He has served as assistant vice president of the New York Business Development Corporation, where he managed a portfolio of loans representing $100 million a year, and vice president of Sterling National Bank and Trust Company. He is currently a Board Director for the Samaritan Foundation, Lighthouse International, and ITAC.

Let me start by saying – obviously, I think it’s, like Andrew said to begin with, small businesses are vital to New York City’s economy, I don’t think anybody doubts that. Businesses with under 100 employees make up more than 98% of all businesses in the city. Businesses with under 20 employees make up about 90% and, I think, in the other boroughs, the numbers are even greater. My first question to the panelists – and we’re just going to have a free-flow of ideas today; the idea is just to have a good discussion – so, I’m going to start off with one question where I’m hoping everybody can maybe give a response. But, from then on, I’m going to certainly ask questions, but feel free to chime in and we’re not going to go in any particular order, just whoever has a point to make, please do so. My first question: are there, in fact, untapped opportunities for entrepreneurs to flourish in New York? If so, what’s holding us back from capitalizing on the city’s entrepreneurial population? Anybody want to start?

William Thompson: It’s always the politician who goes first. It’s amazing. Sure, I think there are lots of additional entrepreneurial opportunities out there. I mean, if you look at the changes in New York City in the last 10 to 15 years, most and so much of the growth across New York City in its communities, and particularly outside of Manhattan – I think the answer is a definite yes. I think what holds it back is access to capital. I think that’s the biggest thing if you look – whether it is, and particularly on a small business level. The lack of capital, in both start-up and for small companies, that’s everything. People who are trying to start up small companies, whether it’s in their homes or in small areas, the lack of capital – either to start or to grow – is the thing that holds people back the most. And that’s the thing that you probably hear about the most, that lack of capital.

Lisa Fortunato: I just want to say that to hear a politician say that is really exciting, because I’m thinking to myself – well, gosh, that’s probably the hardest thing, is getting the money. It’s the idea first and everything else that follows along, but certainly the money is what would hold anyone back, and we’ll probably get to that, and to be able to navigate the system and to find where you can get the money.

Etu Evans: I concur. I think there are several opportunities for entrepreneurs in the city, but as I walk around my neighborhood, the soaring rents make it very difficult to even take root to begin that initial concept. Secondly, I think advertising is very important, and getting a salary, not only to pay yourself, but a staff – I know when I first started, I probably slept three hours a night. I’m getting a little more sleep now, but it makes it very difficult without that capital and the support staff.

Brian Singer I would say, certainly, capital, access to capital is an issue for a large majority of entrepreneurs. However, I would add to that, that it’s not always just capital. And a lot of times, you do hear people to say that it’s access to capital, but I would add a couple other points to that. In addition to that, I would say that it’s access to quality advice and ideas that would be just as important, I think, as access to capital, if not more important. The reason I say that is because I see a lot of entrepreneurs, who, one of their problems in getting started is fear of failure. A lot of people that I meet are ready to start businesses, they think they’re ready, but they don’t take that step to actually starting their business. And part of that is a fear of failure. It’s like – well, should I really do this? Am I going to fall on my face, or am I going to really make it? And in those cases, I think if people would have had solid business plans or at least solid ideas on how they’re going to implement their plans, that they could then feel confident enough to go forward. So there’s a lot of untapped potential out there in people who are hesitating to start their business. Okay, that’s one.

The other is that if people had really good ideas and really good business plans and a better understanding of where the capital is, then I think that you would find that there are a lot of people who say that they don’t have access to capital, when really there is capital there. It’s hard to identify and hard to attain sometimes, but certainly when you have your credit report and your credit history is in line, when your business plan is ready, when you have money saved up ready to invest in your business, and you have the other resources, the technical assistance resources that you need to start your business, you’re more likely to be able to find that capital, to be able to find: where can you go to get that money? It’s not easy, so one of the things on that end would be then to consider: how can we make it easier to get the capital? Because, actually, the money is there, okay. The question is getting the money. So, the question would be – either people don’t know how to get the money, so then that would require technical assistance on how to write a business plan, how to apply for the money, where to go to get it, or reducing the barriers to getting that money.

But there’s a catch-22 there, because if you reduce the barriers to getting money, in the eyes of lenders, you are inviting more failures. So there’s a real catch-22 here – reduce the barriers, you’re inviting more failures; increase the barriers and people will complain of lack of access to capital. So, there’s a question there, and I do believe that there is a huge focus right now in the micro-lending industry, where people are lending money to very small businesses. There’s a huge pressure these days on: what’s your default rate? What’s your repayment rate? And if that’s the only thing that people are focusing on, then your focus will be on raising the barriers to getting access to capital. So, if funders, and people who support micro-enterprise, if that’s all they care about is: you must have a 1% default rate on your loan portfolio, then you have no choice but to be very, very strict with who you lend the money to.

