posted 01-13-2010 03:58 AM                    

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DETROIT — With $6,000 and some Hollywood-style spunk, four friends opened this city’s only independent foreign movie house three months ago in an abandoned school auditorium on an unlighted stretch of the Cass Corridor near downtown.

After the unlikely hoopla of an opening night, red-carpet-style event in an area known for drugs and prostitution, exactly four customers showed up to see a film.

Since then, the Burton Theater has had a few profitable nights. But, the owners say, this adventure in entrepreneurship was never completely about making money. It was also about creating a more livable community.

“Nobody could comprehend why we’d start a theater,” said an investor, Nathan Faustyn, 25. “But when you live in Detroit, you ask, ‘What can I do for the city?’ We needed this. And we had nothing to lose. When you’re at the bottom of the economic ladder, you have nowhere to look but up.”

Despite the recession — and in some cases because of it — small businesses are budding around Detroit in one of the more surprising twists of the downturn. Some new businesses like the Burton are scratching by. Others have already grown beyond the initial scope of their business plans, juggling hundreds of customers and expanding into new sites.

Across from the Burton, for instance, Jennifer Willemsen just celebrated the first anniversary of her shop, Curl Up and Dye, a retro-themed hair salon serving 1,500 clients. Not far away, Torya Blanchard, a former French teacher, recently opened the second location of Good Girls Go to Paris, a creperie. Next door, Greg Lenhoff, also a former teacher, opened a bookstore in August called Leopold’s.

And just down the street from Leopold’s, on Woodward Avenue, Victor Both runs Breezecab, a company he started with a severance package after a layoff from Wayne State University. He uses rickshaws to ferry workers and conventioneers around downtown. “This filled a transportation void,” said Mr. Both, 34, who picked up the pedicab idea while touring Las Vegas before his layoff. “I haven’t made much money, but the experience has been priceless. I had no idea Detroit had so much love.”

It is not an uncommon instinct to start an enterprise in bad times and seize on weakened competition, lower overhead costs and perhaps more free time. Nor is it limited to Detroit. But the trend is particularly striking here, in a city that was suffering long before the rest of the nation fell into recession and where hard times, business closings and abandonment became routine generations ago.

Experts say the zeal for entrepreneurship these days in Detroit and elsewhere has precedent: according to research by Dane Stangler, a senior analyst at the Kauffman Foundation, a center for economic research in Kansas City, Mo., half the companies on the Fortune 500 list this year were founded in recession or bear markets. Further, Mr. Stangler said in an interview, company survival rates going back to 1977 show a negligible difference between companies founded in expansions and recessions.

For some of the new businesses, preparation was minimal.

“All I really needed was a garage, a cellphone and a Web site,” said Mr. Both, who started Breezecab with two leased rickshaws.

Ms. Blanchard’s creperie was more complicated. The restaurant is in the first-floor retail space of what had been an unattractive apartment complex. When the site came under new management recently, the landlord offered to gut the retail space, spending about $70,000 on improvements, Ms. Blanchard said. She put in the rest: $15,000 in equipment, a coat of red paint, an oversize blackboard for the menu, and her own collection of vintage French movie posters.

Now, Ms. Blanchard pays what she calls a “ridiculously low” rent of $1,600 a month for a 1,000-square-foot space that accommodates 45 diners at Parisian-style cafe tables near the Detroit Institute of Arts.

“This was a place to watch your back just four years ago,” said Ms. Blanchard, who founded the business with a cashed-out 401(k).

“I just wanted to do something that I loved,” she said. “And everything worked its way out.”

Michigan, which has the highest unemployment rate of any state, has been aggressive in offering support for start-up companies, particularly in Detroit. The Michigan Small Business and Technology Development Center, which offers support and counseling, counts 20 small businesses, and 400 new jobs, created last year in the three-county area around Detroit, and the center expects that tally to grow as it completes its accounting in the coming weeks. That was down from 41 new businesses in 2008, but on par with the 23 such start-ups in 2007 and 24 in 2006.

At Wayne State University’s business incubator, TechTown, housed in a former auto plant, 150 companies jostle for space — up from one when the building opened five years ago.

“I find it inspiring,” Peter Bregman, the chief executive of Bregman Partners, a New York management consulting firm, said of what is happening in Detroit. “There’s something about that feeling — ‘Maybe America abandoned us, but we’re not going to abandon us.’ ”

Analysts say the entrepreneurs have tapped into buyers’ penchants for spending locally in a bad economy, along with a longstanding void in the service industry.

Some business owners are also capitalizing on a newly energized nostalgia for the vibrant Detroit that used to be, and the more general trend toward urban living.

“This is a passion project for most people,” said Claire Nelson, owner of the Bureau of Urban Living, an accessories boutique, and one of the organizers of a loose network of local entrepreneurs that functions like a support group.

“We’ve got all this empty space in Detroit,” said Ms. Nelson, 33. “If landlords are willing to work with us, we pour our hearts and souls into the place.”

Once the Burton Theater carved out its space in the schoolhouse that closed in 2002 — a 1920s-era building that had receded into the shadows like so many empty spaces in Detroit — the city, which had let the block go dark, turned the streetlights back on. The relighting was a victory felt far beyond the Burton.

“Our business ideas are about taking ownership of where you are and what you have,” said Ms. Willemsen, 29, of Curl Up and Dye. “We want to do right by our neighbors.”

And some customers are going out of their way to support the new city businesses.

“I live in the suburbs where I used to get my hair cut until Jen opened a store,” said Dessa Cosma, a client at Curl Up and Dye. “I’d rather spend my money here. It’s a conscious decision for someone who cares about the city.”

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