Startup Ecosystem Profile: Detroit
A strong, diverse startup ecosystem is driving the Motor City's resurgence
Rewind to 1920. Detroit is the fourth largest city in America, rivaling the likes of New York City and Chicago. Titans of the booming automobile industry, Henry Ford, William Durant, the Dodge brothers, and Walter Chrysler, sit among the nation’s wealthiest. Theatergoers pack into streetcars on their way to catch a show at the Fillmore on Woodward Avenue, one of America’s most iconic and desirable streets.
A century later, the Detroit streets serve as a time capsule to industrial era grandeur. The skyline is frozen in time with Art Deco skyscrapers still dominating the cityscape. However, the saplings of a new economy are beginning to take root in the Motor City, displacing the ghosts of industry past. Offices for tech startups, incubators, and venture capital funds have sprouted in once-abandoned buildings across from the Fillmore, and a new streetcar, the QLine, winds through the city.
In this week’s issue of MidBest, we will explore Detroit’s current entrepreneurial ecosystem and dip into the city’s rich and complex economic history. As two Buckeyes, we are especially thankful for the hospitality of the Michiganders who took the time to speak with us and show us their amazing city.
A brief history of Detroit’s rise and fall
On October 1st, 1908, the Ford Motor Company finished production on the first Model T and made the automobile available to the everyday American. Ford disrupted the automobile industry through pioneering the assembly line, allowing for mass commercialization. Detroit became the industrial epicenter and manufacturers flocked to open operations in the city and surrounding areas. Automobiles drove economic growth in the Great Lakes Region. Coal mining to power the factories skyrocketed in Western Pennsylvania and Southeast Ohio. Steel production exploded in Cleveland, Youngstown, and Pittsburgh. Iron and copper mines flourished in Northern Michigan and Minnesota. People from all over the country relocated to Detroit for their share of economic growth. These new residents included Italian and Eastern European immigrants from the Northeast and Black Americans from the South, who quickly made Detroit one of America’s most diverse cities.
The car is just as significant to Detroit’s rise as it is to its fall. In the 1950s, automotive plants moved to the suburbs, exacerbating Detroit’s ongoing “white flight.” This emigration was aided by recently constructed highways and the construction of additional plants in the suburbs. The resulting industrial sprawl caused the city’s population to decline significantly. Detroit’s Black community, struggling to find housing in the segregated suburbs, was hit the hardest by the decentralization. Lack of public transit meant it was difficult for Black workers, who primarily lived downtown, to maintain their newly suburban jobs. As a result, Detroit's downtown neighborhoods struggled.
The drain continued into the 1970s and 1980s as increased competition from Japanese and German manufacturers pushed more production out of Michigan. At the same time, Detroit began accumulating massive municipal debt, which culminated in the city’s 2013 bankruptcy. Lack of economic diversification left the city with no defense against massive economic shifts.
Over the past decade, Detroit has become an example of post-industrial revitalization, with much of its redevelopment led by Dan Gilbert, the billionaire founder of Quicken Loans, and his commitment to investing in the “Comeback City.” In March of 2021, The Gilbert Family Foundation announced a $500 million investment in the city, the first $15 million of which is reserved to pay off property tax debt for low-income homeowners. Additionally, Gilbert has committed billions in real estate development and investment in establishing Detroit as a hub for entrepreneurship.
Detroit’s startup ecosystem
Detroit founders share the city’s chip-on-shoulder attitude and are chomping at the bit for more unicorns and exits:
Our first conversation in Detroit was with Jared Stasik of Detroit Venture Partners (DVP), who led us on an hour-long walking tour of the city’s storied downtown. Founded by Dan Gilbert, DVP is focused on growing the entrepreneurial community within Detroit and Michigan. One of DVP’s–and Detroit’s–biggest success stories is StockX, “the stock market of things,” which is valued at almost $4 billion. They’re not the only budding success. Over the last six months, seven Detroit startups have announced funding rounds exceeding $10 million each. On the technology side, SignalAdvisors is digitizing workflows for financial advisors, Guardhat is bringing safety analytics to construction workers’ hardhats, and Autobooks is automating small business banking. Detroit also has a strong consumer goods presence; Bloomscape is taking plant nurseries direct to consumers and Floyd is creating a sustainable furniture supply chain. Gilbert isn’t the only leader in the state: Ann Arbor-based Renaissance Venture Capital has driven over $2 billion in venture funding in Michigan by investing in venture funds around the US and connecting them to local Michigan startups.
Detroit’s TechTown, an incubator located in a former warehouse, is just a short drive from downtown. Marlo Rencher, the Director of Technology-Based Programs, provided us with an overview of the critical inception-to-launch curriculum the incubator provides, educating founders on raising capital, finding product market fit, and scaling operations. LunarX is a design and digital marketing agency for startups created by serial entrepreneurs Nate Dillard and Omar Dismuke. They saw a gap in Detroit’s startup marketing scene–no one was creating material to represent the diverse population of Detroit, specifically Black founders and businesses serving people of color. They built their agency with the goal of creating designs meaningful to, and representative of, the communities they serve.
For Detroit to succeed, it must maximize its diverse, talented workforce
Detroit’s entrepreneurial ecosystem is well-positioned to capitalize on the region’s talent pool. Within a five-hour drive of the Motor City are seven major cities (Cleveland, Columbus, Toronto, Chicago, Indianapolis, Cincinnati, and Pittsburgh), 30+ major universities (including the University of Michigan, Carnegie Mellon, the University of Chicago, and the University of Waterloo), and 60 million+ people. Ford and General Motors continue to draw strong engineering talent to Detroit, and the presence of Quicken Loans and Ally Financial have attracted expertise in financial services. Detroit’s central proximity to these resource hubs parallels the city’s former proximity to raw materials hubs during the automotive boom. While the automotive industry is still present in Detroit, it is clear the economy and the talent base are significantly more diversified.
Detroit remains a very diverse city – 22.8% of the metro area’s residents are Black and neighboring Dearborn, Michigan, has the largest population of Muslim Americans in the United States. However, the local entrepreneurial system is far from representative. As one investor put it, the diversity of Detroit is “certainly not reflected in the population of founders we see.” DVP is looking to leverage its Entrepreneur-in-Residence Program to promote diversity and is working with founders to implement diverse hiring practices. Omar Dismuke, a Black founder himself, is dedicated to making Detroit’s Black residents feel more included in the city’s startup community. He has been working to develop branding and messaging that is more appealing to minority audiences, with the goal of showing underrepresented people that they have the potential to be founders, too. Marlo Rencher sees a lack of funding available to Black Founders and is committed to providing the resources to change that. As Detroit's entrepreneurial ecosystem matures, founders, community members, and investors alike must continue working together to ensure that underserved communities are not left behind like they were during the decline of the auto industry.
Building on themes of the city’s founding industrialists, Detroit’s new generation of disruptors is poised to reinvent the city. Its powder keg has been ignited, and it is only a matter of time before it explodes. Whether it is StockX, Bloomscape, or Guardhat, a significant exit is on the horizon and will spark reinvestment. If the community acts with purpose, it could create one of the most diverse entrepreneurial ecosystems in the US.