Nigel Pearce: I would concur that it’s access to funding. I can point to two funds – the ReDec loan fund and NYSIC, which have subsequently stopped lending money. And these are two funds that, I would say, in three deals created employment of over 1,000 people. And they were in that critical zone of the $5,000 - $50,000 in debt, and then the other one was the $50,000 - $500,000 in equity. And, so, those are two critical zones right now, when we’re seeing and looking at early stage companies. Because it takes so much more money today to get into business and get started, especially in New York. The hurdles are high and to get started, you must get started that much quicker and faster, with so much more, so that you need that early stage money in order to get to that point, where a VC or private equity would look at you, because they have certainly moved downstream in what we’ve looked at.

So, the barriers today are those funds that find it unfeasible for them to be able to operate in those zones. And, so, we’ve got to find a way to incentivize those people so that they can operate. Some of our companies we’ve had move into Empowerment Zones because there was incentive to investors, they got a 25% tax credit on their state taxes. So, that was an incentive for many of the people to put money into certain deals. So there are things like that that we need to continue to do in order to get people excited about putting money into businesses, and obviously there’s a risk-reward curve and therefore we’ve got to be able to increase the reward for investors for them to be able to take the risk in the early stage space. And the other thing is, obviously, advice, consultants around to help people, just giving people money is certainly not enough and I worked with Fast Trac, and also the Entrepreneurial Assistance Program, teaching people at night and understanding the power that they have in their hand when it comes to business. Many people come to me and they think there’s only a million dollar business here, but when we look at the real market, there’s a huge opportunity. And, so, being able to recognize the market opportunity that you have in your hand and being able to translate that to the market is also critical to you. So, those are the two things that I would point out.

William Thompson: You know, one of the things that, and as we kind of go into a discussion, note assistance and advice are helpful, but – there was, I guess back on Monday, there was a dinner and a full day of educational programs. An organization called Count Me In, for women’s economic empowerment – which, I think, they’ve become now, probably one of the larger micro-lenders in the nation, and they focus just on women. And the numbers there, and their repayment rate is probably about 90%, which are pretty good numbers, by and large. And they’re doing micro-loans to women-owned businesses or start-ups, and they’ve been very successful. And it is – they help to provide some advice and some direction, but most of it is the access to capital, and people in doing small businesses in this case, even out of their homes, that have been successful that have continued to grow. And they’ve done a number of businesses and a number of loans across the nation. And I think it is, when you start to look at it, it comes back to the question of access to capital.

As I said, advice and support are helpful, and we also, on a larger level, as chief investment officer for the pension funds of New York City. Heck, we’re trying to move $4 billion into private equity. So you see it on a larger level, but I’d like to see it. With my private equity managers, I’d love to see 90% as far as it goes in their numbers, and that’s on the larger level, and that’s billions, as opposed to the micro-level and micro-lenders. And I think it speaks about the need on that level for start-ups and, particularly, a well-defined business plan is a great thing. But as we continue to have a larger and growing immigrant base here in New York City, they’re not going to have the history, they’re not going to have the savings, and a lot of people now still don’t. I’m sure the vast majority of small businesses that start up, people didn’t have huge savings, they didn’t have great credit, there were a number of things that they didn’t have, but they also were able to recognize opportunity and move in that direction. And, I think, as I said, that’s one of the things that the city has never been good at, in figuring out ways over the years to be able to work and assist that. And that’s one of the areas – if we’re going to look at New York City continuing to grow, that’s where it’s going to come from, because it’s not going to be Wall Street. And we have to, kind of, cut the over-reliance and over-dependence eventually on Wall Street.

Jonathan Bowles: You know, I think that’s a really good point that you’re acknowledging or you’re saying that for the future of the city’s economy, it’s these start-up ventures, some of which are not going to succeed, but some will, and that that might drive the future growth. But I get the sense, and I’m curious what Lisa and Etu have to say about this. I mean, maybe from your opening comments, Lisa, I get the sense from talking to a lot of small businesses that they don’t get a sense that they’re really appreciated, that the power of entrepreneurs is really recognized by economic leaders or city officials.

Lisa Fortunato: Well, I think it’s twofold. I think you have to first look at what made you become an entrepreneur? And what was that driving force? You have to look at that. I mean, my own personal situation is: I had worked for people, and I worked for a school and I was laid off. And at that point, I was like – I am never working for anyone ever again. And everyone has probably said that. But, it was at that point that I had worked very hard for different organizations, given 120% and it was always never appreciated and I always felt like: forget this. And, so, at that point, when I reached that, I made a list. And I made a list of ten different things and I said – these are ten different things that I can do to make my own living and I am going to create my own destiny. Well, I was so driven at that point and I was fortunate enough to get a decent severance. So, I spent three months deciding, and I have to back up a little bit – but the week before I was laid off, my dog, Robbie, was going to turn a year old, and I wanted to have a party. Now, my background is fundraising and event planning and all this other kind of stuff, and so I wanted to have a party. Well, I went looking for different things, I couldn’t find anything I liked. I went on the web, I said: well, I bake, I’ll just find a recipe. I went on the web looking for recipes, couldn’t find anything I liked.

