The Metropolitan Economic Development Association
(MEDA) was founded in 1971 by a handful of businessmen as a way to fight poverty and thereby reduce the attendant social ills and disparities. The idea was that economic development at a grassroots level can be an effective way to strengthen the quality of life. Minnesota Business
talked with MEDA CEO and President Gary Cunningham for the current direction and goals of the organization.
MNBIZ: Can you tell me how MEDA nourishes minority-owned businesses?
GARY: MEDA supports minority entrepreneurs by providing business consulting services, access to capital and access to markets. We help businesses with their strategic planning, marketing, all kinds of back office things that businesses need to survive, and then we also help them with capital — meaning we provide short-term capital to businesses so that they can get to the next level, meet their payroll, buy equipment, those types of things. Then we finally help them get into networks for sales and build their revenues for the products and services that they offer.
MNBIZ: How would you assess the state of minority owned businesses in the Twin Cities region?
GARY: It's a tale of two different trajectories. One trajectory shows that from 2007 to 2012 minority businesses were the fastest growing businesses in the state. Minority businesses in that time period — and you have to remember that was during the recession — grew about 53% in the state and non-minority businesses grew by 3%. That's the great thing that's going on that minority businesses are exceeding but they're revenues and sales were significantly lower than non-minority businesses. The disparities and these are round numbers, because I don't have the figures in front of me. A little over six hundred thousand in average sales for a non-minority business in Minnesota. Something like a hundred and thirty, a hundred forty thousand sales for a minority business.
That gap is huge and then if you look at the issue of those minority businesses that employee and those majority businesses, the majority businesses are employing a lot more people than non-minority business, even if you equalize them. It's a tale of two different things going on within the state. If the fastest growing businesses are minorities and we don't really end the demographic shifts that's going on right now in the state of Minnesota, in the metro area in particular, if we don't begin to address that then we all suffer in part because this issue of making sure those businesses can get to the next level, that they can compete, is critical for Minnesota, it's ability not only to compete locally but to compete nationally and to compete internationally.
MNBIZ: That's part of the idea of a region looking at it holistically, the good parts bring it up and the weak parts bring it down. Everybody's in the same boat.
GARY: That's true. For minority businesses in particular, if you look at the universe of minority businesses, this is national data from the minority business development agency. I'm extrapolating for here but we think it's true from our data as well. If you look at the pie about 97% of the pie is businesses under a million in revenue, about 3% are businesses a million or more. MEDA is actually serving that three percent and there's forty-seven thousand businesses in 2012. That's the latest data. Then you have about 15 to 20%of that 97% that actually have the ability to grow. If they get the right supports those businesses will be in the million or more category and then we can actually start working on those that are at the other end of the spectrum. Every one of the businesses, whether you're Medtronic or Target or any of them, all started as small businesses and grew to something.
What we're trying to do is trying to figure out, first of all, are we doing a great job with those that are in that $1 million or more category, because those are the businesses that can drive employment and as I said earlier, people of color hire people of color at a greater rate than the majority businesses, and it creates a talent pool for those majority businesses as well if they're able to work and develop their talent at minority business. There's a connection here, but if we can work to do that better and then we can actually create the better pipeline across the business development life cycle from startup to acquisition and merger as an example of a pipeline, if we can build that pipeline and we can assist those businesses we can actually address the issue of the high failure rate, and the more we can address the high failure rate of small businesses and get those businesses established and their foundation established well then we can actually begin to grow businesses of scale that actually can compete and have access to capital and access to markets and access to consulting services.
MNBIZ: There is an entrepreneurial gap for people of color, but then we have host of other gaps. There's the academic achievement gap, the opportunity gap, the social justice gap. Is the economic gap somehow fundamental that it has the power to catalyze and maybe shrink some of those gaps?
GARY: I think economics sits at the core. I would argue that you change people's lives by giving them economic opportunity and you help them participate in our community in a way, both as citizens and as caregivers, as breadwinners, as all of these things you transform communities. If you look at people that actually get opportunity to be employed or to work as an entrepreneur those folks are better off than folks that are not. I actually think if in fact we are able to address the economic gap all of these things are interrelated, they're not separate. But what do people need? They need a good job and a good job could be working for yourself or working for someone else and they need stable housing. With those two factors you transform peoples’ lives. All the data says that. There's no data that says give me a crappy job and a crappy house and I'm going to do well in society. It just doesn't work that way.
