City of Austin: Challenge Studio

The challenge will focus on addressing environmental justice issues through City of Austin’s (CoA) Circular Economy Program. Circular Economy principles support the concept of environmental justice, particularly as it relates to environmental racism within BIPOC communities. CoA’s Challenge Studio, currently completing its pilot year, is an intensive, 9-month program that forms and supports diverse teams of entrepreneurs in solving a local strategic challenge from one of the CoA’s six strategic priority areas. In scaling this program, the selected challenge will be circular economy and environmental racism, and the program will target recruitment efforts in BIPOC communities. The goal of this program is to 1) build upon the existing circular economy business ecosystem through entrepreneurship cultivation, 2) Increase BIPOC business ownership within circular economy by solving existing ecosystem gaps, 3) Engage BIPOC communities in creating a just transition away from the linear system that has disproportionate negative impacts on BIPOC communities.

The problem that we are looking to solve is the lack of BIPOC representation within the circular economy business ecosystem. Structural racism and implicit bias have led to racial disparities in both environmental health and entrepreneurial opportunity. According to scientists at the National Center for Environmental Assessment black people are exposed to about 1.5 times more particulate matter than white people, and Hispanics had about 1.2 times the exposure of non-Hispanic whites. While the circular economy industry is a new and evolving industry with limited demographic data on small business owners in this industry,  data from the Small Business Administration indicates that  of all U.S. based businesses, only 9.5 percent are black-owned and only 12.2 percent are Latinx owned and additionally, only 2.8 percent of venture-backed founders are Black or Latinx and the racial wealth gaps hinder BIPOC founders’ ability to raise expected friends and family rounds. A 2016 study found that white-owned small businesses in Austin had average sales approximately five times higher than black or Hispanic owned local businesses. Minority-owned businesses are also less likely to receive loans than white-owned businesses, and when they can borrow, they are loaned less and at higher interest rates. 

The Challenge Studio is an intensive, 9-month incubation program that supports entrepreneurs at the earliest stage. Passionate individuals apply before they have a business idea and through the program are connected to co-founders, trained through a curated proprietary curriculum, and matched with mentors and subject matter experts as they learn more about the problem. As they co-create viable, job-creating businesses to address the problem, founding teams receive $10,000 of seed funding, legal technical assistance and, prior to COVID, physical co-working space. The Challenge Studio is designed to help entrepreneurs better understand circular economy challenges, identify innovative solutions, build and test prototypes, and start and grow viable new businesses.

Toward the end of the program, we introduce the entrepreneurs to community lenders, crowdfund investment portals and local angel funding groups that can help them scale beyond the ideation and startup stage.

MIT’s Solve funding will allow us to scale the Challenge Studio program. We piloted the Challenge Studio beginning with a call for applicants in October 2019. We currently have seven entrepreneurs participating, with about 25% identifying as BIPOC, who have formed three start-ups. With these grant funds, we will be able to scale the program 3x: incubating 10 start-ups. 

The Challenge Studio’s proprietary curriculum focuses a great deal of time and effort on recruiting a diverse team of co-founders and helping them coalesce around a shared vision. We do this through an equity-focused recruitment strategy and four weeks invested exclusively to team formation. This program will work directly with BIPOC communities in East Austin through partnerships with our Black and Hispanic chambers, Huston-Tillotson University (HTU), which is a Historically Black University located in East Austin and to use Challenge Studio as a mechanism to increase the amount of BIPOC owned businesses and meet entrepreneurs where they are.

Creating BIPOC owned businesses to support reversing environmental racism and building the circular economy ecosystem is important to our goal of addressing racial inequities as a city. Our programming is designed to proactively address common causes of startup failure and supports the creation of new, viable, job-creating businesses whose products and services result in a local public benefit. BIPOC entrepreneurship as a path to self- employment is part of the reimagining; instead of another training program for jobs that might be gone in 10 years, Challenge Studio creates an opportunity to build wealth and to become job creators. 

Lance McNeill is a FTE and a program manager with the City of Austin’s Small Business Program. He will be the full-time Challenge Studio program administrator.

Skyra Rideaux is a FTE and the Economic Development Services Coordinator with City of Austin’s Circular Economy Program. She will provide 10-15 hours of subject matter expertise per week for program support.

Program administrators will be supported by subject matter experts from the community.

1. Katherine Sobel, a small business coach with local non-profit Community Development Financial Institution (CDFI), PeopleFund.
2. James Howard, a small business lawyer with Naman, Howell, Smith and Lee, PLLC

In 2015, the City of Austin created its first Office of Equity, and in 2016, the Mayor Adler formed the Task Force and Council on Institutional Racism and Systemic Inequities.

Austin is participating in the Equitable Economic Development Fellowship (EED) hosted by the National League of Cities, Urban Land Institute and PolicyLink. Austin’s EED plan is centered on growing small business entrepreneurs in traditional communities of color through economic incentives and permitting reforms, allowing the government, community and private sector to partner in making Austin a more livable city for all residents.

The two CoA Departments collaborating on the Challenge Studio are committed to diversity, equity and inclusion. Staff received equity training, are guided by programmatic equity goals, and use an equity tool to guide decisions about new programs. Staff also participates in the City Equity Office’s Equity Action Team, which coordinates ongoing City and community equity work.

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