Sidecar Co-Founder Fortino on Why He Chose to Invest in Detroit

8/6/13Follow @XconomyDET

Adrian Fortino caught the startup bug early, not long after earning two degrees from the University of Michigan. He had been working at the Van Buren Township, MI-based global engineering giant Ricardo when he jumped into his first go-around with entrepreneurship.

“It quickly failed,” Fortino admits. “But after that, I couldn’t go back to corporate life.”

Corporate America’s loss has turned out to be Detroit’s gain, but it took a bit of a journey to get here. After his first failed startup, he spent a few years in a boutique cleantech consultancy. From there, he co-founded Shepherd Intelligent Systems, an Ann Arbor-based startup that commercialized the “Magic Bus” technology developed at U-M. Shepherd provides real-time fleet management and rider interface services to passengers and managers of bus and limo companies.

Though Shepherd Intelligent Systems was rolling along on a software-as-a-service model, Fortino and his business partner wanted to try launching a sister startup that further innovated transit. They hatched the idea of Sidecar, an instant ride-sharing service that matches everyday drivers with people nearby in need of transportation.

Fortino moved to San Francisco to build Sidecar into the disruptive startup, popular with the Silicon Valley tech crowd, that it is today. (Sorry, Detroit—Sidecar doesn’t serve our market yet.) Fortino says the company was growing so fast that the time came to decide whether or not to relocate his wife and two kids to California.

“We realized the West Coast wasn’t the right fit,” Fortino says. He helped raise $10 million in venture backing for Sidecar so it could continue to expand, and then decided to take a backseat and become non-operational, which meant he was on the lookout for his next Michigan-based project.

“The big thing is, I like to build sustainable companies,” Fortino explains. “I love to do software stuff and help out with new product design.”

This desire led him to co-found Flocktag, a universal loyalty card combined with a deals engine. Meant to replace all those “buy 10, get one free” punch cards in your wallet, Flocktag offers customized deals via text and e-mail based on a consumer’s behavior. From point-of-sale machines where customers swipe their Flocktags, the company collects and analyzes more than 20 factors of customer behavior to craft the deals they offer.

Fortino says he learned a lot in the process of raising a combined $15 million in venture capital for the three companies he co-founded. He was curious about investing, and that curiosity, combined with his love of being involved in the earliest stages of startups, spurred a conversation between Fortino and his old friend, Xconomist Mahendra Ramsinghani, managing partner at Detroit’s First Step Fund.

At the time last year when they talked, Ramsinghani had his hands full with 45 companies in the First Step Fund portfolio. Fortino stepped in to help manage the portfolio and was inspired to create a new fund, Detroit Innovate, which will officially launch after its first close at $10 million this fall.

Unlike the First Step Fund, which does industry-agnostic micro-investing in growth companies, Detroit Innovate focuses on enabling tech startups with “fairly heavy intellectual property.”

As part of Detroit Innovate, three entrepreneurs are embedded with local universities and industry to cultivate big-impact technology in the medical, enterprise software, and digital cleantech sectors. The companies Detroit Innovate invests in must be capital efficient, Fortino says, and fairly software heavy, though the fund will eventually consider hardware, especially if it relates to medical technology.

Fortino is happy to be in Detroit. He’s a believer. He says the level of integrity is higher in Michigan, and he thinks business-to-business startups have an easier time growing in Detroit than they do in other cities.

He’s also proud of the work the First Step Fund has done so far, and hopes to replicate it with Detroit Innovate. “We’ve syndicated with 24 VCs for the First Step Fund,” he notes. “We come in before VCs and hand the company off. We’re the institutional fund at the pre-seed level, and we’re often the first commitment the company gets. That’s as risky as it gets.”

Despite that risk, only five of the firm’s 52 portfolio companies have shut down, and a handful have even paid the fund back. “We haven’t had any IPOs or acquisitions yet, but in six months that will probably change,” Fortino adds.

Sarah Schmid is the editor of Xconomy Detroit. You can reach her at 313-570-9823 or sschmid@xconomy.com. Follow @XconomyDET

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