Today, we return to a familiar theme of profiling changemaking “higher purpose” entities. While today’s organization Makerhoods is not a traditional VC-backed startup, it is an endeavor that is worth highlighting and offers an inspiring vision of making a difference in both affordable housing and entrepreneurial development in low-income communities.
Company: Makerhoods tackles the most intractable problem in the US today: Income Disparity and Unequal Opportunity. It does so by building affordable live/work communities that dramatically lower the barriers to self-employment for underrepresented entrepreneurs. Working in communities with tremendous skills, talent, motivation, inspiration, and desire, a Makerhoods project unleashes these forces by offering a place to live and a place to work in one project, at one affordable price. Coupled with a comprehensive program of business development services, such as low-cost loans, market access opportunities, and an education program taught along the Harvard Business School case study method, the Makerhoods platform increases the chance of business success and ultimately, dramatically increases take-home income.
HQ Location & Year Founded: New Jersey, 2014
Founder: Avi Telyas is an American real estate developer, serial entrepreneur and pioneer in lean manufacturing and large-scale modular construction. His passion for craft entrepreneurship has led him to found Makerhoods. Mr. Telyas is a 1986 graduate of the Harvard Business School and a former trustee of Pratt Institute.
Funding History: $34 million for the first Makerhoods Project in Newark NJ, consisting of 66 apartments, 16 Maker Shops, a Commercial Kitchen, a Greenhouse, and the restoration of a circa 1885 mansion listed on the National Register of Historic Places called The Krueger-Scott Mansion. Funding is currently sought for staffing of ongoing business support operations and community engagement.
1. Where did the idea for Makerhoods originate?
I have always been an entrepreneur. Every problem, every inefficiency, every discomfort seems like a business opportunity. It’s how we entrepreneurs are wired. Several years ago I began to think about why is the world’s wealthiest country amidst a technological and productivity revolution, unable to offer a share of Americas bounty to our friends and neighbors? Like any good entrepreneur who discovers a problem, I researched its origins so that maybe I can find a solution. I ultimately reached the conclusion that the traditional wage-labor social contract was crumbling, and in many cases unable to sustain a middle-class income for all but the most technically trained.
Research showed that self-employment had very promising results, but that the barriers were quite steep, especially in cities. The very way we design our cities: our zoning regulations, our small business regulations, our emphasis on housing over affordable commercial spaces and our general lack of coordination between housing, employment, and economic development places insurmountable barriers before those most in need of assistance. Indeed, the problem is systemically bound up in the brick and mortar of our cities.
I created a few sketches of a new kind of affordable live/work real-estate development that would offer a place to work and a place to live in one low-cost package. I also created a business development assistance program to ensure material success for the companies that occupy these places. Hence the Makerhoods concept was born.
2. What is the key problem that Makerhoods intends to solve?
As the wealthiest, most technologically advanced nation, our poverty rate is too high, food and shelter are too scarce, and gainful employment opportunity is rare. We declared war on Poverty nearly 60 years ago, but sometimes it looks like poverty won.
Our challenge is threefold:
1) Provide employment opportunities for all willing to work,
2) Such employment must provide good middle-class income, and
3) There must be a means to create wealth for all to protect against income shocks
Self-employment through entrepreneurship has proven to offer a higher return on impact investment than any other approach. However, the barriers to self-employment are many. City zoning and design severely constrict the availability of small workspaces at reasonable rent, while small business licensing and regulations places hurdles at every step.
Makerhoods live/work communities solve this problem by offering small workshops (under 1,000 sf) and an apartment in the same campus, for a combined cost of approximately $2,600/month (for projects in the Northeast US) It is a new/old solution that promises to unleash millions of entrepreneurs and propel them to self-employment and self-sufficiency.
3. How are you most differentiated as a service?
There are many affordable housing programs. There are even more economic development programs. But unfortunately, few offer both. And, to succeed in the mission of improving livelihoods, a holistic solution is required. What good is affordable housing with no work? What good is work where income is too low to afford housing? And both fail in the face of unexpected health bills if there are no savings. We must devise programs that solve employment, income, and wealth buildup simultaneously. A Makerhoods community focusing on affordable entrepreneurship, tackles all three objectives in one project.
4. What are the company’s key accomplishments to date?
We just completed our first Makerhoods Campus in Newark, New Jersey. It is a $34 million 66-unit apartment building that includes 16 maker spaces, a greenhouse, and a commercial kitchen. We have many more projects in the pipeline, some of which will be in partnership with other developers who are interested in incorporating the affordable entrepreneurship model into their projects.
5. What lies ahead in the product plans for Makerhoods?
There are two main hurdles we face. The first is obvious in that real estate development is risky, capital intensive and takes a very long time to realize. Fortunately, construction finance is a healthy and vibrant capital market and good projects can and do get funded. In many cases, we can partner with existing developers who share our vision and would like our work to be incorporated into their projects as they seek to satisfy affordable housing minimums. However, creating projects and funding predevelopment costs continues to be a hurdle to scaling our model.
The second hurdle is much more difficult to solve: how to scale the high-touch umbrella of business support services that these entrepreneurs need. As discussed, the problem is large scale, the solution is known, but scaling it is a challenge.
Ironically, the very technological advancement that results in worker displacement can also assist in our mission. The internet and online commerce offer access to markets and customers that were just not available until the last few years. At the same time, Artificial Intelligence powered systems and other business process automation can be sued to scale business guidance and enable one-on-one business mentoring through specific client dialog and at a very large scale.
We recognize that our goal is monumentally ambitious. We are interested in nothing less than narrowing the income gap by ushering in the next industrial revolution led by small-scale self-employed manufacturers. We cannot do it alone. We will need to offer our program in partnership with other developers, across many cities and with the help of NGOs interested in the economic opportunity of its citizens.
Our expansion plan includes packaging and codifying our platform, in effect selling a Makerhoods Operating System so that other developers can replicate our work in other cities. We will also continue to develop Makerhoods projects in every city to which we are invited, and every project for which we can raise funding.