Techstars to open up shop in Detroit
crainsdetroit.com
crainsdetroit.com
The current problem with the Detroit Metro area is when ever outside money comes in. Most the time the offices open in the northern/western suburbs.
I say this because most high paying jobs are in the suburbs. Because that's where the businesses are. The suburbs are doing well. At first I was very excited and hoped they'd open relatively close, but all things consider that wouldn't help the city as much.
I own my own company and I have clients in the city; the Comerica building just to name one. If we are on a project that puts any of us down there after 5pm, we'er in pairs.
I'm originally from New York; parents moved to Detroit area when I was kid. I remember growing up listening to family constantly being concerned for our safety and when I got married about 10 years ago, I had a hard time convincing my NY relatives that Livonia was safe to visit. (Livonia is North & East of Detroit).
My mom worked in Detroit (McNamara building). She would take the bus into the city. If she missed the bus ride home, my dad and I would have to drive down to pick her up. We would always get this nervous feeling coming off I-75 by the old Tiger Stadium. The McNamara building is a federal building so it had high security which I think gave my dad some comfort but still, Detroit's crime has always over shadowed the place for as long as I've been here.
We even have stupid comments big celeberties like Ted Nugent who say we're the murder captial not because we shoot more people but because we're better shooters.
I digress... I'm hopeful things will turn around but as a father now with kids, I'm always on the lookout to get out still. Including moving my company HQ.
Growing up, I only ever went into Detroit for concerts and the semi-annual "Greektown" pilgrimage. Outside of that, it was blight everywhere, and I thought that is how a big city looked. It wasn't until my college years that I seen a bit more of the world and my perspective changed on urban areas.
Overall, I think Techstars moving in will be enormously positive. Cheap rents, stalwart employees (because of the bitter winters), and a "we can only go up from here" attitude is a good mix.
That's really not true. There's a ton of fantastic restaurants/coffee places that don't exist in the suburbs (Mudgie's, Slowe's, Great Lakes Coffee, etc), the Detroit Art Institute in Midtown (including famous works like Van Gogh's self portrait), a music scene ranging from the big pop stars at Fox Theater to the up and coming indie bands at the Magic Stick, there's all the sporting events, there's ice skating at Campus Martius during the winter and free music at Grand Circus during the summer, there's the Opera House, there's touring Broadway shows at the Fox, there's smaller but still professional theater at the Hillberry, and there's a few regular tech meetups that take place downtown (Detroit Google Developer's Group, Lambda Lounge, Detroit Craftsman's Guild). There's almost always something going on in the Downtown/Midtown area.
The "Down Town" area is perfectly fine. I have friends who live down town. Just when you leave that bubble protected by freeways it gets very bad very fast.
Part of the reason we don't attract accelerators like TechStars is the lack of a healthy startup ecosystem. I am NOT saying that the well intentioned community organizers aren't working hard. It's just that most of the VC here goes to Oil & Gas projects. If your tech isn't energy related it won't hit the radar. The technology startup successes I've seen in my 30 or so years here were built inspite of a (nonexistent) local startup ecosystem. Lastly, 9 out of 10 great people I've worked with here have left to go places with more tech opportunity. The talent is voting with its feet. Frankly, I'm done too. I'm on the first airplane out of here once I get my feet under me. I'm sad that it has to be this way. Maybe if I make it rich I'll come back and invest.
edit: spelling
Sure you need good universities and cheap accommodation etc but it strikes me there has to be something unique and alternative to draw in the igniters of a new hub.
The interests of a business community don't necessarily reflect that of a local government.
Yup. Oakland County was once the 4th richest county in the US. Michigan leads the nation in families with second homes. Everyone around here has a second home (cottage, cabin, etc) on a lake from 1-3 hour drive away. OK, not everyone. Part of it is that there are so many lakes that they're relatively cheap. I even knew a guy who bought an entire lake - property was like 100 acres and lake was within that. This cost him less than a two bedroom place in SF.
Northern suburbs (Royal Oak) to Traverse City is 4.5 hours.
Its gotten to the point that some suburbs are big enough to develop their own suburbs. Notable Troy, South-field, Ypsilanti, Ann Arbor, Sterlining Heights.
These started out as satellite cities to Detroit, but since Detroit suburbs grew, the satellite cities suburbs grew. Its just a massive sprawl.
You could buy two of them for the monthly cost of a nice 1-bedroom in SF.
On the other hand, one thing Detroit has that San Francisco doesn't have (or at least not to the same extent) is ready access to a lot of industry, especially automotive (even now), and the recovering Midwestern manufacturing base, in Michigan, easy access to Toledo, and feasible driving to several other industrial cities. If Detroit doesn't produce the next WhatsApp I'd guess it would be because the attraction of more business/industrial opportunities would be too great to ignore.
VC here are willing to fund a liar standing next to a hole in the ground, but lax to fund a software venture.
