By Stefan Kwiecinski
Louisville local Gill Holland has a storied success in entertainment. His company, The Group Entertainment has produced 100+ feature films and documentaries, some of which went on to premiere at Cannes and get Oscar short-listed. He is also the founder of independent record label and music publishing company sonaBLAST! which currently promotes 60+ emerging artists.
In the past decade however, Gill has increasingly turned his attention to the revitalization of Louisville neighborhoods. Most every local can speak to the success of his involvements in NuLu, the fast-growing Brooklyn-esque area east of downtown. But with NuLu now running at full steam, he’s turned towards Portland, the historic sister-city-turned-neighborhood on Louisville’s west side.
At Venture First, we’ve noticed that those attempting to build startup ecosystems and those trying to revitalize neighborhoods often run disparate efforts. So we’re turning to Gill, someone who’s seen both sides of the equation, to shine some light on how accelerators, incubators, and venture development firms like ours fit into efforts of revitalization, and how to ensure a startup ecosystem is equitable for all.
Venture First: As a developer, what are the key elements you’re looking for when it comes to selecting a neighborhood to invest in/revitalize?
Gill: Well first, for me at least, the area should be in Louisville! Though I am now eying some Appalachian towns since my dad was born in Harlan County and I have a personal draw to the area. But mainly I just want my hometown/state to be the most livable, walkable, sustainable, equitable, resilient, entrepreneurial and family-friendly place to be, that is my motivation! I would love it if Louisville becomes so cool that my children will want to come back after college/jobs to live and take care of me.
But as for selecting a neighborhood, I am always drawn to an area that has some history, some old buildings, and some cultural significance so that we can help bring the area back. I am not a suburban greenfield developer, I can create more jobs renovating existing structures than building new ones (more money goes to labor and less to materials). And old brick and wood buildings are inherently “greener” to begin with. The city has already invested millions providing services like water and sewer to the areas where we work, so there is a nice ROC, “return on community”, for all the citizens.
Our work does not have to be a direct revitalization of what was there before, but we’ve learned that people like stories — and revitalizing neighborhoods means telling stories to attract new residents, visitors, and businesses. NuLu had a history of being the city’s marketplace, and Portland has been the sister city to Louisville for over 200 years and is full of wild tales — if you have not already read Jim Higdon’s captivating history: “The Nearly Forgotten History of Portland, Kentucky”, get to it!
Venture First: Many of these revitalized neighborhoods like NuLu in Louisville, Over-The-Rhine in Cincinnati, and South Congress in Austin have quickly become hubs for startups and entrepreneurship. Why do you think this is? Is it just a matter of founders/startups seeking places with momentum? Or is there more to the equation?
Gill: Jane Jacobs famously said, “New ideas need old buildings”. My original idea for NuLu was indeed that the area host an incubator/accelerator and for a long time I tried to think of a brand like “Ohio River Silicon Valley” or “NuLu-rator” to portray that. I did finally come up with a word I still like – “Bizstillery” – for a KY-based incubator accelerator space, but I haven’t launched it officially. Instead, I am thrilled to see the development of 900 East Main, with Story Louisville and others embodying the start-up ethos in a brick and mortar centralized effort.
But at the same time, I realized I personally didn’t need to start a dedicated brick and mortar accelerator space, since all of NuLu functions as an incubator/innovation district. You don’t necessarily need one specific brick and mortar center to attract and host startups – all the small buildings and office spaces are essentially a 4-block co-working space with creative collisions happening at Please and Thank You, Quills, Taj, Galaxie, and the various eateries.
And once you get a couple of start-ups, that mass attracts others and again, you get the oh-so-important creative collisions at the coffee shop. Just as the coffee shop Please and Thank You was one of our first tenants in NuLu, the coffee shop McQuixote was one of the first new businesses in the historic Portland Warehouse District.
Collisions and incubators aside, the reality is that start-ups need cheap rent, and the funky spaces found in old buildings in “challenged” areas are often inexpensive, so financially prudent start-ups increase their runway by locating in such areas. With ample space, I see Portland now as the place for the earliest stage start-ups (like NuLu ten years ago) and present-day NuLu more the place they can “graduate” to.
Venture First: Could you speak more to those so-called creative collisions? What’s the value of them and is there something special about revitalized neighborhoods that better facilitates the frequency in which they occur?
Gill: Creative collisions are when folks from different sectors (whether it be non-profit or start-up or corporate, institutional or even government workers) get to meet randomly or coincidentally, maybe through a mutual friend even, in spaces over coffee (or bourbon). These spaces are safe for brainstorming, so as one person talks, light bulbs start going off in the other folks’ minds and connections start getting made between what on paper would seem to be disparate concepts, and new perspectives from different people can help shed light on what to some had maybe seemed intractable problems. In the film and TV world, these spaces are called “third spaces” (ie, the home place and the workplace are where a character spends most of their time, and we all need a “third place”).
