Hope in Detroit: An Outsider on Motown’s Entrepreneurial Renaissance

12/18/12Follow @michaelgaiss

Long written off by many, Detroit is becoming an interesting city to watch from an urban revitalization perspective. At the core of these developments is the emergence of a startup ecosystem where (for the most part) one did not previously exist. While still early, the progress made in this area over the last several years has been impressive and is having an impact on the region. As an outsider looking in with experience in other entrepreneurial hubs, I wanted to share thoughts on conditions and trends coming together that may help elevate this into a more viable and sustainable model for the city going forward.

I grew up in the Detroit area in the 1970s and 80s. While officially in the suburbs, our house was only two blocks from the city border, bringing the city a bit more upfront in our personal lives. During high school and college, I also worked at the old Tiger Stadium, which afforded the opportunity to experience the city even further.

It was a tough time for Detroit, coming off the riots from the late 1960s and the accompanying exodus of hundreds of thousands of residents. Those challenges continued well after I had left, with the downsizing of the automotive industry, a shrinking tax base, and too much mismanagement and corruption at a local government level.

After graduating from college, I left the area for a programming job in another state. While I continue to spend time in Ann Arbor, I’ve spent little in downtown Detroit over the last 25 years. Still, with family and friends in southeastern Michigan, I have watched it from afar with interest over the years. More recently I’ve been intrigued to watch the rise of the startup community in the region. To be honest, I did not give it a lot of real hope considering the multitude of challenges facing the city.

Sometimes when you’re down, the only way is up. But the story goes much beyond that here. Despite the potential for municipal bankruptcy currently hanging over the city, there are good things happening in Motown. The recent TechCrunch profile of Dan Gilbert does a great job outlining some of them. The region is taking steps and riding some key trends that are starting to effect change. From an outsider’s perspective with some familiarity with the region, here are some of the key ones that are driving (at least for me) a more optimistic view of the city’s trajectory:

Strong Local Leadership and Commitment

New entrepreneurial hubs do not emerge overnight. Local leadership is critical for establishing the early groundwork, setting the tone, and effecting real change. We’ve seen this come from different quarters in other cities. Mayor Bloomberg has set the gold standard for establishing programs and policies at the local level that have led to tremendous impact on New York City. Mayor Menino in Boston has a strong vision around turning the Seaport area into an Innovation District, while implementing initiatives to make the rest of Boston friendly for startups as well.

In Detroit, leadership has come at both the city government level and from within the business community. While facing a multitude of other issues, Detroit mayor Dave Bing (a boyhood hero during his Hall of Fame career with the Detroit Pistons) is taking steps toward making it easier to start and build a business in the city. In addition, businessman Dan Gilbert (of Quicken Loans fame) is leading by example with his wallet and tying in established infrastructure to change the landscape in Detroit. Gilbert’s strategy is a bold approach at an incredible scale, infusing the inner city with additional people, resources and energy.

Community-Focused Vision

Beyond the investment in people and real estate, I like how Detroit is appealing to local professionals and residents to get involved. The focus on inspiring and engaging the broader community in a giveback/pay-it-forward model for the greater good is compelling. It makes people feel like they are part of something bigger and can make a difference, impact the outcome and be part of something special. They key is to make this resonate strongly to lead to action while ensuring that it is sustainable over time to have impact.

Low-Cost Infrastructure

As compared to nearly all other startup regions, it is significantly less expensive to live and build a business in Detroit. Commercial real estate is cheap for startups, talent is more accessible and less expensive, and the cost of living is lower for employees. This has been a huge driver for the growth of Berlin as one of the leading entrepreneurial hubs in Europe. Detroit shares many of the same characteristics that can be used for bringing lower operating costs to companies in the area.

Skilled Resources & Young Talent

Detroit has an existing skilled talent pool from a long history in the manufacturing and services industries. That being said, many of these skills are outside the areas needed by startups. Like NYC, the area would benefit significantly through continuing programs aimed at retraining and equipping people to staff the new companies that are being built. Gilbert is also bringing to bear the resources of Quicken Loans to help out the existing startup community. In addition, Detroit has multiple major research universities within 100 miles—Michigan, Michigan State, Wayne State—that will continue to produce talent on a renewable basis. While it’s much harder to attract outside talent to come in, Detroit can start by doing whatever it can to retain this talent and make the city a place where young people want to stay. They’ve already started to do so with a highly successful internship program that was launched last year involving 600 people.