So I said: well, I’ll make my own recipe. So, I developed my own recipe, the dogs loved it, everybody went crazy. The next week I was laid off. And that’s when I said: that’s it. Now, if I hadn’t had been laid off, maybe in the back of my mind I would have said, oh, I bet you I could have done this as a business. But would I have ever pursued it? No way, because it takes so much commitment and focus that you have to be driven, and after I made that list, I said – okay, this is it, I’m doing the biscuits. And that’s what I decided to do. I spent three months developing and designing. I was lucky enough that I had the severance, that I was able to work from home, and that everything I had done previously helped me to be able to – I didn’t have to hire a designer, I didn’t have to get someone to develop recipes. I spent my time designing everything. Well, when you say: did you do a business plan? Everyone says: did you do your business plan? No, because it’s like – did you do your homework, and you don’t want to do it. I have all these people telling me: do this, do this.

And you’re caught up with wanting to be creative and wanting to do what you’re doing, and I started out of my kitchen – which, actually, my husband laughed when he saw 200 square feet, I think it’s 100 square feet – you know, with a KitchenAid mixer, doing it. And I bought a Viking oven and we’re baking and baking, and you then, all of a sudden, because you’re the sole person, you have to be worried about money, you have to be worried about marketing, you have to be worrying about sales, you have to be worrying about PR, you have to then be able to accommodate your customers, you have to figure out how you’re going to get your customers, you have to do all that stuff. And then you’re saying – do a business plan, so you can get money? Yeah, there’s definitely money out there and you can get these loans, but they want to know that you spent your own money. Well, I’ve already invested $40,000, thank you very much, but I didn’t file my form first to say that I spent $40,000 so that doesn’t count. And, so then I’m like, well, okay, that $40,000 doesn’t count? What about all the split equity? I mean, that doesn’t count either.

So, what we ended up doing is we refinanced our mortgage and that’s how I got our working capital. And this is the way I look at it: my worst-case scenario is, you know what? I close up shop, I sell everything and I have this bank note that I have to pay for 30 years. Well, then I go get another job and that’s what I have to do. That was much better to me than the scary thing of: you have to pay back in five years. I tell you, when we moved from our kitchen and if you could have seen my house, we got to a point – because, it’s like, you know, you talk about how you want to have a kid. Well, if you talk about it and think about it, and everything else, you’re never going to do it. You’ve got to jump right in. When you make that plunge, you’re in there and you’re drowning and swimming, but you’ve got to do it, because otherwise you’re never going to do it. So, when we made that decision because my house, because the living room had boxes and the kitchen had this, and there’s 50 pound bags of flour all over the house, and there’s a dog and a kid and a husband who’s not complaining that the sad thing is that, now we moved into our space in mid-December.

Well, all of a sudden, now, you have to start thinking about the bottom line. And you’re thinking – wait, it costs me this much money each month to be in this place? And, so, it turns that all of a sudden your focus changes and now you have to meet that bottom line, and then you have to say: okay, what do I have to do? But, the part that’s exciting about being an entrepreneur is that, okay, I’ve been doing this since August 2003 when I got laid off. There’s not one day where I say: oh, I hate my job, or I wish I was doing something else. And that, to me – even though it’s all been split equity at this point, I’m not making any money, I haven’t taken a salary, I have staff, but I’m not taking a salary – is, it’s been worth it. And it’s been truly rewarding and it helps you see who you are and what you can achieve and what you want to be.

And, you know, it’s interesting because I did go to, at the beginning, when I had my time, to different seminars on how to get funding and everything else. And I remember – we were at this little table and everybody went around to say what they wanted to start their business with. And I was the first one, and I said, oh, I’m making organic dog biscuits. And they just looked at me like I was crazy. And I was basically laughed off – because people wanted to be event people, they wanted to have a restaurant, they wanted to have computers, whatever. And I was kind of laughed off of that, and I was like – if you’re supposedly representing a financial institution that’s going to give money and you can’t conceive that this is a good way to invest money, then how am I supposed to get money if that’s not going to be part of it?

Jonathan Bowles: Lisa, let me ask Etu. It’s a tremendous story and we’re all really thankful that you’re so successful so far, but let me hear – Etu, I’m curious, how did you get involved in this? I don’t want to pretend that – yes, entrepreneurship is important to the city’s economy, but it’s not easy, as Lisa was saying. How did you get involved in this and how did you get the financing for what you were doing?

