This is a case study featured in our From inmates to entrepreneurs report. Click here for the full report page
The Texas Prison Entrepreneurship Program (PEP) is what you might call the gold standard of prison entrepreneurship programmes. Since its foundation in 2004, it has served over 1,300 prisoners and achieved a reoffending rate of below 7% over three years, compared to the national U.S. average of almost 50%. Its graduates have set up over 200 businesses, including six that generate over $1 million in annual revenue.
While not all go on to start businesses, 100% of them go on to find employment within 90 days of their release from prison, and almost all are still employed after 12 months. These impressive outcomes have been recognised by extensive national media coverage and an award for “Criminal Justice Volunteer Service” from the Texas Governor.
The initiative was started by former private equity professional and Berkeley MBA graduate Catherine Rohr after she was given a tour of a Texas jail. Rohr had been expecting to encounter a “bunch of caged animals”, but instead “saw people who were repentant and people who had changed”. The following month, she brought together other executives to pilot a business course at the prison, the success of which inspired her to start the PEP. Rohr has since moved on to start a similar programme in New York (Defy Ventures) training ex-drug dealers to become entrepreneurs, but PEP – now led by CEO Bert Smith – continues to thrive.
PEP is funded primarily from private donations, but also covers around 5% of its annual costs with rent payments from the organisation’s “transition homes” and services fees from graduate–owned businesses. It is attempting to expand its earned income activities through organisation owned and operated businesses that also employ graduates of the program: the first of these, a franchise of auto-repair shops known as Auto-Lab, was acquired recently.
Given its long existence – relative to the infancy of prison entrepreneurship programmes elsewhere – and a substantial annual budget of over $2 million, PEP has developed a highly sophisticated model involving significant private sector involvement that other programmes have yet to replicate.
The model
Selection: PEP has a rigorous selection process designed to identify the top 500 men each year from over 10,000 candidates identified by the Texas Department of Criminal Justice. Of those who express interest, the pool is narrowed down through a detailed application process involving written and in-person interviews.
In-prison education: Selected participants are transferred by the State to one of the two Texas prisons where PEP operates. Once transferred, participants begin the programme with a three-month, in-prison character development programme known as the Leadership Academy. Participants learn about PEP’s “10 driving values”, and instructors work with them to identify and remove character traits and behaviours that stand in the way of a positive life transformation. PEP Family Liaisons also works to strengthen lines of communication and ties between each family and their participant.
Business plan competition: The Leadership Academy is followed by a six-month “mini-MBA” programme, taught by PEP staff, board members and business executives lecturing on their areas of expertise. Students take part in a business plan competition modelled after competitions held at major U.S. universities, where they pitch their business ideas. Participants also complete courses on financial literacy, employment, business etiquette and public speaking.
Graduation and certification: Upon completing the programme, participants graduate in a formal ceremony held within the prison, with family and friends strongly encouraged to attend. Graduates are presented with a “Certificate in Entrepreneurship” from Baylor University in Texas, a genuine college certificate without any mention of the word “prison”.
Transition: Graduates are picked up by PEP Transition Coordinators at the release gate. Those who wish (65%) are offered accommodation in PEP’s five “transition homes” in Houston and Dallas. In addition to housing, PEP provides extensive post-release services to its men, including transportation, regular counselling, a support network, social events and emergency financial assistance. Participants also have access to bus passes, phone cards, subsidised dental services, medical services and opticians through partnerships with other providers.
eSchool and business centres: PEP hosts a weekly “eSchool” for released participants taught by executives, MBA candidates and university professors. eSchool graduates who start small businesses qualify for a $500 eSchool Completion Bonus in the form of a reimbursement for qualifying expenses, while those in need of more significant funding have access to PEP’s network of financial institutions and individual investors. PEP also run business centres in Houston and Dallas, which act as low-cost incubators for graduate businesses providing everything from Internet access to affordable accounting.