Urban Innovator of the Week: Alfa Demmellash
Alfa Demmellash, CEO and co-founder of New Jersey-based Rising Tide Capital, was born and raised in Ethiopia. Her mother fled the country as a refugee when Demmellash was just two years old after losing two of her siblings in the ongoing civil war. Her grandparents urged her mother to leave the country, but there was a condition: that Demmellash would go to school from an early age.
There was one Montessori school near her grandparents’ home that Demmellash attended, while her mother sent money home to support her as often as she could.
“That impacted the trajectory of my life hugely,” says Demmellash. “Unlike my other cousins running around in my grandparents’ home, they had to make sure I had clothes and shoes and breakfast to go to school.”
Demmellash spent the first 12 years of her life in Ethiopia as her mother made her way through Kenya to the United States, working as a waitress in the hopes of earning enough money to reunite with her daughter. She knew her waitress earnings wouldn’t be enough, however, so she enrolled in night school for sewing and began creating clothing incorporating Ethiopian design elements with western patterns, generating enough extra income to move Demmellash to Boston with her.
“I had all of these ideas of what it must be like living in America,” she recalls with a laugh. “I pictured her as this fairy godmother living in this castle of cotton candy and honey and milk, and all the things you picture when you’re not from the U.S. I realized very quickly what a huge undertaking it takes to make it in America. It was a very eye-opening experience that there is such a thing as poverty in America.”
Given her own history with her mother’s commitment to her shaping her life from an early age, Demmellash felt that she needed to do the same – to be as generous and supportive of the people around her as she could. She eventually landed at Harvard, where she met her future business partner and husband Alex Forrester, who cared about the same kinds of issues she did.
“We would have conversations about why there is urban poverty. We felt very called and pulled to think about how can we resolve these issues of multi-generational cyclical poverty.”
After taking her own journey studying state violence, particularly the Rwandan genocide, she recalls thinking, “Out of this devastation came this human creativity, this desire to build, this resilience of people willing to move forward and generate income. This issue of economic empowerment and economic hope is very tangible but it can’t be top down. There needs to be an ownership over one’s economic destiny.”
As a “really earnest young person” who was so passionate about building peace and protecting freedom, Demmellash felt called to do her part. She and Forrester moved to New Jersey, where he was born and raised, and began researching issues of urban poverty and how to translate that poverty into prosperity.
“There are neighborhoods that are seen as struggling, as dangerous places,” she says, “but in these same places there are tons of people who are incredibly hard-working and resilient. Yet very little recognition is given to them. The support and structure, whether access to capital or access to business training, is nonexistent or very ad hoc and unreliable.”
Initially they thought the most persistent need in communities of color was access to capital, so in 2004 they formed Rising Tide Capital – because “a rising tide lifts all boats.”
Except…first you need to have a boat.
“We came to decide that we need to support people in building boats,” Demmellash explains. “These problems are actually a lot more nuanced and deeper than access to financial capital. There is a need for knowledge capital and social capital. We realized very quickly if you’re just focused on providing access to financial capital, you don’t focus on the other two so critically needed.”
For capital lenders, she says, the driving motivation of how they select entrepreneurs is making sure they get paid back. Demmellash and Forrester felt the knowledge capital piece is what people really need.
“Where do they go to get the business training they need?” Demmellash asks. “SBA programs are usually for those who already have had higher education. Many don’t have access to higher education; it’s completely inaccessible to them.”
They felt there was very little in terms of hands-on, tangible business management education. So they shifted their mission two years in and decided Rising Tide is not going to be a fund. Other funds already existed, but those funds didn’t have a pipeline of qualified entrepreneurs.
“If the funds exist that’s not the challenge,” she says. “We need to meet people where they are – like a mom with two kids who is waitressing and trying to get a sewing business off the ground. You really need to have somebody who can sit down with you and formulate a business strategy with you, who sees your aspirations for growth are not limited from where you come from.”
They decided to create a “best in class” education for entrepreneurs – their Community Business Academy – and not just the knowledge piece but also the relationship-building piece.
