Palo Alto Weekly

Cover Story - May 9, 2014

Not your usual startups

City uses federal grant to kick start Palo Alto's low-income residents' businesses

by Elena Kadvany

They're atypical Palo Alto entrepreneurs.

One sells handmade clothing and jewelry that she crochets; another is an independent health-insurance agent who meets clients in Starbucks, the downtown library — anywhere she can access Wi-Fi. Another is a hair stylist; a fourth wants to run a baseball and softball umpire company. Another sells unusual metal jewelry she solders and crafts in her Palo Alto apartment; a sixth, a former biotech worker, plans to launch a company to help other small businesses and organizations build, publish and host affordable websites.

The City of Palo Alto's first-ever microenterprise program — which aims to provide Palo Alto entrepreneurs, particularly low-income ones, with the funding, tools and support necessary to kick start small businesses — awarded its first grants last month.

Through significant federal funding provided to the city's Community Development Block Grant program (CDBG), Palo Alto became a combination investor-incubator for six Palo Alto residents, who received grants ranging from as low as $1,500 to as high as $15,000 as well as mentorship, business education and support.

The Community Development Block Grant program, administered by the U.S. Department of Housing and Urban Development, is meant to provide cities the means necessary to develop affordable housing and expand opportunities for their lower-income residents.

Palo Alto's program operates on a two-year funding cycle and has five different categories for spending — public service, administration, housing, public facilities and economic development — but has historically focused on the housing element, said Palo Alto senior planner Consuelo Hernandez, who spearheaded the pilot Microenterprise Assistance Program (MAP).

Last year, the opportunity finally arose to use $150,000 in CDBG funding to focus on a long-identified priority in Palo Alto: creating economic opportunities for low-income residents and combating the city's ever-widening gap between high- and low-income earners.

Hernandez and other staff in the Planning and Community Environment Department launched the program in December, bringing in residents of Palo Alto Housing Corporation properties and formerly homeless or low-income participants of the Downtown Streets Team work program to gauge their interest. They also solicited the help of various members of the Palo Alto business community to serve on a review committee to select and eventually mentor the final applicants.

"I think the thing that intrigued me (about the program) was I felt like this was a way you could change someone's life forever," said Jon Goldman, a founding partner at Premier Property Management in downtown Palo Alto, who mentored two of the grant recipients.

Twenty-six people submitted pre-applications, with 11 selected as eligible for the funding. Those 11 were asked to submit a formal, more detailed application with a full business plan. The city required that applicants either live or operate a business in Palo Alto. Their income could not exceed 80 percent of the area's median, or $52,500 for a single person.

"It's not a handout," Goldman said. "It's not like, 'OK, let's have a dinner and everyone gets free food.' It's 'How can we change their lives so they can make their own living?'"

Hernandez said that, initially, the city set the goal of helping a single microenterprise but was able to give six grants to six very different applicants.

"Every business that you walk into started somewhere," said Roger Smith, another program mentor and founding president and CEO of Silicon Valley Bank. "Somebody took a chance (and) invested time, effort and money."

He himself remembers when Silicon Valley Bank — now with billions of dollars in assets and more than 1,500 employees — was just 11 people unsure if their company would make it or not.

"It's so easy to forget that," he said.

The nascent grant program is expected to grow in the next year. The City Council approved on May 5 an action plan for the roughly $434,000 the city has received this year as part of the CDBG. The plan includes $150,000 for the microenterprise program, money that will supplement the $80,000 left over from this past cycle.

The council's approval was unanimous, though members had some questions and concerns about what exactly the city will be getting for the additional money. Councilman Greg Scharff noted that the city has committed about $70,000 thus far — $38,200 on direct grants, $27,000 on personnel and $5,400 on supplies and technical assistance — on a program that benefited six people. He suggested that the city can "spend money a lot better on some of the higher impact things."

Scharff ultimately joined his colleagues in supporting the entire action plan for the grant program, with the provision that the council's Finance Committee will get more information about how the expanded program will work. Planning staff has proposed holding a round-table discussion with the program's partners and participants in June to review and consider how to further develop the program.

Heekyoung Kim, a local hair stylist, received the largest MAP grant: $15,000. She declined to be interviewed for this story, but Goldman, her mentor, was particularly struck by the challenges of making a living as a hairdresser.

