How the Motor City Got Its Groove Back
Crumbling cities aren't supposed to be this popular.
For the most recent Startup Weekend in Detroit in mid-February, organizer Brandon Chesnutt cap attendance at 120, and still had people banging down his door.
"We literally just ran out of space," Chesnutt says. "I can't go an hour without getting e-mail from somebody wanting to attend."
The most popular Startup Weekend in the city's history took place inside the M@dison building, a modern five-story start-up Mecca that—as home to several VC firms and many of their portfolio companies—is part of the groundwork for a tech-centered rebirth of Detroit. The building is the brainchild of Dan Gilbert of Quicken Loans, who has been making it his crusade to reignite Detroit's downtown by buying property, seeding ventures, and moving thousands of Quicken employees into the area.
The M@dison is located on a stretch of Woodward Avenue that is poised to become Detroit's own Silicon Alley: Gilbert has dubbed it "Webward Avenue" for its burgeoning concentration of tech businesses and incubators. And with the neighborhood's surge in restaurants, bars, and entertainment options, Webward just might become the movement that is key to transforming Detroit back into a great American city.
"Regardless of what you call it, there is something really special happening," says Paul Glomski, CEO and co-founder of Detroit Labs, a year-old mobile app maker based in the M@dison. "A city that people consider down on its luck in terms of manufacturing, when you come here, you see a vibrant work force driven by innovation and technology. It's something that is exciting to be a part of."
"A Run" at Downtown Detroit
There's no doubt that Gilbert is leading the charge to spark the Webward Avenue movement: Not only is he encouraging downtown revitalization by buying up abandoned or under-used buildings to turn into office space, but he's also connected to several other major players in the neighborhood. He's a general partner in Detroit Venture Partners, the VC group seeding many of the hot prospects in the city.
The M@dison is a $12-million renovation of a century-old building that alone contains a several start-ups that have begun to get some notoriety, including the tech newcomer Detroit Labs, which gained national notoriety for working with Chevrolet on a Super Bowl promotion. In contrast, there's Skidmore Studios, a 53-year old company that started as a Detroit illustration house, moved in to the building after a long exile in the suburbs, and the proximity to the action has already increased business enough to hire more employees.
"If we were going to make a run at the city, we're going to do it downtown," president Tim Smith says. "Moving it back to its roots, where it started, was a big priority of mine. Emotionally, I think there was an uptick in our own personal pride being part of a creative resurgence."
It must be considered that Webward Avenue isn't an entirely new phenomenon. The neighborhood has its own breed of anchors tenants, which have been laying the groundwork for the movement since the first dot-com boom. Compuware built its 1.1 million square-foot headquarters off the southern hub of Woodward Avenue in 2002. Last year, the company started C-Power Compuware Ventures to fund early-stage technology start-ups with a Michigan connection.
According to Paul Czarnik, a Detroit native who is executive vice president and chief technology officer at Compuware and oversees the company's venture arm, one of the first pioneers to try to reclaim downtown was the Ilitch family. It owns the Detroit Red Wings, the Detroit Tigers, and Little Caesar's pizza chain, and which invested heavily in renovating buildings and venues downtown in the '80s and '90s. That ripple of renovation downtown seems to have lured big tech firms to start testing the waters. Compuware's move downtown was a monumental one.
"When they made the decision, we were all kind of floored," Czarnik says. "It was not good times in the area we were moving to. It's been almost nine years and we love it."
After Gilbert relocated 1,700 employees from Southfield into the Compuware building in 2010, he moved 1,500 Quicken employees into the renovated 14-story Chase Tower building on Woodward in October.
The transformation of the area is changing the kinds of talent the city is drawing too: once considered a haven of engineers for its auto-industry connections, Detroit's scrappy vibe is tech-savvy drawing in college graduates who are looking for something fresher than in Chicago or New York.
"A bunch of people that we have talked to are specifically interested in Detroit," says Reid Tatoris, one of the founders of Are You A Human, a game-based authentication system—like a CAPTCHA, but ostensibly fun—also based in the M@dison. "I'm really surprised by it. They've got a reason to try and take a risk and be here. It's really cool to see people from outside who have no ties say 'I want to be in Detroit.'"
Maybe you've heard the joke about being able to buy a house in Detroit for the price of a VCR, but that's not the case around downtown: The residential occupancy rate is higher than 90 percent. Tatoris says he was stuck on seven different waiting lists for apartment complexes before he finally found a place to live.
Brand New Identity on Webward
A few weekends ago, Glomski took his wife and 2-year-old to see Sesame Street Live at the Fox Theater. To get there, he parked in his office's parking lot, passed by Comerica Park, home of the Detroit Tigers, through Grand Circus Park, and through a corridor of restaurants, bars, and coffee shops, including old prohibition style speakeasies, live jazz clubs, and a coffee shop with music venue tucked away in the back.
The area is starting to see the benchmarks of activity that define a creative hub, all which fight the notion that Detroit is economically hopeless.
"People have shifted in their minds," Chesnutt says. "They love spending time—and more importantly, spending money—downtown."
Pedestrian traffic has increased, and more hopeful signs emerge almost every day.
"You are seeing buildings that are vacant and unoccupied for an awful long time that you know just got sold," Smith says.
Entrepreneurs use words like "discoverable," "unlocking," and "scavenger hunt" when describing the best parts of Detroit, which is to say a casual visitor is not as likely to just stumble across something amazing or eye-catching the same way one might while walking down a busy street in New York City.