Having a revitalized walkable neighborhood obviously greatly increases the chances of these collisions happening. It can take a whole year in LA to meet as many people as you can meet in one month walking around in NuLu because cars are “mobile shields” against personal run-in’s.
Venture First: Moving on to concerns for the future, it’s no secret that without proper safeguards, revitalizing a neighborhood can lead to the displacement of its residents. Building a high-growth startup ecosystem on top of that can further exasperate things. We’ve seen this play out in San Francisco, NYC, and Boston, and now we’re seeing it happen again in cities like Seattle, D.C., and Atlanta.
Could you briefly touch upon the responsibilities of developers and local governance in minimizing these displacements? And then could you expand on that with the (less documented) responsibilities of those involved in building startup hubs on top of revitalized neighborhoods?
Gill: I am working on an article about this very topic, but here’s a summary:
Unfortunately, in the last five years, the population of Louisville has increased by only 0.8% (and that is not annually). So I do not foresee the negative aspects of gentrification impacting our greater community in the near future. We simply do not have and have never historically had the growth of the cities you mention.
In the Portland neighborhood alone, if one takes the 1400 vacant abandoned buildings and we hit a home run every week by attracting a new family to live in the area, it will take 27 years to get Portland to the density it had before the Great Flood of 1937. There are between 6,000 and 8,000 such properties in west Louisville, so it will take 100 years at that rate to get back to 1936. There is absolutely no need to do anything more than fix up these buildings and attract folks to live there.
That being said, we do address the issue of gentrification head-on daily as we actively undertake two approaches: one, as responsible “impact” developers we try to only attract, sell to, or rent modestly to folks and groups who will be “value-add” in some way to the community; and two, we advocate to politicians and policymakers to be educated and implement best practices. It is important anytime discussing gentrification of course that everyone involved in the conversation is using the same definition of the word because for different groups, the word means different things.
Our work is in some ways curatorial. As impact developers, we can take a lower return if need be, to get the right non-profit or start-up into the area — knowing the overall impact can be a great enhancer to our “stakeholder” return (we are not just about our shareholders).
Now, long term, there are valid concerns that rents will unreasonably rise as property values rise (and they will), and that is where government must have a role to play, in instilling rent stabilization or rent control measures for folks in historic neighborhoods or towns or central squares, or historically black areas, etc.
As a state, however, Kentucky is known as a “property rights” state so these measures may never be able to be legislated. We have long said property values will quadruple in 10-15 years when the Portland area rebounds. We are on track to see that, with values having more than doubled in the last 6 years. Even at double presently, the property values are way under what any valuation would be, if the banks and PVA “valued” properties based on rent rates. There is a serious “appraisal gap.” Banks use area comps to establish value. When every block has a vacant/abandoned property that sells for $5,000, the value of the perfectly lovely houses gets dinged. If banks used even our low monthly rental rates of $650/month, it is hard not to see every house in Portland being “worth” at least $100,000 instead of the $50,000 today (and $26,000 6 years ago when we started).
The government could also implement moratoria on property tax increases for certain folks (like long term residents) in certain areas if there are concerns that those on fixed incomes could not afford to pay the $250 of yearly tax increases when their property goes from being valued at $25,000 to – $50,000 on the PVA.
Building start-up hubs I think falls in line with any other kind of urban development. The folks involved in the “new” activity need to be aware and community-minded when it comes to their efforts, including initiatives that flow to the overall stakeholders in the community as opposed to just the close shareholders of each entity. Having intentionality in reaching out to the historically under-represented or folks without the networks of social capital that some have can also yield long term dividends and help the entire ecosystem blossom in an equitable fashion. So start-up hubs should dedicate some space that can be rented for free or deferred or rent-for-equity, etc and should always think long-term when it comes to tenant selection.
Venture First: So when it comes to this thoughtful tenant selection for a revitalized neighborhood, could you provide some archetypes for who to shoot for? What traits should a startup formed within the neighborhood have? And what about startups from outside looking to move/expand into the area?
Gill: Well, every neighborhood is like a little town so you need all the elements any town has: teachers, doctors, police, firemen/women, shopkeepers, a post office, library, etc. Then you may need more specific categories of the above, the shops could be a laundromat, barber, a hardware store, a flower shop, a micro-brewery, an art gallery, gift store, etc.
You need folk who can help the town and residents function in society and then you need others to nurture folks, both literally and culturally and spiritually. Most folks think of start-ups as some kind of tech, social media, “bro-grammers in tee-shirts coding furiously” entity. But at the end of the day, there are a lot of products that need to get actually made, physically manufactured, to keep a city humming. So while tech start-ups that can scale and are sexy for investors are great job creators and talent attractors, any neighborhood that will be able to attract such a company (most of which could be based anywhere in the world) has to have the urban amenities that the talented work-force will want. At the end of the day, it all becomes about quality of place.
Huge thanks to Gill Holland for lending his time and ideas. Be sure to check out his efforts in Portland through the Portland Investment Initiative along with The Group Entertainment and sonaBLAST! Records.
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