Since 2018, downtown Akron, Ohio has been filled with construction machinery and Road Closed signs. The city’s Main Street Construction Project promises new pavement, sidewalk and a cycle track. But between construction and the COVID-19 pandemic, in-person business at Totally Tangled Creations has almost come to a standstill, says April Couch, the owner of the art boutique.
“Slow”, “standstill” and “struggling” are all common words to describe the state of many small businesses.
Eager to change the narrative in Akron, Mayor Dan Horrigan and Deputy Mayor of Development James Hardy are trying something new: a partnership with a venture-backed Israeli tech company called Colu.
Colu sells cities a custom-branded mobile wallet app that rewards residents for shopping locally in City Coins, or local digital currency. In Akron, Ohio the platform is called “Akronite” and the local digital currency is called “Blimps.”
From the user’s perspective, Colu is fairly straightforward. Couch is a part of the U.S. pilot.
She says Akronite works like this: “Download the app onto your phone, enter your credit/debit card details and from then on, as you spend money at participating businesses, you earn rewards or “Blimps” that can be used as currency at other participating businesses.”
“You’re already shopping, going to nail salons, getting your hair done, this way you can save your money as you go, and for a shop like mine you can use saving to buy something that is more of a luxury” says Couch.
Colu was founded by Amos Meiri, a native of Tel Aviv, Israel, in 2014. After leaving a career in music, Meiri pursued his MBA and began his career in fintech. His own career launched amid the disastrous financial crisis in Cyprus in 2012 – 2013. Meiri says his company, Colu is a fusion of principles of blockchain, crypto and digital currency and his fascination with behavioral economics.
Meiri said he emptied his savings account of about $40,000 to get Colu off of the ground. The app has received $20.7 million in investments over three rounds from five investors. Meiri says about 50 investors said no, before his first, Aleph, invested $2.5 million.
Colu’s Birth Story in Tel Aviv
Colu now employs 35 people in Israel and New York City. Women make up over 50% of Colu’s team, impressive representation for fintech.
Initially, in Tel Aviv, Colu worked independent of city governments. It recruited businesses and residents to participate on the ground. When Colu reached 100,000 users in Tel Aviv, the city government noticed, and an official partnership was born.
“They were building a light train in Jaffa, which is a deprived area in Tel Aviv where you have a mixture of Jewish people and Muslim people living together,” Amos says. “They blocked the whole main street … people could not access restaurants and retailors. The city put $750,000 in rewards to get people to go and shop locally that area. That was the first case where Colu saw a real economic impact.”
Meiri notes that even after rewards expired or ended the incentives from Colu changed consumer behaviors, and residents continued to shop at local businesses they first encountered through the app. Consumers’ new and sustained habits to shop local had a multiplier effect. The initial $750,000 investment produced $2.5 million in money spent, Colu says.
Previously, Colu attempted to launch in the United Kingdom. In earlier iterations – in Liverpool, England, for instance, Colu tried a different business model, charging a commission as people cashed out their currency.
In Jaffa and Akron, the cities fund the upfront costs. To generate revenue for the city, businesses would need to see a large enough increase in revenue to produce taxes to make up for the initial investment. Colu aims to partner in five to six more small to medium size American cities by next year, Meiri said.
Colu’s transplanted to Akron
Hardy scouted out Colu and has orchestrated the start-ups partnership with the city of Akron. He says that construction conflicts which plagued Jaffa, have similarly, impacted Akron’s economic center downtown. “The similarities just clicked.”
Akron has a very specific and complicated economic task ahead. Late in the 20th century Akron was the “Rubber Capital of the World.” It was home to four of America’s five largest tire companies – B.F. Goodrich, Goodyear, Firestone, and General Tire; many other small and medium sized rubber producing companies were located in the area. But from 2000 to 2007, Akron experienced profound job loss. The number of workers in plastics and rubber products fell from 14,400 to 7,200 (a 50% decline) and gross product fell 33% during the time period according to a 2007 Brookings study.
No single sector has compensated for loss of manufacturing in Akron. Hardy hopes that entrepreneurship, bolstered by the Colu platform, will.
“A lot of tech companies are selling solutions to problems cities don’t have,” Hardy says. “I get inundated with marketing, requests for meetings, beautiful dashboards but at the end of the day municipal budgets can’t afford those things. What I love about Colu is that yes, they have a good product but at the end of the day they have a specific policy goal.”
The 18-month contract costs the city government, a total of $131,250, which includes advertisements that will appear in unexpected places like Akron’s electric and water bills. Hardy hopes that by 2021, Colu will be fully integrated city-wide with hundreds if not thousands of businesses.”
The city has it made free for businesses to be a part of the app. The beta phase of the project aims to run on 121 local businesses, mostly non-white and women owned businesses in downtown.
Small municipalities did not receive CARES Act aid
Colu is an innovation, but Akron has a high mountain to climb in the recovery from the pandemic. Hardy notes that smaller municipalities like Akron, did not receive federal assistance from CARES Act because they did not meet certain population thresholds. Thankfully, the city was gifted a slice of Ohio State’s subsidy, but the numbers are not enough to cover Akron’s expected pandemic-related revenue decline of 20 to 35%.
Akron is looking to strengthen its local entrepreneurship ecosystem overall. Bounce Innovation Hub, Great Streets Akron and securing loan funds from private banks are other initiatives through which the city government seeks to strengthen entrepreneurship for more sustainable economic growth.
It was nearly impossible to funnel federal money to businesses if they did not have an existing relationship to a financial institution, Hardy notes. Under this structure non-white-owned businesses and cash-based businesses did not reap the benefits of SBA’s PPE program. The PPE’s failure makes efforts like Colu that much more critical to Akron’s economy.
April Couch of Totally Tangled Creations hopes that in the short run, the Akronite app, via Colu platform will “make people want to investigate downtown Akron” and continue shopping there even as the rewards system comes and goes for individual businesses. The Main Street construction project is wrapping up soon and Ohio is entering phase 3, allowing Totally Tangled store-front to re-open on July 10th. “Akronite comes at a perfect time,” says Couch.