Etu Evans: I’m a firm believer that prosperity follows passion, and to become an entrepreneur, it requires removing fear with fate. My mom is still recovering – I graduated from Columbia with a 4.0, she was ecstatic, I was in Italy working, all over Europe working. I’m a behavioral therapist turned shoe therapist, I should say. And, I had a thriving career, a lot of clients, and she said: you’re going to quit your job? I knew I bumped my head when I had you, but I didn’t know how hard. But I’m pleased to announce, as of two months ago, she’s now a shoe fan. But not only dealing with the fears of your friends, your neighbors or your relatives, you have to deal with your own fears. And sometimes people say: you can’t do that. I had a horde of press, and people would still say to me: but, who makes shoes? I said: you’re wearing shoes, they have to come from somewhere. I think a lot of people really didn’t understand the industry of footwear. It’s a thriving industry, whether you’re doing a Payless, which I’ve designed for, to a high-end shoe, which is my particular niche market.

Since you’re talking about economic vitality in the neighborhood, I went to the Empowerment Zone, they were not helpful. In fact, they said: you graduated with a 4.0, what are you doing here? I had guys on Wall Street helping me with a business plan, they said: it’s really great, it’s really in-depth but it would take us two months to go through this. So what do I do? I mean, rent’s due every month. They just weren’t really kind. I had Paul Weiss assisting me, I had a great legal team, a great accountant, a great everything. But the service sucked. I don’t know if it’s improved, but after you’re hitting your nose three times, you need to breathe, so you find other ways. So I said, okay, I need to make people aware, since they don’t understand what I do. So I started my own PR company, and I thought: this was a great way for me to increase public awareness of what I did, at the same time while serving other people. And what that did – it allowed me to foster a cohesive and comprehensive network of individuals that I could sell to.

Okay, now I have that in place, but what about the equipment? It’s very, very expensive to get shoe equipment, and then how do you operate it? Okay, now I operate it, now I don’t have anyone who can assist me to operate it, because it’s a technical skill set. Also there’s glues and health hazards. I had a classmate whose gall bladder was damaged. So, commitment is one thing. You need muscle – there’s over 100 steps to make a shoe. We tried to get a few ladies in, no offense ladies, and they said: this is breaking my nails. So, currently, we’re set up in Italy and I’ve been making all the shoes, up until last week, myself. But you should see us in Bergdorf, Neimans, Nordstrom, Saks at the end of the year.

Jonathan Bowles: Great. Brian and Nigel, I’m curious – when I’ve talked to some local development community people that are working with small businesses and entrepreneurs in New York City, one of the things I’ve heard from a few people is that they see a lot of copycat type entrepreneurs, that the businesses that they see starting the most are business models that already exist in the neighborhood – so, the nail salon, the beauty parlor, the restaurant. These two examples of entrepreneurs seem like they found a niche in the market where there’s actually growth potential. But, I get the sense that that’s not what most of the entrepreneurs out there in the neighborhoods are. I’m curious if you see the same kind of thing, and is it good that we’re seeing this kind of growth model, this niche, or should we be supporting that? How can we see more of these kind of things?

Brian Singer: That’s a tough question. What I’m seeing – just to give you a little bit of a context, I work in Brooklyn on the corner of Church and Flatbush, which is right in the Flatbush community. And what we typically work with are micro-entrepreneurs, like I think you guys started – entrepreneurs who have, businesses that have 5 or less employees and what we do see is a wide variety of business owners, some who are doing businesses that are not very unique or out of the box and then some who are doing businesses that are quite unique and out of the box. And I’m not sure – there are a couple of strategies one could take. You could either look at it and say: okay, let’s focus on those that are out of the box and what people would call “traded goods,” goods that you could actually sell outside of your local area, as opposed to a local deli where you’re just selling within your own economy. And the idea of dealing with businesses that sell outside of your economy is that you are actually able to create a greater inflow of cash into the local economy.

So it would make sense to, it might make sense to try to focus on that. The difficulty there would be choosing which industries – maybe you just go with, when people come to you and say, it’s organic dog biscuits, say: great. How can we do this? What’s the market for this type of thing? And that would be the appropriate approach to doing that. So, helping people do that kind of thing is certainly something that really piques our interest when we see people doing traded products or services, because we know that’s something that will bring additional funds into the local economy. But there’s no reason that we have to stop working with people who are just serving the local economy. And, so we do both, essentially.

Nigel Pearce: I would say, for entrepreneurs, my barometer has been sort of how many business plans I see a week. And in the heyday of the dot-coms, I was seeing probably anywhere from 5 to 10 new business plans a day. Last year, it probably came down to about 5 to 10 a month. And we’re back up to about 5 to 10 business plans a week. And I’ve got to say that they’re very artistic and many people coming up with their ideas, just like Lisa’s background, and many of the entrepreneurs come to us, with backgrounds, sometimes corporate, wherever they come from, and they’re being able to leverage that in a business today. So, we’re seeing very different businesses across the board come to us. One business that came to us was Home Bistro, which is the delivery of services, of food to your home, like the Omaha Steak in the white styrofoam. And we outsourced everything. We started that business with a computer and a desk, and it’s now doing $10 million, has 80 people in employment, but his background, he came out of Kraft Foods, he understood foods, he really wanted to do this, he felt the corporate environment didn’t allow him to do this, and so they’re able to leverage that background into a business that we expect to sell back to the company that he left, because he realized he couldn’t do it within.