"There is a lot down here, but it's not as visible," says Nathan Hughes, co-founder of Detroit Labs.
But the things that are happening give Detroiters with the feeling that the city is discovering a brand new identity.
"We Felt a Renewed Energy."
Clumping together in the start-up zone of Webward Avenue means two things to Detroit's entrepreneurs: For one, business is easier to do when you can just pop a few doors over to talk to your graphic designer or engineer.
"There's a lot going on, but it's distributed through miles and miles of suburbs. There's an energy you can't take advantage of when every one of your clients is separated by 20 or 30 miles of driving," Hughes says. "One of the founding principles was to get everyone together. That's not something that necessarily exists normally in Detroit."
But perhaps more crucially, it also means when you're circling the wagons around the center of what is supposed to be a dying American city, you find yourself with a lot more ammo to fight your way out.
"Emotionally, I think there was an uptick in our own personal pride being part of a creative resurgence," Smith says of relocating onto the Avenue. "Everyone upped their game a little bit. We felt a renewed energy. The work we were doing six months ago that was great got better. The days of hanging our head and being ashamed of where we live are over. We're not going to be the punch line any more. We're going to lead that charge back."
Chesnutt says Detroit is catching up to other cities, where start-up energy feeds off itself in bars and social events, on and off the clock.
"Entrepreneurial density and getting everyone in the same spot, that's what leads to success," he says.
You can already see that sense of combatants-in-arms in the popularity of events such as Startup Weekend and tours of the M@dison building, which have drawn capacity crowds. The attendees may be competitors in the business world, but they say their uniting goal is to pick the city up, dust it off and push it back into the ring.
Josh Linkner, a serial entrepreneur who works with Gilbert on Detroit Venture Partners, was born in Detroit in 1970, when the popular conception about the city was already that it was becoming a "wasteland." His parents moved the family to the suburbs shortly after.
"I'm going to be telling my grandkids about this five-year stretch when Detroit got back its mojo."
—Detroit VC Josh Linkner
"I'm going to be telling my grandkids about this five-year stretch when Detroit got back its mojo," Linkner says. "I don't think social transformation and profit are mutually exclusive. Our philosophy is that you can do well and do good simultaneously."
A More Rational Resurgence
People in the Webward Avenue community, many of whom have roots in Detroit that go back generations, talk about the latest attempt at resurgence like they've finally test-drove a reliable truck after years of hearing used-car-salesman hucksterism. But how do they know this is the real deal?
"In the 1990s tech boom, it was irrational exuberance. Now their [hopes] are based on what's already happened," Linkner says. "While there is some hype in the tech space now, it is more rational."
They also say other efforts to revive Detroit have been radically different because they were often led by the government instead of the private sector.
"The foundation that it's built on is more solid," Smith says. "Any thriving city needs to have a couple of key components: Great places to work, to live and to entertain and do things. In the past it's been maybe one or two things now it's all of those things."
Entrepreneurs said they feel like they have a government that finally understands them too. Changes in leadership have "broomed out" rampant government corruption, as one source put it, and the guy in the statehouse is a compatriot: Republican Governor Rick Snyder has an MBA, was president of Gateway computers, and founded his own venture capital company in the late 90s.
Still Fighting Perceptions
As the talent pool grows in Detroit, companies are reaping the benefits.
"If you're launching your start-up in Silicon Valley, where you have Facebook and Google, you're lucky if you get to over-pay for C-level talent," Linkner says. "There are certainly less raw numbers [of talent] but far fewer companies are chasing that talent."
The popular opinion of the city is starting to change too, partly thanks to the energy generated on Webward Avenue.
"When I get a call, we'll often hear that exact same thing: 'Detroit, it's all falling apart,'" Hughes says. "We'll say, 'It's not, why don't you come down and see it?' There's genuine surprise and excitement when they see what the reality is. There's a definite curiosity and a willingness to give it a shot."
In other words, the city's start-up community sees Detroit less like the industrial burnout depicted in Robocop and more like another city's movie champion.
"It’s a story Americans can relate to. It's the Rocky Balboa of cities," Linkner says. "We're the underdog. Now I think the whole country is rooting for us."
Detroit is in its early stages of its revival as a tech center and start-up hub, and entrepreneurs know they've got a long way to go. For one, retail has been slow to return to the area around Webward Avenue, though some say they expect to see that market blossom in the next year or two. It follows a traditional urban-development logic that residential housing follows jobs, and retail follows residential housing.
The next step for Webward Avenue's emergence as a leader in the tech scene is to celebrate a few breakout success stories.
"We are setting the foundation for what will hopefully be a very strong and busting tech hub," Chesnutt says. "We're kind of at that point where we're going to generate a few strong companies that will lead the way. It's that sort of rally-around- the-flag effect."
The other issue is attracting more talent to Detroit: Czarnik says promising graduates often get lured away by high-paying Silicon Valley jobs because they have student loans to pay off. The solution might be in reaching down to the high school level to provide more direct training opportunities.
Even as there's still uncertainty about what the future will bear for Detroit's entrepreneurial avenue, including how many jobs it will create or how broad its scope will be, the excitement around it has chased away the clouds of hopelessness.
"It's not 'What are we going to do?'" Tatoris says. "It's 'wow, I can't wait to see what Detroit is like in five years.'"
For the folks who have seen Detroit rise and fall over the decades, the view from Webward Avenue is one a city on the move once again.
"I just don't know where the tail end of that is going to be," Smith says. "But I'm going to like the ride."
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