in the world,” explains Ted Serbinski, vice president of Detroit Venture Partners (DVP), at his office in the Madison Building. “You go way back to 500 AD, if you wanted to bake bread you had to live next to a river to grind the flour. With the invention of electricity, now I can plug my KitchenAid into the wall, and I can make bread in here with my little toaster oven. The same thing is happening with the Internet. I can plug into Amazon Web Services, and now I can have a startup that serves millions of customers around the world. And now I don’t need to be in New York or Silicon Valley anymore. I can actually do it in Detroit.”
For fans of the Midwestern way of life, this has been a very significant development. Now they don’t have to choose between the work they want to do—software development—and the lifestyle that they want to live. And make no mistake: There are worse places to live than southeastern Michigan, despite all of the negative press that Detroit attracts. The cost of living is low, the lake districts are beautiful (“Traverse City: Pure Michigan”), and the state’s midcontinent location makes both the East and West Coasts a reasonably short flight away.
The business side of startup life in Detroit comes with a distinctive Midwestern bent as well. The focus here isn’t on the latest and greatest app or attracting the most users or page views. Conversations among Michigan entrepreneurs often turn on topics like “sensible growth” and “capital efficiency.” It’s a little old-fashioned, it’s a little conservative, but it’s exactly what many people would expect out of the Rust Belt. And, for some founders, it’s a good fit.
“I moved here from California,” says Serbinski, “and one thing we’re seeing is people that are kind of looking to start a family, so they’d like to buy a house and have a backyard. That’s kind of what my wife and I were looking for when we moved here. You have the Great Lakes and you have Traverse City, which is just this undiscovered gem up north. You can have a really nice life here with great schools and great values.”
It’s also proving to be surprisingly profitable for some entrepreneurs.
Mango Languages is a self-funded startup—“No thanks, we’re good,” says CEO Jason Teshuba about his interactions with potential investors—but in fact it is just one of several non-VC-funded businesses that I found in Detroit. Billhighway, which offers a cloud accounting solution for “shared bills” like those among roommates or membership organizations, is also funding its own growth, as is app maker Detroit Labs. It’s a little surprising at first—after all, venture backing is a fact of life for many technology entrepreneurs on the coasts (and a badge of honor for some)—but this more conservative approach just comes with the territory in Michigan. Rather than rely on money from outside the area, and the limitations that often come with it, many of these startups truly want to go it alone, and they structure their businesses to be revenue-positive and growth-oriented from the start.
As a result, they’re also taking their time as they grow.
“You’ve got to give yourself the time to succeed,” says Mango’s CMO Ryan Whalen. “You’re going to fail, but what you don’t want is to build a cost structure that will hit you if you don’t grow as fast as you expected. Focus. Find your niche. There’s power in focus.”
It’s about reasonable, organic growth. It’s about playing your own game. “Don’t worry about where other people are,” Whalen says, “just worry about where you are. There are enough pieces of the pie to go around for everybody.” And, most importantly of all, staying in the black. Entrepreneurs don’t come to Detroit (or stay there) to swing wildly at pie-in-the-sky ideas. The point in this town is to create revenue, create jobs, and help contribute to the rebirth of the city.
It might be quaint, but there’s no denying that this attitude is making gains. The Detroit area’s startup scene has grown dramatically in recent years, taking the city from a tech backwater to a bona fide player on the national map.
According to Automation Alley, more than 201,000 people were working in technology jobs in Detroit as of 2013. The area was named the fastest-growing region for tech employment in 2011, according to job search site Dice.com, up an amazing 101 percent since 2010. Things have only expanded since then. Rents are up in the downtown core, condos and other residential options have begun to spring up, and street life is returning to central Detroit for the first time in at least a generation.
At the center of this effort is Detroit-born billionaire Dan Gilbert, the founder of Quicken Loans and majority owner of the Cleveland Cavaliers. Since moving his company’s headquarters from the suburbs to downtown in 2010, the Michigan native has made it his personal mission to transform the core of Downtown Detroit back into the vibrant, successful, functional place that it once was. The first step was overhauling his company’s workspaces, which are scattered across half a dozen downtown properties and feature bright, colorful offices and hip, worker-friendly amenities. Now, he’s trying to bring the rest of the city up to these modern standards.
And he’s doing it the old-fashioned way: by buying up empty or otherwise available properties throughout downtown, rehabbing them, and then renting them out to new tenants. The idea is to attract the kind of high-growth, high-potential companies to Downtown Detroit that would otherwise be working out of office space in the suburbs by reinventing what life in Downtown Detroit is really like.
Needless to say, this is no small undertaking. If he hopes to be successful, there needs to be capital to fund new businesses, jobs to attract high-tech workers, and workspaces and housing to support them as they grow. So Gilbert and company decided to start the process by creating a tech accelerator program in January 2012. The resulting nonprofit organization, Bizdom, is housed in the Madison, a historic theatre that Gilbert gutted and renovated, creating the downtown area’s first startup coworking space and one of Michigan’s leading tech incubators.
But Bizdom is not alone. The Madison is also home to DVP, Gilbert’s for-profit venture capital firm, and a number of its portfolio companies, including Detroit Labs, design firm Skidmore Studios, and more than a dozen in-progress new startups.
It is, to put it mildly, a very busy, very unique place.
As for the five-story structure itself, it at one time housed offices for the long-ago demolished Madison Theatre, which was razed to make room for a parking lot in 2000. Now that the remaining structure has been overhauled, there’s a street-level coffee shop that, unusual for Downtown Detroit, is actually bustling at midday. Access to the upper floors is well secured (a key card is needed to even take the elevator from floor to floor), and, once there, visitors are treated to exposed brickwork, open rafters, and a number of floor-to-ceiling murals. Large windows dominate the space on the south and east sides, offering sweeping views of the Detroit River and the east side of town, including Comerica Park. The loftlike warehouse space—which includes three floors of offices, an auditorium, meeting rooms, and an open-air party deck on the roof—is unlike anything else in Detroit.
And it’s packed. The day I visited, workers were crowded into cubes and offices, with many even working at tables in the hall. DVP and its associated companies take up about half of the third floor, with Bizdom and its entrepreneurs crammed together on the other side. Where there aren’t startups at work, there are sport-jacketed executives waiting for meetings. In the middle of the space, a stairway leads down to the second floor, with hardwood accent walls giving the stairs an organic, natural feel.
It’s a cool space, for sure, but the importance of the Madison goes beyond the smoothie machine and the city views. There is serious work being done here, and it is work that many in the city believe would not be happening locally if the forces behind this space did not exist.
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