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‘Sometimes experiments fail’: The Grand Forks grant project that wasn’t

The Grand Cities Mall, the planned site of the Global Entrepreneurs Training project. Herald photo.

It would have been something like a farmer's market.

Filled by immigrants and their food and crafts, the Global Entrepreneur Training project was a big vision for Grand Cities Mall. It might have built a tall, flashy outdoor entrance for an empty space on the building's north end, bringing in steady foot traffic and international life—food, fabrics and crafts by immigrants from around the world.

An up-and-coming Somali chef might have cooked in the kitchen, sold his food and gained the skills he needed to get on his feet. The project was imagined as a student-driven venture, drawing young trainers from local colleges and other schools to advise the chef on the ins and outs of the American business scene. Customers from around the city might have walked through, weighed a purchase from any number of bright-eyed entrepreneurs, and headed home happy.

In time, that same chef might have struck out on his own and founded his own restaurant, graduating from the mall into the wider Grand Forks community of entrepreneurs.

But that vision never came to be.

Instead, the project unfolded in a series of steadily mounting failures, all falling like dominoes against its success. Its history offers a look behind a curtain typically kept drawn across failed ventures, but also suggests a world that might have been—one with a thriving business at the Grand Cities Mall's north end.

Launched in 2015 by UND entrepreneurship instructor La Royce Batchelor, the project started with $70,000 in grant funding, but disintegrated over the course of 2016. First, it ran across asbestos in its space at the mall, holding up the project and jeopardizing relationships with donors. Then it failed to receive a key federal grant, immobilizing the project—a critical blow that left it without a future. By September, the project received a letter from the Community Foundation, led by since-resigned director Kristi Mishler, freezing its remaining funding.

Mishler called the move unprecedented in her nearly decade-long tenure.

Nearly every major player on the project tells a slightly different story—each placing blame somewhere else.

"There are no easy answers to this," Batchelor said in an interview. "It's all interconnected mess."

By the end of the project, there was no market. The lion's share of $70,000 had been spent paying for labor, asbestos removal and rent, but the project appears to have made a minor impact on the community at best—at least compared to its lofty visions.

Some say such failures are part of building business. Bruce Gjovig, whose Center for Innovation's foundation held funding on the project's behalf, said it's part of the process—one with no guarantees.

"Part of it is an experiment," he said. "Not all experiments work."

'A lot of optimism'

The Grand Forks Herald conducted nearly nine hours of interviews and reviewed more than 15,000 pages of documents, accessed via Freedom of Information Act requests, to chart the course of the project.

The research tells a story that began the summer of 2015, when Batchelor first assembled her project team. A black belt overseeing her own local karate studio, Batchelor was living a busy life with a heavy focus on entrepreneurship. She was pursuing a Ph.D. in communications at UND and, during the academic year, she was an instructor in the UND School of Entrepreneurship.

During the summer, she worked as a consultant at the entrepreneur-focused UND Center for Innovation, for which she drew some pay from grant dollars if they were available.

That role found her vetting project ideas as they rolled in.

As she sifted through those, Batchelor was also thinking about her own venture.

"The idea came in a sudden flash, but the pieces fell together the first week of June, and then I spent a lot of time talking to people," she said in an interview.

She saw a lack of "multicultural" businesses in Grand Forks, despite plenty of new Americans in the city. The project she had in mind would be a business incubator for the kinds of immigrants she'd seen before, who come to the U.S. with only a vague understanding of American regulations and other entrepreneurial hurdles.

She built a team around a handful of UND students, including her son, Thomas Batchelor. The younger Batchelor went through the same student hiring process as the others, La Royce Batchelor said, a process overseen with the help of Gjovig and Tim O'Keefe, who was then chairman of UND's entrepreneurship school.

During the summer and fall of 2015, Batchelor and her team began applying for a flurry of grants, conducting research and seeking the know-how they'd need to build the project. They delved into daily operations such as site security, kitchen and food safety and educational programs. Team members visited similar project sites in Minneapolis and Winnipeg and, back in Grand Forks, they started searching for a place to call home.

Leaders from around Grand Forks gave the project early advice. Pete Haga, a high-ranking city staffer, said he offered introductions and pointed out opportunities for grants. Cynthia Shabb, who heads the immigrant-assistance nonprofit Global Friends Coalition, visited Minneapolis to get a look at a similar venture. Her group was considering an office alongside the new project at Grand Cities Mall, she said.

"I think there was a lot of optimism around the idea and around the opportunity," Haga said. "What we saw was a chance for several different partners all around the community to come together, leveraging UND expertise, community partners like Global Friends and many others."