"That's a really great job for people. There's a lot of single moms in that job. It has flexible hours and it's something that, once you become established, you can do it forever, and it can lift someone out of poverty forever.

"What I learned is there are people that don't have the wherewithal to get their own (salon) chair. You need a security deposit, first month's rent, all your own equipment. Even when we first received the application from the hairdresser, we were all thinking, 'Why does she need that? You have a pair of scissors, and you can make a living.'"

Hair stylists must also purchase hair products, such as chemicals, and foot the costs of training.

"When someone goes into this salon, and they're paying $40, $50, $100 for a haircut, they don't realize the person cutting their hair isn't making practically anything and is living in poverty," he said.

The grant money will help Kim purchase equipment and pay off a security deposit for her salon chair.

"The concept is taking a skill set she already had and helping her acquire the equipment she needed and the security deposit and all that. Suddenly, her skills become 50 times more valuable to her and her family. That was tremendous to go through that experience and learn how that could work and see the pride and hard work."

Kim also got a new client out of the process. She's now doing Goldman's hair, he said.

Sherice Lane

In November 2010, Sherice Lane became injured at work, tearing tendons in her foot and her meniscus and irreversibly impacting the gait of the right side of her body.

The warm, ebullient mother of three, who lives in the nonprofit Palo Alto Housing Corporation's Tree House Apartments and had been working in early childhood education, said it was a taxing time in her life.

"With this type of injury that I have, or any injury when you can no longer do what you were doing, you begin to get depressed," she said.

But she picked up crocheting, a craft her mother had taught her when she was about 9 years old, making hats and scarves and teaching crochet classes at her apartment complex.

"I was in a lot of pain, and I re-discovered crochet while I was in pain," she said. "It seemed to really help me with the pain and the frustration — and I was also producing something."

Friends and family who received Lane's creations as gifts urged her to sell what she was making. When a Palo Alto Housing Corporation staff member told her about the city's MAP program, she jumped at the opportunity.

Lane will receive $1,500 from the city. She said she's using the money — which isn't given in cash form but instead as reimbursements for eligible expenses — to pay the fees to get her business, Sherice's Kreativ Lane, off the ground.

She'll also be able to purchase an embroidery machine, which she's long lusted after to be able to do more detailed, custom work; a printer; and materials, such as eco-friendly, organic yarns and fiber.

She said she's going to sell clothing, jewelry and crochet art online but would one day love to secure a brick-and-mortar retail space where she could also teach crocheting classes for kids.

"For me, my injury put me in a different class. For this opportunity to come up was huge for me," she said. "I began to be even more excited. I said, 'Oh my god, someone's thinking about me.' You know what I mean?"

Walter Barnes

It's hard to imagine a better candidate to umpire local baseball games than one who attended Palo Alto schools, playing baseball on school fields and in the Baylands; went on to play second baseman for the Chicago Cubs' minor league affiliate; and eventually returned to Palo Alto to coach Little League and at Terman Middle School.

"I've been around sports now for about the last 50 years," Walter Barnes said. "This is where I'm comfortable at."

With a $1,000 grant from the city, he's turning that comfort and passion into a business, hoping to cast a wider net as a freelance umpire and referee. He's currently a subcontractor for the City of Palo Alto, umpiring its recreational adult baseball league. He also refs flag football in Los Altos and hopes to expand into local baseball games, "to at least the high school level," he said.

He's also a participant in the Downtown Streets Team, a nonprofit program that helps homeless and low-income people find employment.

Baseball was a constant for Barnes during his Palo Alto childhood.

"Me and one of my friends, we just played all the time. We didn't have too much time for anything else. And it paid off," he said, referring to his time in the minor leagues.

He was drafted in the 21st round in 1971.

"It was a dream," he said. "I got halfway there."

A Downtown Streets Team caseworker told him about the MAP program; at the time, he was coaching Little League full-time and not umpiring. But coincidentally, he had just heard from a Recreation Department employee about a need for umpires in Palo Alto.

"It fell right into place," he said.

Barnes' mentor, Roger Smith of Silicon Valley Bank, advised him to find out just how big or small that umpire void — that is, the market — might be.

Perhaps more helpful than the business-specific advice was Smith's support.

"He was in my corner," Barnes said. "He was pulling for me."