I live 30 minutes from detroit and come from an upper-middle class household.
See my post further up. I grew up 30 minutes in what many around here call the down river area (Riverview) and when I bought my first house, I went north. I'll happily pay more taxes for blue ribbon schools, trash pick up, snow removal, and be able to take an evening bike ride under street lights in a safe neighborhood.
Why would anyone trade any of this for living in Detroit. The bad areas are where people go who can't afford to live anywhere else. A hard cycle to break.
You are spot-on; until it's safe to raise a family in Detroit (which, based on the lead and heavy metals residing in the soil from the torn down structures, this may never happen) I can't see myself raising a family in the city. I'll be moving to the suburbs, if I'm still living Detroit.
D3 and Loveland are doing a great job documenting the upcoming housing apocalypse - and I don't care how geneous the city gets with payment terms to the debtors, if there is no present or future income to service the debt, it's game over.
For as much building as going on in Midtown/Downtown along with the new entertainment megaplex that Illitch is constructing, there is a two factorial amount that's decaying in concrete/wood/basic raw building materials, because there is zero disposable resident income to upkeep the property.
The city will have to decompose fully to thrive. I've sometimes played with with the idea in my head to split Detroit into three or four separate cities (to help certain portions thrive), but this of course would be politically untenable.
ps - See the 'Detroit by Air' article from a few days ago.
Also, the downtown area of Detroit is extremely nice and if the rest of it was even half as nice I would consider moving there.
As an entrepreneur, you do not need a "healthy startup ecosystem" to build a successful company. Let me repeat: as an entrepreneur, you do not need a "healthy startup ecosystem" to build a successful company. If you have a great product or service and are willing to make the effort to get in front of customers, you can build a successful company anywhere. Starting today.
I won't argue that the things that come with a "healthy startup ecosystem" (accelerators, venture capital firms, etc.) can't be helpful, particularly to certain kinds of entrepreneurs chasing certain kinds of opportunities, but as a general rule, the people who are going to build successful companies aren't waiting for their cities to become startup hubs. It's simply irrelevant to their ability to execute.
> If your tech isn't energy related it won't hit the radar.
Any entrepreneur in any industry passively waiting to "hit the radar" is going to be disappointed. If you want attention from customers, investors, media, etc., you almost always have to go out and get it. Ironically, this is even more true in the Bay Area because there are so many companies and there is so much noise.
> The technology startup successes I've seen in my 30 or so years here were built inspite of a (nonexistent) local startup ecosystem.
Even in Silicon Valley, which has the "startup ecosystem" that is the envy of the world, most startups fail. You just don't see the graves because they're covered by the latest batch of startups.
> Lastly, 9 out of 10 great people I've worked with here have left to go places with more tech opportunity. The talent is voting with its feet.
While it's easy to get the impression otherwise, lots of people come and go in the Bay Area too. Just because this is the tech capital of the world doesn't mean the grass is greener for everyone.
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I've lived in Wyoming, Colorado and the SF Bay Area and honestly I'd take Houston over all of them.
You seem absolutely convinced that entrepreneurs can't build successful companies without a certain kind of "ecosystem" in their city. It's simply not true, but please don't take my word for it.
If and when you leave Houston and come to an area with a great ecosystem, like the Bay Area, you'll soon discover that despite the ecosystem, there are tons of entrepreneurs and wantrapreneurs who aren't any better off. The only difference might be that instead of the excuses you've provided ("there's no ecosystem", "the investors don't invest in tech") you'll hear a different set of excuses ("I can't find a co-founder", "YC rejected me for the fifth time", "the VCs won't invest in my company").
I know there are some entrepreneurial efforts being made at my alma mater, but overall it feels like a huge missed opportunity. The business school is strongly walled off from the undergrad population, the excellent CS department tends toward the academic side (with rare exceptions like COMP 410/415 [1]), and personally I never saw much of an attempt on the part of the local tech scene to get students integrated. There is the Rice Alliance [2] but it isn't quite the same as an organic grassroots-y scene.
[1] http://www.bandgap.cs.rice.edu/classes/comp410/ [2] http://alliance.rice.edu/
Seriously, keep in mind that for all of the companies in Silicon Valley that do truly groundbreaking or meaningful things, there are many more startups that fall into one of the following categories:
1. Doomed to failure chasing inane consumer internet ideas that 50 other companies are chasing.
2. Doomed to failure leeching off of other startups, something that won't be viable when the current cycle ends.
3. Doomed to failure pursuing legitimate opportunities that their founders don't have the domain expertise to exploit.
San Antonio is similar with companies like WellAware raising a $37 million series A for oil field monitoring tech.
There is a lot of talent here. As evidence, here's the First Robotics Competition team map: https://www.google.com/maps/d/viewer?mid=zIJNq656OeBY.ke6fB8...