Wrench in the plans

The project's labor came with a price.

By the early spring, the project was taking shape. It had won two grants—one for $20,000, another for $50,000—both awarded through the local Community Foundation, which was led at that time by Mishler.

In its early stages, the team consisted of Batchelor, her son, and a handful of UND student workers. Financial records for the project show payments to nearly a dozen people across its lifespan, including to Batchelor herself, ranging from several hundred dollars in professional fees to a $10,000 scholarship awarded to one student from the grant money. The latter raised questions from the Community Foundation.

According to financial documents associated with the project, Batchelor received payments of more than $7,000 from the grant money, which she described as reimbursement for her time. She stressed that was part of her work as a private individual, separate from her employment at UND.

Batchelor said the scholarship recipient's status as an international student prevented her from paying him an hourly wage or stipend. She said the student put in long hours and had the kitchen experience to warrant such pay. He helped with food costs, policies and presentation, and Batchelor claims his regulatory research saved the project tens of thousands of dollars.

The other student workers received anywhere between a few hundred and a few thousand dollars and, by early 2016, were paid at an hourly rate of $12. Batchelor said that wage is standard to all the interns hired by the center and was set through UND administrative policy.

Jonathan Puhl, whom Batchelor described as the student lead for the project, received about $2,000 in pay and is listed in financial documents as having been given an additional $3,000 in retainer fees. Neither Puhl nor Batchelor remember that retainer being paid out, but a representative from the Center for Innovation who worked closely with the grant dollars said the money was disbursed.

Batchelor said the work done in the project's earliest days went unpaid as grant applications flew through the mail and the project sought a space. It eventually settled on the former Bingo Palace in the Grand Cities Mall, a roughly 10,000-square-foot space where GET became a tenant on April 1, 2016, for $3,500 per month.

By that point, Batchelor believed she could see the light at the end of the project tunnel. A draft schedule, circulated in late February, had renovations on site wrapping up on May 5 and the building opening to its first class of entrepreneurs within the next several weeks.

That timeline was ambitious, and the initial grant money of $70,000 wasn't going to be enough to get things off the ground. A draft budget circulated in March showed about $330,000 in proposed improvements for the space, from flooring to drywall to carpentry. Far less would have to be spent to open the project's doors—the full sum, and further renovations, would come later.

Batchelor said the project had its eye on hundreds of thousands in funding—in the form of grants and donations—that had yet to flow in. The $70,000 wasn't enough to get the project off the ground, but it was never meant to—it was only seed funding.

Major facility costs were only one piece of the pie. Financial documents show projected personnel costs, from interns to a director to other staff, running into thousands of dollars per month.

The project's team knew it needed to collect more funding to help the project thrive. The first wrench in Batchelor's plans did just the opposite.

Asbestos was found at the building site.

By the time the GET crew cleared this unforeseen hurdle, they'd spent almost $13,000 of their dwindling pool of cash to strip their space of the cancer-causing substance.

'You have a problem'

Batchelor said mall management told her after the lease was signed that asbestos had been found in the floor and the ceiling at the market site, slamming the brakes on the project. Though she'd hoped to launch within weeks, suddenly she was in a dispute with mall leadership on who would pay a nearly $20,000 removal bill.

"'You have a problem,' is how (a mall official) phrased it," Batchelor recalled. "'You have a problem, there's asbestos in this space.'

"We finally said 'Look, the project has to go forward, and if we're sitting around dilly-dallying about asbestos, we're never going to get our construction done (and) we're going to be paying you rent for space we cannot use,'" Batchelor said. "And they said 'Well, we can work this out later.'"

Looking back, she ruefully describes the situation as sealing a deal with a handshake.

Louis Christoffer, the mall's manager, said mall leadership would have informed project leaders about asbestos before signing the lease if they had been aware of it. When the Herald asked in late July, he couldn't recall when the first conversation about asbestos occurred, but said he'd be "surprised" if the mall had known and not relayed the fact to the project.

"That's not how I operate," Christoffer said.

The mall is owned by Hope Church, which operates out of a large space on one end of the building, and is run by a board of about nine people. Christoffer said the mall's leaders had been excited about the project and what it could do for new Americans.

But the remodeling was delayed for the time it took to safely pull the asbestos out of the facility. With their space offline, Batchelor said, it was more difficult to mentor potential clients.

Worse, funds they'd long eyed for the project were suddenly in jeopardy.

"A lot of the grants that we applied for, if we didn't have the space, we lost the grant," she said.

