Can Southeast Michigan’s Four Accelerators Play Nice With Each Other?

Thomas Lee3/21/11

Last week, the Kauffman Foundation released details from a six-month study that cataloged the capabilities of the region’s four top economic development groups: Ann Arbor Spark, TechTown in Detroit, Automation Alley in Troy, and Macomb-OU Incubator.

Collectively, the report boasts, the groups “have created more than 1,000 jobs and invested approximately $18 million in hundreds of start-up companies while securing more than $101.2 million in additional capital.”

Sounds good, right? Left unanswered, however, is whether these accelerators are helping to create companies and jobs for the benefit of the whole region or for their own pockets of geographic influence. In other words, can these four disparate groups rise above their own agendas and pool their resources for the good of the regional economy?

“There’s an opportunity for the business accelerators to cooperate and do things that we couldn’t do on our own,” says Automation Alley president Ken Rogers. “We can step outside our parochial interests and work together to secure more funding, more programming.”

The first step, Rogers says, was to form the Business Accelerator Network for Southeast Michigan (BANSEM), an alliance of the four groups forged in June 2010. In addition to commissioning the Kauffman study, BANSEM last year bankrolled Accelerate Michigan, a business plan competition for promising startups. BANSEM is also exploring ways to win funding from the U.S. Commerce Department to form international trade missions that would represent southeast Michigan.

But collaboration, I believe, will be difficult. Economic development is often a zero sum game in which states and countries attempt to swipe each other’s companies and talent. Throw four accelerators, each with its own agenda and constituents, into a relatively compact geographic area and they inevitably start to compete for time, money and attention.

Take Detroit’s TechTown and Ann Arbor Spark. One represents a struggling city with a predominantly African American population trying to rebuild its economy beyond the auto industry and attract capital and young professionals. The other represents a well-to-do, mostly white college town filled with tech startups and well-to-do angel investors.

“I think it is going to be a struggle for the two regions to work together in the name of regional economic development on a broad scale,” says Jeff Bocan, managing director of Beringea, a private equity firm based just outside of Detroit. “I do think there are opportunities for the two areas to collaborate on mutually beneficial projects like high-speed rail or attracting new airlines to Detroit-Wayne County Airport. But in terms of broad-scale development, I feel that the needs of the respective areas are too divergent. The scale and fundamental nature of the challenges faced by Detroit far exceed those of Ann Arbor and makes it very tough to have those regions coordinate their efforts.”

I’ve spoken to several people in Detroit and Ann Arbor and they consistently describe a tension that roughly breaks down to something like this: Detroit resents what it perceives as arrogance from Ann Arbor and all of the money and attention the town, home to the University of Michigan, commands.

Ken Nisbet, executive director of the university’s Technology Transfer Office, says people need to get over it. A major research university produces technologies and startups that naturally attract an ecosystem of investors, entrepreneurs, and highly skilled talent, he argues.

Ian Bund, chair of Plymouth Ventures, says he would invest in a Detroit startup in a heartbeat—if he could find a fundable company.

But Ann Arbor is a small town and it’s not clear whether any parts of the university’s economic development machine extend beyond the confines of its immediate community.

To generate true economic growth, I’d argue the region needs the density, infrastructure, and the brand name of a major city like Detroit. For all the negative press it receives, Detroit still remains key to the state’s economic revival.

‘Though Ann Arbor may feel relatively smug about its economic standing in Michigan, for Ann Arbor to truly flourish, it is somewhat dependent upon Detroit becoming a viable, attractive, and sustainable metropolitan area before it can reach its fullest economic potential,” Beringea’s Bocan says. “So it does make sense for Ann Arbor to work with Detroit but I think they have to choose their battles wisely—go for projects where their goals are aligned with those of Detroit.”

Many people are optimistic that Republican Gov. Rick Snyder, a former venture capitalist and Spark leader, could provide necessary leadership to pull together the region’s divergent economic clusters into a more cohesive unit.

“There’s no doubt in my mind that there is a need for broad based regional cooperation” like BANSEM, says Mike Finney, a former Spark CEO who now heads Michigan Economic Development Corp. “If we had more of that collaboration throughout the state, we would be much more effective.”