Hills, Detroit, in March 2013, the scene is anything but chilly. The open-floor plan of the office is packed with at least 100 of the region’s most promising entrepreneurs and technology boosters, mingling over pizza and “fancy” beers in the home of one of metro Detroit’s more notable recent tech success stories.
Up the elevator and through the glass entry doors, we may as well be stepping out of the Midwest “spring” and into Startup-land, USA. Overhead, the exposed gray ductwork is interwoven with random ceiling tiles, open space, and orange accents, with a touch-screen panel wall on one side of the room and a slick kitchen and workspace, complete with bar and bistro seating, on the other. About two dozen low-walled workstations, arranged into pod-like units, are scattered around the rest of the space.
Ignore the view out the window and it would be easy to mistake the scene for an office park in San Jose or Sunnyvale. But the fact is, this office is just twenty minutes outside of Downtown Detroit in a modern, two-story office building off of a frontage road that could be located in just about any suburb in America.
But that’s where the similarities end.
“Things are really happening in Detroit,” says Mango co-founder and COO Mike Goulas, his eyes wide like an evangelist preacher, before regaling me with details about the ins and outs of Michigan’s startup culture and how things are improving for entrepreneurs in and around the city (the same city that declared bankruptcy in July 2013). The company itself, which creates and manages a library of Web- and mobile-based language learning software programs, has been around since 2007, and when I visit is in the process of outgrowing its suburban workspace. The solution, according to Goulas, may in fact be a move to Downtown Detroit.
That’s right, Detroit. The city that’s called America’s forgotten city and is generally considered one of the most dangerous cities in the country. “There’s just so much going on down there now,” Goulas says, “even more now than just a year ago. And downtown is just so much more exciting; the spaces are amazing.”
The attraction now, he explains, is the large number of technology startups that are moving into what the locals call Detroit’s urban core—the downtown area bordered by I-75 to the north and the Detroit River to the south, near the General Motors headquarters and the Detroit Tigers’ Comerica Park. Essentially, this is the area’s new “innovation district.” Money is flowing, companies are opening, and the market for technology talent in the Motor City has never been hotter.
Again, this is Detroit we’re talking about.
“It’s an old city,” says Jason Teshuba, Mango’s cofounder and CEO, “but now Detroit is itself a startup, and I love being part of a startup. You know New York, if you look at it in terms of companies, New York is a stable blue chip. Chicago, same thing. Atlanta is probably a medium-sized company that’s kind of had its growth spurt. But I see Detroit, especially the ‘new’ Detroit if you will, as really this amazing startup story in terms of the city. I think we’d like to be part of that.”
For Mango Languages, a move downtown would make perfect sense. The forty-six-employee company—which is self-funded and self-sustaining—has reached the point where it can benefit from proximity to other companies in the software space. Although similar-minded operations are spread out in Farmington Hills—the rest of the Mango building is filled with law offices, bankers, and private medical practices—Downtown Detroit is where the real action is at this point. With a space along Woodward Avenue, for example, Teshuba would have convenient access to neighbors like Quicken Loans, app developer Detroit Labs, and startup training center Grand Circus, with whom they could swap ideas, talk shop, and just generally help contribute to the area’s new tech ecosystem, not to mention the boost that this proximity would offer in terms of hiring and recruitment.
“So in this building here, for example, there are a lot of law firms,” Teshuba says, “and they just opened up a gynecologist’s office on the first floor. So culturally speaking, if we were to go to Detroit, every other company that would be in a building with us would be a tech company. Maybe we’ll be in a building with other app developers. We might be in a building with, you know, some other creative technology companies. So for us it would be a better fit. Plus a lot of the talent that we’re trying to attract on the design and programming side, they have a natural affinity to that area of Detroit.”
In short, it’s where they as a company need to be. It’s where they want to be. And they aren’t alone.
There are literally dozens of new technology startups currently up and running in the city of Detroit and the surrounding suburbs, mostly focused on software and business-to-business services, that are reinventing what the economy of southeastern Michigan can look like. It’s a recent trend, one that’s really only been happening since about 2010, when billionaire financier Dan Gilbert moved his company, Quicken Loans, into new offices downtown. It is evolving and changing on a weekly basis as new companies get started, new buildings come online, and new neighbors move in.
It’s part of a deliberate effort to overhaul the state’s “muscle economy” that for generations has been focused on manufacturing and the auto industry. In fact, the Big Three American automakers (GM, Ford, and Chrysler) were such a dominant part of the Michigan economy for so long—from roughly the 1890s to the late 1980s—that little else had sprung up in the area to employ the citizens or support the local economy after the industry collapsed in the 1990s. The choice for much of the city’s modern history was either to go and work for the Big Three or move.
Now that’s changing, and many in the area feel that software startups can be part of the solution, offering a high-growth, high-potential new alternative that could one day emerge as an anchor for the city’s economy.
“It’s about speed in which growth can happen,” says Jared Sta-sik, an associate with local venture capital firm Detroit Venture Partners (DVP), the largest software-focused VC firm in Michigan, with $50 million under management as of 2013. “A technology startup is so capital efficient that we can make a $500,000 investment that will last the company a year and create a few jobs. But it has high growth potential. If they find the right product that is the right fit for the market then, boom, whatever it might be could actually become a big employer. When we first invest in these companies, the number of jobs is not huge. But the idea is that they are extremely high-growth, high-potential jobs.”
And for the down-and-out Detroit job market, this is nothing but good news.
Tech entrepreneurship might seem like a new thing for Detroit, but, in fact, technology has been part of this city’s DNA since the very beginning. First, the region’s abundant natural resources made Detroit a leader in the horse-drawn-carriage industry in the mid- to late-nineteenth century. Then, Henry Ford arrived on the scene and those same carriage makers become some of the first to build bodies for automobiles. That, of course, grew into one of the great success stories of American business, but we all know how that story ended.
At its peak, the automotive industry formed the foundation of the Detroit economy, helping make the city the fifth-largest in the US and a key player in the country’s postwar economic boom. Fast-forward half a century and things in and around Detroit have changed dramatically. The city’s population has shrunk from its 1950 peak of about 1,850,000 to just 701,000 as of 2013, with about 25 percent of residents having moved out of the city in the last decade. Prior to declaring bankruptcy, Detroit was some $18.5 billion in debt, with $3.5 billion of that tied up in pension obligations.
But that’s the bad news. Since declaring bankruptcy and working to restructure its debt obligations, the city is now going all in on Internet technology in hopes that it could make up at least some of the economic slack from the long-struggling automakers. Optimism is high.
“The