Batchelor and the church split the cost of removing the asbestos, with the GET team picking up two-thirds of the bill. The final tally for remediation came to more than $18,000, according to financial documents obtained by the Herald.

The project pinned its hopes on federal funds disbursed by the city though the Community Development Block Grant program. Batchelor and the rest of the group had won $100,000 from that program in December—part of a package of projects approved by the Grand Forks City Council—but the money fell through. The award came with a series of requirements that forced the project to gain significant momentum before it could actually get its hands on the funding.

And there was another financial catch: Because mall management owned the space, they were also the ones responsible for paying back the federal funds if the project failed.

Accounts of the project start to diverge at this point.

Batchelor said the mall's board of directors initially seemed receptive of the guarantee when she met with them to provide details of the federal grant process.

"I went back to them and said, 'OK, if we fail, you're going to receive the assets for many of these grants. We need to know you'll sign a guarantee should anything go wrong,' " she said. "And the board said, 'Yes, we'll do that.' "

Batchelor said that conversation about the guarantee happened "around the time" she signed a lease, as the willingness of the mall to sign on was "one of the deciding factors" of moving forward with the space.

But over the summer, she continued, mall leaders lost their appetite for the grant, spooked by the guarantee and citing a "change" of some kind in their board leadership.

Christoffer's story is different. He said the mall's leadership didn't find out until "very shortly before the due date" for the grant that it would put them on the hook for potential repayment. He said it was a sudden development that chilled mall leaders' enthusiasm and would have likely required the mall to take out the equivalent of a second mortgage on that space.

Because of that, Christoffer said the board decided to back away from the CDBG agreement.

Mishler, then-head of the Community Foundation, said the city dragged its feet on the granting process. Drawing from her experience with those grants, she also believed the terms of the federal grant were unusual by requiring a guarantor at all. That kind of requirement makes sense for a loan, Mishler said, but the need to pay anything back for a grant struck her as unusual.

Meredith Richards, the city staffer who oversees the CDBG granting process, said the project failed to meet requirements and fell apart at the finish line. She couldn't recall how, exactly, the grant failed—how much a lack of outside funding complemented a need for the mall's guarantee—it simply didn't work.

A the city, she said, conducts all the grants by the book.

At any rate, Batchelor said she turned in the keys to the mall space over the summer.

By that point, the asbestos had been removed and the team had paid three months' rent for a space that was never used.

"We couldn't make it happen," Batchelor said.

Tumultuous time

Batchelor's project unfolded during a tumultuous time at UND.

The university was beginning to absorb the first of what would be two significant budget reductions. The UND College of Business and Public Administration, the home of the school of entrepreneurship that employed Batchelor, was subject to cuts of its own that Gjovig says disproportionately hit entrepreneurship programs. Gjovig and other leaders also felt a sense of animosity in their dealings with the business school's then-dean, Margaret Williams, that was expressed in emails obtained by the Herald.

By the end of the 2016-17 academic year, the business college had been overhauled. Williams left UND in April to become dean of the business school at Texas Tech University. Gjovig had been pushed into retirement and the entrepreneur school's former chair, O'Keefe, left UND to serve as a business dean at a university in Virginia.

Batchelor doesn't believe the structural issues facing the entrepreneurship programs directly affected her project, which she had taken on independently of her roles at the university.

That's not to say issues at UND had no impact on the operations of Global Entrepreneurship Training. Batchelor pointed out some examples that trickled down from the school. Maybe the biggest hit was the loss of three major donors whose contributions might have kept the project's hopes alive. Though the three sat in meetings with Batchelor and showed significant interest, their support ultimately fizzled out. She said part of the reason was that "these three individuals are not fans of the current administration" at UND.

Beyond the money coming in, the ties to UND also affected the money being paid out. In collected emails, Batchelor described a push-and-pull with UND over how to sort through paying students on the project. She vented in a February 2016 email about "doing (the) Twamley shuffle," in reference to the campus building that houses the university's central administration. She said later that the administrative red tape had been a time-consuming drag on the project's early momentum.

'Caught off guard'

Mishler, said Batchelor did all she could with the resources she had, though she lamented that there wasn't a bigger core of leadership—a board of directors, for instance—backing the project.

And Mishler mentioned ways in which this project was atypical. The $10,000 scholarship for a student was a "red flag" when foundation officials reviewed expenses, for example, something that might have been best explained earlier.

In September 2016, the project had been floundering for months when the foundation sent a letter asking that remaining funds from the grants not be spent. Mishler had served nearly a decade with the foundation previously and said such a letter was, for her, unprecedented. Though Batchelor said she was in regular contact with Mishler about the state of the project, Mishler said the Community Foundation was "caught off guard" by the state it was in. After a flurry of communication, the letter was sent as a formality.