So, we are seeing entrepreneurs across the board. But even if someone comes to me – someone recently came to me with a restaurant in Harlem. I said: don’t just look at Harlem. Think about the market, think about other marketplaces that you could also interface with, create this as your prototype for the initial, so that this lends itself to being, you know, 80 stores, 120 stores, whatever it is. Don’t just think about Harlem, think about all of the intricates that you have that make it viable in other marketplaces, so that you can understand the size of the market. I’ve met people like Al White, who owned Network Solutions. Network Solutions sold for $1 billion. He didn’t get any of that, because he sold out too early, not understanding the market potential he had in his hand. Another entrepreneur that I spoke with had 14 cell sites back in the ‘80s, and he tried to tell VCs that this was the next wave. And nobody could listen to him – they said: who wants to be disturbed outside their office? And, so, not being able to translate that into what the market potential of cell phones were going to be, he sold his 14 cell sites for $14 million – not a bad thing, but somebody sold that after that for 500 times that and AT&T bought it for 1,000 times that.

So, entrepreneurs really need to understand the potential, the power that they have in their hand, utilizing their background. If you came to me and said, “I just found an idea that came to me last night,” you’re probably not my client. But if this is something you’ve been dreaming about all your life, this is what keeps you up at night, this is what you want to do, there’s nothing that’s going to stop you, not even funding, nothing will stop you, that’s the client that I’m looking for. So, the entrepreneurs, we talked about passion, this is what they’ve done. This is all of their life, their background, everything they’ve done up to this point has led them to this, to be able to do and produce the product and service that they’re doing.

Jonathan Bowles: I have a question for everybody, but I want to start with the Comptroller. How do you raise the, I guess, profile within city government? And I do want to give credit – I think that a lot of people I talk to out there really do give a lot of credit to the Small Business Services Department now under this administration. They’ve opened Business Solution Centers in all boroughs, I believe, or will when they open one in Staten Island pretty soon. But, from what we’ve heard from some of the entrepreneurs on the panel, clearly getting the attention – whether it’s the Empowerment Zone in Harlem, I think maybe we need to raise the elevation of how important this is. What would you suggest?

William Thompson: Well, you know, government – and there is a bit of a shift going on under Small Business these days. They’ve started to make the transition from just looking at large businesses to smaller businesses, and I think they will get better at that. It’s one of the things I will give the Bloomberg administration – they’ve made that shift and it hadn’t been done before. Before, I think, in the past it was about retaining large businesses, and that was basically the city’s economic development idea – let’s hold onto the large businesses and that was it. I think that shift, bit by bit, I think the city will start to get better at that, and I think that’s important, number one. Number two, it isn’t just going to be city and city government. It’s going to be other places and smaller lenders and things along those lines. I think if you rely on government in this case, you’re out of your mind. You can – that’s part of the solution, but it’s not the full solution. So I think it is in smaller and some of the banks and some of the micro-lenders and others, I think that’s what you have to do. Or some of the larger lenders, depending upon the idea and the background and the expertise that you have. But it’s a variety of different things, it isn’t one area and one focus. It’s a number of them across the board.

Jonathan Bowles: Lisa and Etu, would there have been something that would have been very helpful coming from government or even from the private sector that would have been really helpful to you in starting and growing your business?

Lisa Fortunato: Well, I think that – I mean, I do still want to say that what I have found helpful is that in Brooklyn, the business library which is in Cadman Plaza has wonderful programs and it’s a wonderful resource, and I did go to several programs there, and that helped me tremendously. Becoming a member of the Chamber, which I thought would never be something that would be very positive for me, but it has been extremely positive, and they’ve been very supportive. And, then, we’re in Red Hook and Red Hook is in the Empire Zone and so by being in an Empire Zone, we’re going to be getting lots of benefits that way as well. So, it’s just that as I say, I know there are things – what about, isn’t there stuff for women who are over 40? I’m not a minority, but I’m still a woman over 40.

The thing is, I think what’s just so hard is it’s just one more layer of different things and that’s what sometimes is hard. There’s stuff out there and that’s for sure, but you have to navigate it, and that can be overwhelming and then it gets pushed aside because you have so many other things. But, certainly, the Chamber has been great, the business library has been wonderful, and there is plenty of stuff out there. I mean, there’s definitely stuff out there – the small women’s business association, they have lots of information on their website, which has been great, because I’m working on my press kit, and that’s the other homework that I have to do. They have a step by step. So, it is out there, it’s just getting it and being able to then find the time for yourself to do what you have to do.

Jonathan Bowles: Etu?