Our teams also have a long history of winning ;-)
Detroit is the perfect place to build the robotics industry and they should call it Uncanny Vally.
Why?
The automotive industry has already created a host of general consulting engineering companies specializing in everything from hydraulics to electronics to fluid flow is insane.
One area of the city is literally known as "automation alley" due to the huge number of PLC controlled robots it produced in the 80's and 90's.
The ideas of line automation were invented in Detroit.
Also the exposure the metro-area children get to this technology is unpresendented. While HN doesn't seem to be "big" on First/FRC high school robotics competition. Nearly every school in the suburbs has a team that builds at least 1 50k+ robot per year to compete locally. There are multiple programs and competitions FIRST isn't the only. I bring this up because Michigan teams don't exactly compete but dominate was a better word before the region limiting system was put in place.
Finally the education system is also in place. Lawerence/Kettering university were founded by Ford and GM as trade schools to crank out engineers for their companies, now they're private universes. But the it demonstrates just how many engineer degrees come from the state let alone the metro area.
Oakland U also has (or had) a decent engineering program, no idea how it's coming along these days though.
Cheap land to build large testing facilities.
Infrastructure that is only recently started to erode to test out various robots on.
Cheap cost of living in an otherwise capital intensive industry.
I once looked into the suitability of Detroit for a start-up. It seemed that professional services were generally not as interested in working with young companies as in the bay area. The availability of deferred legal, accounting, or other services was non-existent. Being in the bay area, my company has benefited greatly from having deferred legal work. I also worried about finding good advisers.
With Techstars there, it would definitely solve these problems for their awardees.
While there aren't a wealth of affluent, urban customers in the city, there would be great opportunities for consumer or educational startups that address problems for the base of the pyramid. Whole Foods opened a store in Detroit, and talked more about it in their last quarterly conference call than any other topic. Ostensibly, figuring out how to be successful in markets like Detroit is a huge opportunity for growth for them. Finally, the city of Detroit has neighborhoods that are young and affluent. Inventory is very limited, and rents in the highest profile areas are as high as most big cities -- think Lake Merritt in Oakland.
I really hope TechStars is successful there. Detroit is a place dear in my heart and not as scary as many think. I lived in SF's SOMA 10-ish years ago, and can say that I had way crazier stories and more dangerous moments than my mom, who has been working in Detroit Public Schools since her retirement.
Detroit is cheap compared to SF but actually downtown is filling up, rents are not as cheap as you might think.
However, when is someone going to setup in Phoenix (Chandler, Scottsdale, Tempe)? Huge market, short flight to CA, always overlooked. Gangplank (web/app/product), Game Co-lab (games) co-working locations + ASU are doing a good job for startups but it would be awesome for more investment here, fairly untapped and a blue ocean in the desert where we have to stay indoors working most of the time anyways.
However, many people outside of the startup scene have misconceptions, as they see survivor bias/success bias in the reporting. One item in the report feeds this misconception: "The average company got $1.9 million in funding." The median raised would be far more revealing of the actual experience that a startup faces than the average.
I just pulled some numbers quickly...
In the last 3 Techstars NYC batches (not including the most recent), there were 37 companies with median funding of just over $1.6 million. 28 are still active, 6 have been acquired and 3 have failed.
Total companies: 486
Median funding: $450,000
Average funding: $2,039,918
Total funding: $991,400,000
var fundings = $('.batch .parent .right').map(function(){
return +this.innerHTML.replace(/(\$|,| )/g, '') || 0;
}).toArray();
fundings = fundings.sort(function(a, b) { return a - b; });
var totalFunding = fundings.reduce(function(a, b) { return a + b; });
console.log('Total companies: ', fundings.length);
console.log('Median funding: ', fundings[Math.round(fundings.length / 2)]);
console.log('Average funding: ', Math.round(totalFunding / fundings.length));Though, I'm surprised they aren't coming to Ann Arbor- the real startup hub of Michigan.
Detroit has far more start ups and venture capital firms...mostly owned/invested in by Quicken but the point stands.
A2 lacks a Dan Gilbert to make all the things happen, but it has a much more vibrant, Bay-like share-and-share alike, encouraging, open start-up culture.
Plug for A2-NewTech, a start-up meetup I'm a huge fan of (I'm not affiliated, just a fan)
Barracuda Networks was started here. Google's Michigan office is here. One of the top 5 public universities in the world is all around us.
I can't imagine why anyone on HN would drive from Ann Arbor to Detroit for work when there are much better and higher paying prospects right here in A2.
Are there any Detroit-centric REITs out there?
Good news for you Detroit!
You should checkout über offices. They have 5-10 startups working out of all three locations (most of with funding). On top of the co-working/startup spaces you have other accelerators and funding opportunities like 1776 and Acceleprise.
The DC startup scene is definitely healthy.
DC startup scene is hardly dead.