"I'm not saying it was La Royce's deal," Mishler said. "It became very clear the project wasn't moving forward, and this (was) a formal notification to not spend any more money from this grant. And we needed to know why and what was happening. I had some general knowledge, but not all of it. And even after I left, it still wasn't clear—after I left the foundation (in January)."

In a subsequent interview, Mishler reiterated that she felt Batchelor had done everything she could—except, perhaps, ask for help.

"I got a little bit of an impression that (Batchelor) felt that things were falling apart sooner than she shared with me, and I wish she had talked with me sooner," Mishler said.

And finally, in December, the mall sent a letter seeking $21,000 in back rent—following an apparent miscommunication after Batchelor said she had given back the keys to the space. That money was ultimately not pursued by the mall, Gjovig said.

Asked if the project might have fared better outside the Grand Cities Mall, Batchelor demurs.

"I can't speak to alternate-universe realities," she said. "But I will say we would have had significantly fewer difficulties."

'Encouraged to experiment'

Batchelor said that, despite the project's failure—and the return of what funds they could to the Community Foundation—there are silver linings.

The students she worked with got hands-on experience in working through the entrepreneurial process and, in doing so, established connections among local immigrant entrepreneurs looking to expand on their business interests.

Mishler praised connections the project built among friends of Grand Forks' immigrant community.

"You saw a bunch of people wanting to do something for the good of the whole," she said. "It didn't get to the endpoint we wanted, but the people sure do care about other people here, and that's always a good thing."

Gjovig, the former head of UND's Center for Innovation, said the business world is do-or-die—if a project doesn't pan out, that's that. But he cut the project's workers some slack for their efforts.

"I don't think you could say the students or La Royce—maybe they could have communicated more, got somebody involved earlier on," he said. "I'm not sure it would have changed the outcome. Asbestos is asbestos, and the grants weren't issued."

Gjovig said plenty of grant ideas fail to pan out. He estimated that as many as 40 percent of the startups he's seen have ultimately ended in a failure to launch, dying off as their leaders found roadblocks in the earliest stages of development. The failure rate drops after funding is released, but some projects never get the money they need because their leaders can't prove feasibility. Even after dollars start to flow, Gjovig said roughly half of the startups in his experience made major changes in direction due to early issues.

Daniel Borochoff is the president and founder of CharityWatch, a Chicago-based charity watchdog group. His organization specializes in reviewing nonprofits' operating efficiency to give donors the best results for their money.

Borochoff said that, regardless of Batchelor's business model, the project forged ahead well before it had enough funding guaranteed to make it work. He also noted that Batchelor ought to have had a board—or some kind of other help with her extremely busy schedule.

Another expert echoed the need for a wider base of support when it comes to driving entrepreneurial ventures. David Audretsch, a professor at Indiana University and the director of that school's entrepreneur-focused Institute for Development Strategies, said projects like Global Entrepreneurship Training "live and die by their community involvement."

Audretsch didn't necessarily mean the general public, but rather the community of groups that might have benefited from the marketplace had it been completed. Beyond the lack of a more vigorous network of partners, he didn't think there were any serious flaws in the work that was done to bring the project to completion. He said the basic story at the Grand Cities Mall was typical across the world of entrepreneurship.

Whether in Grand Forks or Manhattan, Audretsch said these experiments begin with some implicit risk of failure, develop to a certain point and then blossom into success—or wilt into obscurity, as was the case for Global Entrepreneurship Training.

Batchelor, who now heads an entrepreneurship center at the University of Manitoba, said she wasn't running a traditional charity, but a kind of social startup. She ran it as an entrepreneur, seeking seed money for an early phase before moving ahead. Her schedule was busy because that was part of the expectations of her position. She said she consulted with people knowledgeable about grants and received feedback from the Center for Innovation Foundation's board—and would have formed her own board in time.

"There were tons of mistakes made, but it's a launch," she said. "It's messy."

Gjovig assessed the project as more of a nonprofit model than a business. He felt the nonprofit world could be graded more on effort than outcome and, for that, gave the Global Entrepreneurship Training project a letter grade of a B, maybe a B+.

Ultimately, Gjovig framed much of the effort as an educational journey.

"Are there things you can learn from a grant that didn't work? The answer is yes," Gjovig said. "I think the one worry we all have is about grants (that fail), is will it discourage grantors or potential grantees from trying? ... They need to be encouraged to experiment."

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