Smith said he was impressed with Barnes' obvious passion for the sport and for business. Barnes plans to use the MAP grant to purchase umpire equipment, such as uniforms — he needs different colored uniforms for different cities' leagues.

He said criticism of the city using public funds to help support a handful of private businesses is unwarranted, as planting the seed with one person helps grow others' employment opportunities.

"I'll be able to pull in people and put them to work," he said, looking down the road to where he might be able to expand his business. "In that respect, you don't lose. You don't lose. I think that's a major goal behind (the program) — to grow and employ other people."

Chris Murphy

In true entrepreneurial style, Chris Murphy gets a bit cagey when asked about his business idea, reluctant to reveal the full concept lest someone else steal the big idea that's been gestating since he was an undergraduate.

The most he'll divulge is that it's focused on building, publishing and hosting affordable websites for small businesses and organizations, "with some ad creation and publishing to boot," he said.

But he's confident in his idea, bolstered by interest expressed by local industry leaders, investors and the City of Palo Alto, which awarded him a $9,200 MAP grant.

"The money is a much-needed boost," he said. "I think for all of us it's been a boost — taking what (we) had and really setting it in motion."

Murphy, who lives at Alma Garden Apartments in Palo Alto with his wife, said he's been tinkering with the idea for the company for years but didn't decide to work on it full-time until he lost his job in the economic downturn.

"I thought, 'You know what? I need to work on something.' I was doing some independent work on the side, but I started to tinker more often on this project. I just needed something to kick start me, I think."

He, like the other recipients, stressed that the most valuable part of the program was not the financial support but the mentorship and education the city provided.

"I learned more about business in the course of about five months than in my entire life," he said.

Richard Bush, a seasoned Valley executive who has founded numerous companies, mentored him.

"You can't assign a monetary value to the immense amount of wisdom and guidance that I've received from Richard. He's achieved his success in life and business, so he's been a really great example to look up to, and that's what I'm aspiring to be one day."

Murphy is still developing his prototype and plans to use the grant money to pay for some additional educational "pick-me-ups" he feels are necessary and "typical logistical and infrastructure needs."

"Tomorrow I'm meeting with an attorney; Thursday I'm meeting with the president of a bank," he said, his face lighting up and his perpetual smile widening further.

He added that he sees the grant as an investment that one day he'll provide returns on.

"Maybe one day I will have reached that pinnacle and I can help someone else."

Robin Angstadt

As a single woman with a limited income and on disability, Robin Angstadt said taking her arts-and-crafts business beyond selling items on online marketplace Etsy.com has proved difficult.

She's never applied for a traditional business loan because of what she called "questionable credit."

"It's common among lower-income (people) to have lower credit. It kind of goes along with it," she said. "I never did (apply for a loan). I was trying to do it on my own, and it was really, really hard."

Angstadt — short and blond with shocks of pink highlights in her hair — draws, paints, sculpts and makes all kinds of jewelry. She makes most of it in her Palo Alto Housing Corporation apartment.

"I love to work in a wide variety of media, from gemstones and beads to oils, acrylics, watercolors, pastels, graphite, linocut, polymer clay, felted wool, yarn, fabric and leather," her Etsy.com profile reads.

Her specialty is "Lord of the Rings" themed items, like an orc bracelet with spikes made with copper and precious stones.

Angstadt holds a bachelor's degree in psychology and a minor in art as well as a master's in psychology, both from the University of California, Santa Cruz. She grew up in both Salt Lake City, Utah, and San Carlos and has lived in Palo Alto off and on since the 1980s.

She said that as a jack-of-all-trades artist, she also had trouble focusing the vision for her business.

"I needed help deciding what to concentrate on; I needed a mentor," she said. And — "I needed some money to get some equipment."

Enter MAP, which eventually connected her with mentor Michael Gross, a Palo Alto resident who has worked as an executive at high-tech companies like National Semiconductor and Applied Materials. The program also provided her with a $4,500 grant.

Most of the money will go toward purchasing equipment, such as a kiln and micro-torch, to make the jewelry she wants to focus on selling. (Up until now, she's been borrowing other people's equipment.) She's also found a garage to rent.

"It's making an enormous difference," she said of the grant money. "It's the difference between success and failure."

Kathy Wu

Kathy Wu is a soft-spoken and reserved independent insurance agent with a history of commitment to her profession.