Etu Evans: I would say that I agree that there are many institutions that are in place to help – unfortunately, none have helped me. But the person that I know that I can depend on at the end of the day, is me. And so I’m committed to making it happen. And I think that when you have a committed mind and make that commitment to yourself, it ultimately happens. And when it didn’t happen in Harlem, I went to DC. When it didn’t happen, I went to Paris, and then I went to Japan, and now I have all of them working at the same time, but they didn’t help. I needed money, my credit was good at that time. When you’re an entrepreneur, your credit, sometimes it falls off a little bit. I had two rents, because I couldn’t put the machinery in my home. So, I couldn’t depend on BRISC or the Empowerment Zone or the Harlem Venture Group. I went everywhere – and maybe that’s for the best. I mean, it’s working.

Jonathan Bowles: All these groups – BRISC, the Harlem Venture Fund, the Empowerment Zone – why do you think that they didn’t see the model you have as being something worth supporting? Is it that their requirements are so high that it was just too much of a risk for them?

Etu Evans: I would say – in my honest opinion – I think there are people who have jobs who don’t really understand the constituents that they’re serving. Secondly, I think there are individuals who are caught up that they have the title of the job, and they don’t work really hard. And when you’re an entrepreneur, you’re committed to working really hard. I mean, I had proven myself academically as well as artistically, and I think they like when you come in and you kind of look like you’re leaning on a crutch. And I think your job is not to judge people on what they look like aesthetically but the content of what they’re trying to achieve. And a lot of the concerns – in Harlem, particularly – were as people who were not residents were coming up, they all seemed to get placements and a lot of the community residents were outraged as a result of that, but I think you just have to be committed, and stick to your guns, and it happens. But those institutions were not helpful. And I’m not saying that they aren’t needed – I think they are needed – but I think they need to really address and take an acute look of what the community really needs and how to best serve those individuals.

William Thompson: By the way, just for information, from the both of you, how much did you need when you were looking to raise money? How much did you need?

Etu Evans: I needed, initially – well, to do a line, it costs around $300,000. And for a designer, once you get those samples produced, then you can get several doors. So I needed around $300,000. I already had the equipment at this time, I already had the showroom, I just needed the lines and we actually had contracts in Paris – they stopped me and tried to push me in the Yves Saint Laurent guy who reps Gucci, so I had all this going, but still no assistance.

Lisa Fortunato: And I needed $200,000, which really isn’t that much. When you don’t have it, it’s a lot.

Jonathan Bowles: Brian, you were talking earlier about the importance, not only of financing but of information, technical assistance. A lot of entrepreneurs – it sounds like what you’re saying was – need some hand-holding at the beginning, help with the business plan, whatever. Obviously, there’s a lot of programs out there in New York City that do this kind of thing, CAMBA is one of them. And I imagine you get government support, whether it’s city, state or federal. Are there things that you would suggest, you’d like the city government or state government to do a better job of this or more of this? Any suggestions for what government could be doing to help you help entrepreneurs?

Brian Singer: Well, after we hear what they just said, it’s hard to fight for what we do, because it’s clear that they’re not getting the services that they felt like they needed. And I’m not sure exactly how to address that, because we can’t just ignore it and pretend that they didn’t just say these things. And it’s true, what you’re saying – for many people, they go to agencies trying to get assistance and these agencies exist for assisting entrepreneurs. And then the entrepreneurs come in and some leave unsatisfied. I cannot speak for the places that they went, but I guess there are a couple things I can throw in.

One is that if you’re looking for $200,000, $300,000 and you’re going to an agency – on the agency side, from our perspective of micro-lenders, people come into our door, we get many phone calls every day and many people just walking in every day looking for funds. And we are told by our funders that if you have a high default rate, you’re doing a bad job. So, our task, then, is to try to figure out: well, how do we not do a bad job then? How do we lend the money to those businesses that are going to succeed? That’s not easy, especially when you’re thinking about giving a quarter of a million dollars in a loan or $10,000 or $2,000 in a loan. This money has to come back. So, like I said before, I do believe it’s a catch-22, because on one side, we really want to assist the businesses and lend the money, but on the other side, we know that if we lend this money and it doesn’t come back, we have to close the shop. In fact, that’s what Nigel was talking about, is there are some lenders out there who did, and part of that problem is what I just said – that sometimes the money doesn’t come back.

Etu and Lisa are two examples of successes. For every two successes, we could show you 20 failures. That’s just the way it is. So, that’s a reality when people come in. So, the answer – I guess I don’t have the answer. When it comes to lending the money, what are we going to do? You have two choices, right? Either you provide a lot of technical assistance, which a lot of people don’t have time for, we know that. You don’t have time to attend all these classes – some people do and they love it. We teach a 90-hour class and there are people who are in it from the beginning to the end and they love it and it’s perfect for them and they have the time and they’re doing it and they’re learning how to start a business. A lot of people would never have time to take a 90-hour class or even to do a lot of one-on-one because we also do a lot of one-on-one technical assistance, which is a great way to work with people who don’t have the time to come in. We’ll go to you and try to provide that assistance. Now, obviously, the expense of doing that, to the government or to any funders is going to be much greater. So, that’s one way to do it, is to take individuals that are looking for money and we’re not sure. We do need a plan, we need some evidence, you need something – you can’t just lend money to everyone who walks in the door.