“After a four-hour intensive class people were standing around outside, letting the buses go by – they were networking. We needed to create a place where that could happen in a pervasive way, but we needed it to be ubiquitous, not just for a handful.”
Once the light bulb went off around social capital, they decided to make their academy 80 percent low- to moderate-income that is fully scholarshipped, with the other 20 percent open to anyone – Ivy Leaguers, astronauts, and anyone else who could get an MBA but really wants a grounded experience.
Demmellash says, “What if we had 1,000 entrepreneurs in this micro neighborhood who understand how the economy works, who are grounded in their local experience, who are grounded to be culture makers, so that kids see what it means to be a resilient leader in your local community? That ‘what if’ has been firing us up for 12 years now.”
The Community Business Academy exposes people to their strengths but also challenges them in a safe space. Classes are held on weeknights and on Saturday mornings in the neighborhoods where people live – in church basements, at community partner organizations – so that they are accessible.
There are now 12 academies running simultaneously, twice a year for three months at a time, both in Spanish and English, in four cities in New Jersey and through an organizational partner in Chicago. Every graduate leaves with an action plan and a coach, and receives long-term strategic support for sustainability. They are connected to capital resources when they are ready and it is appropriate, and are helped through the whole process of loan applications and crowd funding. They are also assisted in building social capital, with connections to co-working spaces, business incubators, master classes, and six-month residencies; not to mention learning to be “social” in a more basic sense – through social media. Rising Tide also runs the Start Something Business Challenge, a state-wide business pitch competition for New Jersey entrepreneurs with a $10,000 business grant grand prize.
“The fact that we have ongoing engagement with entrepreneurs allows us to benchmark where they are,” says Demmellash.
Rising Tide currently has over 200 entrepreneurs enrolled in their programs. In 2015, they had 1,385 graduates with 685 now in business, 645 in planning stages, and 228 new jobs created. The survival rate of their entrepreneurs’ businesses beyond the five-year mark is 87 percent – versus the U.S. average of 50 percent. The average household income increase of their entrepreneurs is 47 percent, with a 64 percent average increase in business sales. Their average entrepreneur is a single mother. 70 percent of their entrepreneurs are women, and 90 percent are minorities.
These impressive numbers have not gone unnoticed: in 2009 Demmellash was profiled as a CNN Hero and recognized by President Barack Obama during a speech at the White House. She was named one of Forbes‘ “Most Powerful Women Changing the World with Philanthropy” in 2012 and a “Young Global Leader” by the World Economic Forum in 2015. She has appeared on Larry King Live and the Suze Orman Show and was named a “40 Under 40 Dream Maker” inEssence Magazine‘s 40th anniversary edition, along with receiving a slew of other national media coverage.
“Now looking at doing this nationally is very daunting,” she says. “So many communities have reached out. The push for us to go national very quickly was there but we just said no, we needed to reassure our community that we are there.”
Demmellash and Forrester do want to replicate the work Rising Tide is doing in other communities in such a way that they can copy the backend structure and replicate their processes. So far they have expanded their efforts to one community outside of New Jersey through an organizational partner: Sunshine Enterprises in Chicago.
“We need to give courage to one another for these opportunities to exist for these everyday entrepreneurs who are holding it together for this country,” says Demmellash. “Entrepreneurship is often a ‘cool kids club’ for really cool gazelles and Silicon Valley types. But, actually, no, this is what entrepreneurship looks like. They’re the ones picking up the pieces and employing the unemployable.”
She shares the story of one of their graduate entrepreneurs who is a teacher and a mother. She decided she wanted to start a Montessori school in her neighborhood, so that children in the neighborhood could have access to the same kind of quality education that exists in more affluent parts of town. She now educates the children of Rising Tide’s entrepreneurs.
“That community of entrepreneurs, who are really showcasing what it looks like to build a robust entrepreneurial community of change agents, we need them desperately, in their numbers and their courage. That empowers me. Seeing that come to life is the greatest story of my life.”