Partly what we're trying to do at MEDA is grow employment for minority people. We do that through entrepreneurship because small businesses are where the jobs get created. Government only is going to create so many jobs. The private sector is where the jobs are getting created. We need to be able to compete and be a part of the market base solutions to the problem. I don't think the market-based solutions have really been tried. Over a period of time we've worked on some rights legislation that was important, we worked on trying to address some of the other issues, but if we can't address this issue of economic opportunity — that I can actually as a young person or person in this community that I can actually compete and live and have the return for my labor in a way that actually gives me something, a living proposition — then I'm not going to feel like I'm a part of this society in any way. I'm going to have a lot of grievances around that. That doesn't mean there aren't other structures that need to be worked on, but you've got to start with the basics and that is having a place to stay, having a great job and a great opportunity and that's what minority businesses do within our community. They establish that base. If we go in and we look at the lives that got changed because Thor construction built the US Bank stadium, that's huge, that's great, but look also at all the small businesses that contributed to the building of the US Bank stadium. If you walked outside there when that stadium was getting built and you looked at that population of people that were coming out of that stadium, you saw that you were changing lives. These are people that live here. That's just one example. There are hundreds of examples that we have in MEDA of this going on.
In our loan fund, we have about a $13 million loan fund. Soon, hopefully, it'll be $15 million soon, and when you look at the employment of the people of the firms that we've made loans to, the average wage is over $22.50 an hour, and a majority of them are getting health care benefits. It's not like you go to a minority firm and you have to take less money and all of those things. Actually, those minority firms are competing at a high level and they're competent and they're capable and if we could actually grow that we'll be a better community and a better society. The economic income gap that the governor responded to a couple of years ago or last year is just a symptom of some deeper problems. Part of that is that we're not competing as part of the economic system in Minnesota. Part of this is actually to get us to be engaged. It's not just a government solution. It has to be a private sector solution to the problem if we're going to solve it.
MNBIZ: You're not in this alone. Who are some of your partners?
GARY: MEDA has had the support of the corporate community for many years. On our board are US Bank, Wells Fargo, Medtronic, Target, Capella University. I could go on. You get the picture. We are represented on the board, General Mills, all have high level staff that actually contribute to MEDA. Accenture, for example, did our whole analysis on the business ecosystem and did our strategic planning work for free. Wells Fargo just gave us a major contribution to our loan fund and annual support that will last the next three years. Basically we have that partnership, but we also have a number of other partnerships. We've entered into memorandums of agreement with the other players in the minority business ecosystem. I mentioned that earlier. Part of those memorandums of understanding is so that we actually work together better for minority entrepreneurs.
Latino economic development center, Asian economic development center, African economic development center. We're reaching agreements with the Latino chamber, with the African chamber, so that we actually are all working together in alignment but if you don't have an agreement with somebody to do anything or principles on how you're working together, this is the first time we've ventured into this space of having partnership. Neon, which is a minority business development group that serves north Minneapolis, we ventured into a partnership so that we actually share clients. They're doing some of the work with us and we have an agreement to that effect. We're actually getting deeply involved in having interlocking relationships with the partners in the system.
We're also attempting to develop standards by which we interact with minority entrepreneurs together. Clifton Larson Allen has put up some pro bono support to help facilitate this ecosystem work that we're doing, which I'm really excited about. CRF, the community reinvestment fund, Frank Altman is also partnering with us in that. They're a national lending intermediary that is actually going to bring more capital to the table for us. I'm really excited about the future of partnerships and I think I mentioned the Minnesota chamber of commerce and Bill Blazer sits on our board. They've come to us and actually have been helping us match make minority firms with mid-level firms in terms of contracting and RFP and other opportunities that exist or needs that they have. I think everybody's really moving in the direction of doing something different. There are hiccups and growing pains and all those kind of things. I'm excited.