Jonathan Bowles: Brian, the money that you all get for micro-enterprise lending, whether it’s from government sources or from banks or foundations, do you get support built in that for technical assistance for doing the hand-holding?

Brian Singer: Sometimes. Yeah, usually that’s what we’re looking for is assistance, financial assistance to lend the money, but there has to be money along with that to actually provide the technical assistance that comes with either writing a business plan or writing an application and going through the paperwork required to get a loan pulled through. So that kind of assistance is critical for organizations like ours, who provide a lot of assistance to individuals, who, when you have 80% to 90% who probably are not going to go on to succeed. So, part, actually, of our role as we see it sometimes, is to prevent failure. Now, that’s a little bit backwards because most people talk about success – bring in the entrepreneurs who had big, great successes, you don’t bring in the entrepreneurs who avoided failure, because that also happens and people come in and you talk through things and realize: this probably isn’t the best way to go about something. And, so, the entrepreneur either decides this isn’t the time to start or this isn’t the way to do it and potentially avoids failure in that way.

So, anyway, I had two points. One was you could either just provide more assistance to get people to that point where a loan committee would feel confident that the money will come back –

[tape cuts off briefly]

…making a lot of loans and having a lot of money come back, and Accion is another, and there are a lot of lenders out there who have done a great job of that. We’re talking about very small amounts of loans – neither of them are going to lend $200,000 or $300,000; they’re $5,000 loans on average, somewhere around there. So they’re doing a great job around that, but if you’re talking about this size of loan, there is nobody that can say: well, we’re just going to throw the money out and just hope that it comes back. So, it’s hard –

Lisa Fortunato: But, the reality is: what can you do with $5,000?

Brian Singer: Right. Well, I agree.

Lisa Fortunato: You have the $5,000 and you still have to pay it back and at what percentage? What is $5,000 going to do? I mean, that’s like in the wind, and it’s – you know, I mean, I don’t mean to make it sound obnoxious. But, we were doing our taxes, right, taxes were due the other day and it’s like oh my god, you spent this much money, and we spent our money. I did spend my severance. I mean, that whole salary was spent. So, to get a loan that – oh, we’ll give you this acorn seed or, whatever, there’s another organization – $10,000, $5,000, what is that going to do? Maybe it’s going to buy me an oven, and not even.

William Thompson: But in a number of, to be able to reach a certain level, a loan from $5,000 to $25,000 is the beginning of a small business, and it goes from there. And then after that, you may need to borrow $200,000 at the next level, or $100,000 at the next level, but I can tell you that looking at what they’ve done, the $5,000 to $25,000 loan has helped get a number of small businesses off the ground and helped them grow. And it does. I understand, maybe not the next level, but the initial level. And that has worked.

Lisa Fortunato: Right, but I think the thing is, though, what takes you from a cottage industry to the next step? And you’re saying, oh, we’re a success story. Well, I don’t consider myself a success story yet.

Brian Singer: You are.

Lisa Fortunato: Yeah, but success in what way? I mean, I’m not making any money. I haven’t even broken even yet. I’m crossing my fingers that this month we’ll break even, and that would be a huge success, okay. That would be a success. I think it’s still so much of the person who is willing to take the risk. You are taking a risk. It’s much easier to go and work for someone. It’s much easier to get a nanny to take care of your kid than to stay home and take care of your kid. It’s a personality that will take that risk and then maybe not be involved with all the other aspects. You do have to be so driven. You’re talking about the same thing, that you’re single-minded and you’re focused and nothing’s going to get in your way and if you can’t do it this way, you’re going to find another way to do it. And that’s what makes it, and if you’re a creative person, that’s what is keeping you – you’re being creative and to have to explain all these different things to people, it becomes frustrating.

Brian Singer: No, I agree. I just don’t know what the answer is, when you have. Like I said, we have pressures to make sure that the money comes back. When I say you’re a success, you are a success. You’ve been up here, you’re still in business, you’re still working for it, but there will be plenty of people who would put the effort in that you have who won’t be where you are and won’t become that success. And if those people were lent $200,000 to $250,000 by a non-profit organization, and it flopped, then that organization will find itself nonexistent or that program will be nonexistent. So, it’s a real difficult situation. I guess that’s why we’re here.

Jonathan Bowles: Let me ask, I think we talked a little bit earlier about the role of government in all of this. I’m curious, Nigel, to start with you. Are there things that financial institutions: banks, others, could be doing with this? For instance, in some of my research, I’ve heard from a lot of the micro-enterprise institutions out there in the city that they’d love for banks just to make referrals more. Obviously, a lot of these entrepreneurs are a huge risk, even if we’re just talking about $200,000 or $300,000, but if they can’t make the loan, someone like Accion says: well, we’d love for more banks to just refer people to us, so we can try to do it. That’s just one example, but I’m curious – are there things that you think financial institutions, foundations could be doing more to help with this financing issue?

