Motor City Mojo: The Startup Renaissance in Detroit

Posted on August 20, 2012

I heard them say they’re shutting Detroit down.
But I won’t leave ‘cause this is my hometown.

– Kid Rock, “Times Like These”

San Francisco. Palo Alto. New York. Cambridge. Austin. Boulder. Detroit. One of those doesn’t seem to fit in there right? After all, Detroit’s a mess isn’t it? The median house price in Detroit is $6,000. Half of the adults in the city are functionally illiterate. 48% of children live below the poverty line. Some people would say that Detroit epitomizes what is wrong with America.

But for a group of talented and motivated entrepreneurs in Detroit it’s something else. It’s a chance to show what’s right about America. Last week I had the pleasure of meeting with a dozen of Detroit’s top founders to discuss what it’s like to start a company in what’s probably the most economically depressed city in the country. While their businesses were different and they didn’t agree on everything, they all shared one thing: a strong feeling that the Detroit of the future will be better than the Detroit of the present.

The meetup came together in large part due to the efforts of Ben Bator, the founder of Texts from Last Night, a somewhat random idea that spawned a website with four million monthly unique visitors, a book and a development deal with Sony Television. Ben is the kind of the guy who could start a company anywhere but instead has chosen to grow his company in Detroit and help to provide jobs in the community that he grew up in.

If that attitude sounds familiar it might be because of a guy named Dan Gilbert. Gilbert, a Detroit native, founded Rock Financial back in the 80s and the company was acquired in 2000 by Intuit and rebranded as Quicken Loans. In 2010, Quicken Loans moved its headquarters and 1,700 employees to downtown Detroit and plans to move an additional 2,000 people downtown by the end of this year. Estimates of Gilbert’s wealth have exceeded a billion dollars, plenty of money for him to buy the Cleveland Cavaliers and perhaps more importantly plow some of his cash back into the Detroit startup scene through Detroit Venture Partners (DVP).

Jake Cohen, who joined DVP in November, feels that Detroit is on the verge of a startup renaissance. “There are a number of advantages to starting a company in Detroit including lower costs, strong talent at the local schools like the University of Michigan, Michigan State and the College for Creative Studies at Wayne State and an an opportunity to fill a local hiring void left by the downsizing of the auto industry.” DVP has written checks for 10 companies in the last year alone and the company’s roster of investors includes impressive guys including Josh Linkner, DVP’s CEO and founder of the ePrize and, most recently, Michigan’s favorite son, Magic Johnson, who joined as a General Partner in July.

The renaissance in Detroit is one that spans generations. It includes guys like Andrew Rauh, a guy who Peter Thiel should be actively recruiting for his 20 Under 20 program. Andrew, a freshman at the University of Michigan, has already started one company and been featured by Fast Company. Andrew’s resume is one of the most impressive of any teenager I’ve encountered and includes being published by Johns Hopkins University, finishing 3rd in an International Science Fair and raising money for Haiti after the earthquake.

But it’s not just young guys starting companies in Detroit. Hossein Nivi might be a bit older than your average tech entrepreneur but he’s no less visionary. Hossein is attempting to disrupt education and training through Pendaran. Imagine a cross between a flight simulator, a boot camp and a business school and you have a highly effective training model that’s been used within a number of corporations. And if Hossein’s surname is recognizable, it’s likely because you’ve seen the work of his sons out in San Francisco, Babak (“Nivi”), the founder of AngelList, and Farbood, the founder of Grockit.

So while it’s easy to look at Detroit and feel discouraged by what’s going on, spend an hour with one of Detroit’s entrepreneurs and your mindset will change. Raji Bedi, the founder of doingtonight (think Plancast for where you’re going out tonight), put it well with an emphatic statement. “We don’t want your pity or to be someone’s charity project. We want Detroit’s startup companies to stand on their own.”

After spending time with the founders of other innovative companies like Are You a Human (game-based CAPTCHA), Gumshoe (a social game best described as “Clue meets The Amazing Race”), HealPay (disruptive play in the collections space) and Own Point of Sale (social point of sale) and with the people behind incubators like Detroit Labs and Tech Town I was left with a strong sense of hope for Detroit. The numbers are pretty clear. Job growth comes from startups. So if Detroit is to come back it’ll be the founders that assembled last week (and hopefully many more who will follow in their footsteps) who will be part of driving that job growth.

No pity here. The kids in Detroit are definitely alright.

Jon Bischke, Techcrunch