Urbanization

More and more, people want to work in cities. For many, cities offer a more concentrated and exciting living experience. This is definitely a draw for new grads, but it is also occurring with more experienced professionals that are looking to leave the suburbs. They have become destinations and we’re seeing that play out on the startup scene with the entrepreneurial shift to San Francisco, Boston/Cambridge and New York. Detroit has a long way to go before it offers a similar experience to living in these other cities, but they’ve started to turn the ship with progress made to make a core area of the city more livable and attractive.

Strong Expat Network

Many folks have left Detroit and Michigan over the decades for a variety of reasons, largely economic. Like most grads and expats they have a strong latent desire to help their former community. This is a huge asset waiting to be tapped. Figuring out a way to leverage this in a unique way could accelerate access to outside expertise and capital for Detroit from across the country and world.

Access to Capital

There have been early stage venture capitalists in Ann Arbor and the suburbs for years. With groups like Detroit Venture Partners, there are now VCs emerging in downtown Detroit that are focused on funding startups in the city. Angels are also emerging and collaborating to advise and help provide seed financing for companies. From what I know, this didn’t exist several years ago at the scale we’re seeing today. While not nearly at the same level as the main hubs, it is a significant change in the local environment with the ability to provide early capital to get companies off the ground and running.

Don’t get me wrong, there are still significant challenges facing Detroit. The city needs to continue to focus on ways to make the city an exciting and energetic place to live (not just work). While the lower cost of living will help, other initiatives for attracting and supporting a stronger artisan/creative community could be beneficial on this front (e.g., like the Ride it Sculpture Park). In an era when many young people want to avoid having a car (anathema to the Motor City mindset), the nearly non-existent mass transit system is another major hurdle. Longer term, there needs to be stronger differentiation and brand around “Why Detroit?” to create a compelling story to better compete with other major centers for talent.

Most importantly, to really get a sustainable flywheel going, it will be about making some of those startups in the city today successful. This will be the ultimate indicator that companies can be built in Detroit. In the process, it would also create a generation of successful entrepreneurs and employees that can help build and fund subsequent companies.

You have got to start somewhere though. Curb the exodus of departures and provide a viable reason to stay and contribute in meaningful, valuable ways. Enact public policy to encourage and support development (look to the Bloomberg 13-point model for inspiration). Seek out and pursue cross-collaboration opportunities with universities and corporates that bring more innovation and resources to bear. Engage and embrace the extensive expat community to contribute expertise, help fund and give back in a variety of ways.

Given the way that Detroit appears to be thinking about it, I suspect many of these initiatives are well underway or being considered. It may be a long, slow path but I am more optimistic about their chances than ever before.

In some ways, Detroit has the opportunity to become a rallying point for many parts of the nation. To a certain degree, the city represents what was once great about this country. If they can execute a true renaissance and reinvent themselves for today’s world, it should be an inspiration for all. Let’s all root for them, or better yet, find some way to contribute to their turnaround. What is good for Detroit will be good for America.

Michael Gaiss is an entrepreneurial and marketing-focused executive currently on sabbatical. He blogs occasionally at http://n-days.tumblr.com. Follow @michaelgaiss

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  • ArtNicholas

    This article is spot on, both in sharing the current optimism as well as the assets Detroit can and should tap to make sure the growth continues and the development is sustainable. I’d add there are some very creative efforts being made to make good use of currently abandoned lots both commercial and non profit.

  • http://www.dailygrommet.com Jules Pieri

    Thanks for this Mike. Born and bred in Detroit (within the city limits :) ) I had a novel experience here in Boston recently. I was meeting with a Harvard Business School student who is preparing herself to return to our hometown of Detroit to help with its rebuilding. Her passion and specific words were pretty much what you would hear from an exchange student returning to a third world country. I’m not saying Detroit is third world, but that sense of similar purpose was what was remarkable.

  • dolphins78

    Young people want to live and work in cities, and the good real estate prices in Detroit (for buyers) means that planning out a startup there works because your funds will last much longer there than in any of the big tech towns. The problem is that Detroit still has a very questionable reputation as far as safety, local government horror stories, etc. Not trying to offend anybody, but it seems as if getting the real story out about Detroit is critical for their long term health.