Nigel Pearce: Absolutely. I think we all need to be aware of all the programs that are out there. I mean, I’ve been in this business for the last 15 years and I’m always finding out about new programs that are available that I wish I knew about earlier. So, there are a lot available. And I think this process is a very difficult one and you’ve got to avail yourself of what’s out there to you. Part of the reason why we raised $4 million for the food company was Department of Agriculture had given us a loan guarantee, and, so, we were out there looking for whatever benefits, programs, anything we could utilize that would help us in getting this funded. So, whatever we could offer to investors, whatever assurances we could offer to banks, we had to do a lot of homework to go through almost 144 institutions before we could get this round put together.

So, it is a lot of work. There is a lot of turning over rocks, trying to figure out who’s out there, who’s real, who can work in your best interest. As far as the government is concerned, as much as you can to find out, maybe cataloging all these together so people know what’s available. And I would say that the $5,000 to $25,000 is a critical role, because once you get that done, then maybe a bank can say – because sometimes banks are looking for history – where have you borrowed, what have you borrowed, and that $5,000 to $25,000 gives you that history, gives you that ability to get more capital. As an entrepreneur, you’re always looking for capital. That is a full-time occupation from here on out. Because, even if you’re growing, you’re still looking for capital and if you’re not making money, you’re looking for capital. So, either way, you’re going to be looking for capital for the rest of your business life, because that’s the heart and soul of a business. And how you acquire that capital at the lowest cost you possibly can. There’s horror stories, like Famous Amos. You know, he ended up losing his business because the private equity firms took it away. He even lost his name at one point.

So, understanding the critical game, how you get money, where you get money from, what you have to do for that money, those are all questions that you really need to understand and know before you get into the game, because capital is the key to growing your business today and where you get it from, how you get it and whatever government programs are out there, there are a lot. And there are a lot of funds out there – you know, I have funds that just do day care centers – and so we look for those funds that understand businesses, not just money. We call it smart money. If I’m going to get an angel investor for a restaurant, I’m looking for a guy who does restaurants only, because I want him to come to the table with his Rolodex, I want him to come to the table with information to help that entrepreneur through the process. So, whatever specific money and information we can get for the entrepreneur, that’s what we’re looking for.

Jonathan Bowles: You know, I don’t want to close discussion of that topic, but I also want to ask the Comptroller – not to put you on the spot here, but one of the things that I notice that California is doing is that they’re using their pension system to invest in some small business-type enterprises, looking at growing, I think it’s called, the Double Bottom Line program. And I’m just curious – I know you’ve made a lot of investments with regard to affordable housing, real estate. Is it a possibility at some point that we might see investments in small businesses?

William Thompson: The difference between us and CalPERS and CalSTRS – other than size, and I guess CalPERS is probably about $150 billion these days – they’re probably a bit further down the curve than we are, and that is being very honest. We have started to diversify into real estate, into private equity. That didn’t exist five, six years ago. So, we’re making those changes now. They are probably five to ten years ahead of us. Eventually, what you’d look to do is to invest in different funds, and whatever the focus would be, that’s where you’d look to put money. I don’t think we’re on the level yet and I don’t know if has been there, from German Vogue to the heads of De Beers diamonds. You just have to make it work. I think you can take whatever you have, if you’re creative, and make it work. And now we have a thriving business.

Jonathan Bowles: Lisa, you expanded to about 2,700 square feet. You’re in Red Hook. I know from a lot of manufacturing businesses that I’ve talked to in Red Hook that they fear that with residential real estate so in demand right now, there’s a lot of conversions taking place there, prices are really escalating. Was it difficult for you to find expansion space?

Lisa Fortunato: Well, when we decided to start looking, I wanted to stay in my neighborhood, and we live in Prospect Heights. And, you know, what’s ironic is we’ve lived there 18 years and Washington Avenue – I don’t know if anybody’s familiar with Washington Avenue – is a dump, okay? And I still consider it a dump. No, I’m sorry, it’s really a dump. And I’ve lived there 18 years and now that the museum is renovated, and we lived through ups and downs and all of this. And now, with the museum renovation, there was this great space and it was a decent-sized space and was owned by this restaurant next door, which was a dump, or is a dump. And the rent that they wanted was outrageous, and I was appalled. It was like $3,500, I think, and I was like: are you kidding me? And they just said – now, with the neighborhood. And I’m like: excuse me, I’ve lived in this neighborhood, and without picking bones, you can’t have it both ways. You can’t say you want to make it an upscale neighborhood and say you’re going to raise the rents, if you don’t let entrepreneurs. And I was told – well, I’m sorry, maybe your business won’t be appropriate. And then I looked on V