Working to Make a Craft Business District Inclusive

LISC Duluth

Duluth, MN

The Practice

The dozen or so blocks of the Lincoln Park Craft Business District, in western Duluth, are tucked into a pocket hemmed in by elevated highways from the middle of the last century, near the edge of Lake Superior. In the past several years, 40 or so new businesses, including several manufacturers, have emerged or located in the district. These include soft goods manufacturers, clothiers, a craft brewery, and several food producers. In addition to the burgeoning retail presence, many of the businesses sell online and abroad, creating an important export economy
for Duluth.

All of this has made Lincoln Park one of UMA’s favorite examples of how
a city can support small- scale manufacturers as an important part of its economic development and commercial corridor strategies. In addition to a city-run loan program that helped business owners cover some of the costs
of rehabilitating buildings, non-profit partners like LISC Duluth have also contributed by providing lending capital and technical assistance to business owners.

The district’s success has also made it a favorite of locals and visitors alike, including The Atlantic’s James Fallows and his wife who included a profile of Lincoln Park in their recent book Our Towns, and then discussed it in a CBS Sunday Morning story. Among the parade of visitors checking out Lincoln Park’s craft business scene was one of LISC Duluth’s local funders, the McKnight Foundation. “After the tour, the Foundation observed that there were few, if any, people of color running the businesses in the district,” says Lars Kuehnow, who is responsible for leading Duluth LISC’s commercial revitalization efforts. “It was an epiphany for us in the midst of a lot of success.”

McKnight Foundation posed the challenge to LISC Duluth and its partners to address the race gap.

Kuehnow, who spent time working in a regional CDFI before joining LISC, anticipated that an important part of the challenge to getting more entrepreneurs of color off the ground was in technical assistance and accessing start-up capital. He worked in the community to convene a group of entrepreneurs of color and, with their input, brought the incubation curriculum of Creative Startups to Duluth. Of nearly two dozen business owners who have entered the incubator, 40 percent were from underrepresented communities. “Given that Duluth’s people of color population is 12 percent, we are really proud to have such a diverse group of cohort members participating,” Kuehnow says.

The Northwest Area Foundation, based in St. Paul, noticed LISC Duluth’s efforts to close the race gap and has stepped in with support to help them go further with

African American and Native American entrepreneurs, in particular. The foundation has offered LISC Duluth a one-year planning grant to develop an approach to engaging nonwhite communities further
in both entrepreneurship and employment as pathways to economic mobility. LISC Duluth anticipates receiving funding for a subsequent two-year implementation grant.

And the timing couldn’t be better. In addition to the financial resources to help LISC Duluth make its craft business district an inclusive one, Kuehnow will get to tap into the community of practice that is the Pathways to Patient Capital cohort. “I was incredibly impressed by the expertise of my fellow participants. We all share similar challenges. Prior to convening with them,
I felt our task was possible. Now, I know there is a solution and it will come from our work.”

The Practitioner

Lars Kuehnow

LISC Duluth

Lars Kuehnow grew up helping his family run their grocery business in Duluth. In other words: “entrepreneur” was always part of his vocabulary.

But it wasn’t until his mid-20s when he realized he wanted to follow that same path. He set a somewhat ambitious goal to do so. “I didn’t say what kind of a business, or where or any of those things,” he remembers. “I wasn’t super thoughtful about it, but I knew I wanted to open my own business by the time I was 30 years old.”

Five days before his 30th birthday he incorporated his first company, Kuehnow Management Inc. They bought and managed gas station convenience stores, and ended their 16-year run in 2000 with 30 employees and annual average revenues of $8 million.

From there he moved between leadership roles in the construction material industry and a non-profit. In each case he pulled these enterprises out of their struggles and into states of success.

Now with LISC, he’s applying that same business management experience through an advisory lens. In 2018, and in partnership with the University of Minnesota-Duluth, LISC Duluth helped launch a local chapter of Creative Startups Labs, a pre-accelerator program designed for creative entrepreneurs just starting to think about business management.

The program is mostly targeted at entrepreneurs of color. Participants work with Kuehnow and other advisors to decipher the market viability of their idea, and identify the customer relations steps they should take to forge long-standing ties with consumers.

Fifteen of the 22 participants in the first cohort were generating revenue six months after graduating. Thirty percent decided that they wanted to keep their business low-key and run it from home — “which is a success story,” noted Kuehnow.

So Duluth has the accelerator support nailed down. Now they’re thinking about ways to launch equity-focused capital programs that can help graduates take next steps.

One impetus for this is their charge to turn Duluth’s Lincoln Park district into a maker- centric Main Street-style thoroughfare. They’ve been applauded by local press and leaders for making that happen, but Kuehnow’s concern is that few of the participating makers in that area are businesses of color.

“That’s where the UMA cohort was perfect timing,” said Kuehnow.

With support from UMA and the Creative Startups program, they’re hoping to change that reality. The goal is to give a greater diversity of Duluth residents the opportunity to create entrepreneurial environments that their families can grow up in — just like Kuehnow had.

UMA has assembled our Pathways to Patient Capital practitioner cohort because each member has found a successful or promising approach to helping entrepreneurs of color — including makers and manufacturers — to get access to the capital and know-how they need to realize their business ideas and plans at scale. We know there is great benefit in lifting up and sharing this information among other practitioners, but also with other audiences, such as policymakers, lenders, and other funders. We compiled the brief profiles you are about to read to give these audiences a sense of both the personal and the practical: one section describes the people and organizations doing this work and the inspiration that guides them (“The Practitioner”); the other describes the innovations in capital access or readiness that each is pioneering or bringing to scale (“The Practice”). You can read the full report here.