The China native, who came to the United States in 1984, works with underserved populations who need but have trouble accessing health care, such as seniors or impaired people who have difficulty leaving the house or people with language limitations. Armed with a master's degree in mathematics from the University of California, Los Angeles, she's been in the industry since the mid-1990s and last year became a certified insurance agent under Covered California, the state's new health insurance exchange that operates under the federal government's Affordable Care Act.

Though the certification is helpful — she filed 50 Covered California applications this year — new insurance requirements are complicated, time-consuming and costly, she said. As a one-person business, she must acquire considerable knowledge, and her clients cannot always pay her on time. She also has a "pretty old" computer and relies on using public Wi-Fi at coffee shops and city libraries when she meets clients.

"She was literally having people be wheelchaired to Starbucks so she could use Wi-Fi," business mentor Jon Goldman said. "So I said, 'Let's figure out what smartphone you need; let's get you a year of subscription for 4G to your computer. You need a tablet? Let's get it.'

"Insurance is a numbers business; you need to get a lot of people. You can't see one client a day and make a living."

Wu will be receiving $7,000 in grant funding from the city. She said she plans to buy a laptop, a cell phone, stationery and business cards as well as rent office space and pay for her insurance license and continuing education.

She said the support she received through the program proved invaluable.

"Of course financially it helped me, and also it's a big encouragement," she said. "It helped me to learn about writing grants and getting resources and getting business ideas."

To make ends meet, Wu also does some online teaching and works as a Mandarin and Cantonese interpreter at local hospitals.

"This is clearly her passion," Goldman said, referring to insurance. "Medical interpreting is a very high-paying job. However, it's a job where they just call you when they need you. She might go make a substantial sum in a day, but she might not work for a month after that.

"You really learn a lot about how society is a little bit ... it's hard," Goldman said. "A lot of people are just trying to improve their situation but can't quite get to that next level. That's what this is all about."

Staff Writer Gennady Sheyner contributed to this report. Online Editor Elena Kadvany can be emailed at ekadvany@paweekly.com.

Comments

Posted by Last of the baby boomers..., a resident of Community Center
on May 9, 2014 at 9:50 am

Thank you to all that have made this happen. This is a wonderful reminder of the good people can do one person at a time.


Posted by jerry99, a resident of Barron Park
on May 9, 2014 at 10:51 am

This adventure is not something the City Council knows anything about. Fix the crime, burglary and criminal activity downtown and on California Street. Stop the frantic building of apartments, condos, hotels and businesses. Do something for the Palo Alto residents instead of a feel-good exercise in stupidity.
This is the craziest thing I have ever heard of, of course it must have come out of the Housing and Urban Development Dept., one of the most corrupt government departments, whose only job seems to be wasting US taxpayers money. It needs to be eliminated, and the City Council needs to stop this nonsense.


Posted by Silly, a resident of Embarcadero Oaks/Leland
on May 9, 2014 at 1:30 pm

Almost half of the funds go to administer the program -- worthy though it is.

Shame on the city. They're more inefficient than the worst of charities and non-profits.


Posted by Nayeli, a resident of Midtown
on May 9, 2014 at 2:11 pm

What a great idea! I've always believed that the best means of promoting innovation is through education ("teaching a person to fish" rather than "giving someone a fish"). This seems to be an educational program that recognizes worthwhile individuals, businesses or business concepts with tools and advice from city/business leaders along with a small financial investment boost. Kudos to the city for putting this program together!


Posted by Hmmm, a resident of East Palo Alto
on May 9, 2014 at 10:00 pm

Hmmm is a registered user.

I agree w/Nayeli. It's great to read about these ideas, the practical funding and crucial mentoring these people are receiving. I wish all of the participants the solid success with their endeavors.

I would love it if there was a website for this program that featured ways readers could get in touch with participants if we wanted to check out their products or services.


Posted by Deep Throat, a resident of another community
on May 10, 2014 at 10:44 am

The article names the recipient of the highest grant of $15,000, but does not name the recipient(s) of the personnel costs of $27,000 or the recipient(s) of the portion of the $5,400 that was used for "technical assistance".

The real beneficiaries of this program may just be the unnamed people who received the personnel costs of $27,000 and any personnel costs included in "technical assistance". Are those beneficaries city employees or do they work for the applicant that proposed this program?


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