Failure of a Nonprofit-Owned Business Incubator Raises Questions: Where’s the Money and Why Did It Fail?

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November 29, 2011; Source: Wisconsin State Journal | The city of Madison, Wisconsin may be out $1.1 million in loans that it awarded the Genesis Enterprise Center for a business incubator on the city’s South Side. The 70,000 s.f. building in question is in foreclosure and being managed by a receiver. The nonprofit developer of the center (the Genesis Development Corporation) hasn’t filed a 990 with the IRS since 2007, and was “administratively dissolved by the state Department of Financial Institutions,” and a related organization, the Genesis Community Development Corp., lost its nonprofit status in 2010 for failing to file 990s for three successive years.

The Genesis Enterprise Center is one of several ventures started by the Mt. Zion Baptist Church, whose minister has in the past claimed that the defunct entity has helped 100 minority business start-ups (The receiver says that the building currently has 34 business tenants). Although the Enterprise Center’s executive director and the minister aren’t talking to the State Journal, the Mt. Zion pastor, Richard Jones, wrote to Mayor Paul Soglin that the city’s forgiving of the loans would help ensure the fiscal survival of the incubator.

There’s certainly a logic to that: not paying $1.1 million is financially better than paying $1.1 million, though the foreclosure, receivership, and administrative dissolution suggest that the city’s loans (from 2005 Community Development Block Grant funds) are hardly the only problem the nonprofit incubator faces. The city isn’t the only lender likely to be stiffed. Another nonprofit, Forward Community Investments, loaned Genesis $200,000, but its executive director left the Genesis board after Genesis spurned offer of help, citing Genesis’ poor management.

Assume that somehow, in an environment with a supportive local government, Genesis (or Mt. Zion) simply mismanaged its way into business incubator oblivion. Do NPQ Newswire readers know of examples of nonprofit–developed and owned business incubators that have been successful? What are they doing that makes you confident that they are surviving and succeeding and will continue to do so in the future?—Rick Cohen