By Karen Dybis
The two-hour informal presentation was part of Creative Mornings Detroit, a monthly breakfast meeting designed to engage the city’s growing creative class in meaningful conversation and collaboration. After some networking and chatting, the crowd dispersed mainly on foot or by bicycle, heading back to their lofts, retail stores or downtown offices.
This is today’s Detroit, a city where the “Work, Play, Live” philosophy is gaining traction in a significant way. It is a city where entrepreneurism is thriving, businesses are relocating with greater regularity and reinvestment from some of the state’s largest corporate entities and private financiers is happening at a pace equal to the race cars that once again visit Belle Isle.
“I truly believe in my heart of hearts right now we are writing history. We are in the middle of the greatest urban turnaround story in America’s history,” said Josh Linkner, CEO and managing partner of Detroit Venture Partners, an investment firm focused on turning Detroit into a high-tech hub.
“This is a five-year period that will be studied for generations to come. And what a privilege it is for us to be part of it,” Linkner added. “We’re seeing it happen in real time. The entrepreneurs that are here not only get to witness it, they get to participate in it. They’re not getting lost in the herd; you can make a mark here. The opportunities are incredible to make a difference, to get your voice heard, to get media attention, to have funding, to get government support, to fill vacant office buildings.”
Rising from the ’90s
It is a far cry from the city that existed in the 1990s, when Detroit arguably was at its lowest point. It had a well-deserved international reputation for violence, decay and divisiveness. Decades of mismanagement and abandonment had left ugly scars, seen mostly through the empty houses, boarded-up buildings and a blighted riverfront.
Then came the November 2000 announcement that the city would host Super Bowl XL. Between then and February 2006, Detroit underwent external renovations across the city, gained new stores, bars and restaurants, enjoyed massive cleanup efforts and generally experienced the kind of facelift that set a tone for what was about to happen next. All in all, the Detroit Economic Growth Corp. and other institutions spent more than $150 million on improvements in the central business district.
The big-business influx started with Compuware, completing its world headquarters next to what soon became Campus Martius Park in 2002. General Motors Corp. completed its Renaissance Center renovations in 2004. Then came the hotel boomlet; notable additions included the Doubletree Guest Suites Fort Shelby and Westin Book Cadillac, both of which opened in 2008.
Quicken added its commitment in 2009, bringing 7,000 workers to the downtown mix in two years. Since January 2011, parent company Rock Ventures has “bet big” on Detroit, purchasing 15 buildings totaling nearly 2.6 million square feet of office space, in addition to three parking garages with a total of 3,500 parking spaces (tenants include Chrysler and Twitter).
In November, Rock also broke ground on a 33,000 square-foot specialty retail development with a 10-story parking garage in downtown Detroit.
Blue Cross Blue Shield of Michigan boosted that total with 3,000 more employees in 2010. As employee density grew, so did the number of people moving downtown, bringing residential vacancies to all-time highs in key districts like Midtown. And did we mention Whole Foods is coming? Construction of the 21,000-square-foot Whole Foods at Mack and Woodward avenues in Midtown is still on schedule for opening in the spring of 2013. That will add new food options along with the recently opened Ye Olde Butcher Shoppe.
Retail gained a foothold, using social media and old-fashioned teamwork to support their fledgling successes. Business incubators and think tanks like Ponyride in Corktown and the Green Garage popped up. Events such as the Marche du Nain Rouge, a parade largely led by Generation Y supporters to remove bad tidings from the city, have given Detroit a quirky and edgy appeal.
Another Super Bowl event brought Detroit additional claim to fame - Chrysler broke ground in 2011 with its well-received Super Bowl ad featuring Eminem, introducing America to the phrase “Imported from Detroit.”
The changes in the city have been significant, said Jason Huvaere. As a teen and young adult, he acutely remembers what the city looked like in the early 1990s. When he first started coming here for concerts, Huvaere said the streets were largely empty, void of pedestrians. A handful of bars and restaurants populated the downtown. There was no Campus Martius, no Midtown hipsters, no Cass Corridor coolness.
Huvaere is the president of Paxahau, an event-management firm that organizes Detroit Restaurant Week and the massive Movement Electronic Music Festival. The company - which has about 12 employees - recently moved from Ferndale to Detroit. It set up shop alongside Metro Times magazine in an office one block south of Greektown.
Having population and business density is an essential part of the city’s rebirth, Huvaere said. That is one of the main reasons he said his company wanted to be here.
‘The perfect storm of opportunity’
“Detroit is growing and it’s heading in the right direction,” Huvaere said. “When you consider the last 20 years and what could happen over the next 20 years, it’s exponentially growing. There are more and more people coming downtown. Between the resurgence, the energy and the investments companies are making - it’s unstoppable.”
Multiple sectors are thriving, said Mark Denson, manager of Business Attraction for the Detroit Economic Growth Corp. The big question right now is managing the growth, Denson said. The DEGC is working on all cylinders to meet the expectations people have in terms of space and support they need to come into the city.
“It’s the perfect storm of opportunity,” Denson said. “You can see the trends in the type of companies coming downtown. Detroit has been ranked No.1 in growth in IT jobs for the past few years. Health care has been a big draw. Marketing and advertising are booming here. There’s been a resurgence of Detroit’s garment industry - that’s going to be a huge driver, particularly in activating long-vacant storefronts and retail space. -¦ The pace (of development) is beginning to quicken.
“For the first time in forever, I see all of the main stakeholders in this city’s turnaround going in the same direction,” Denson added.
Matt Clayson, a former ePrize executive and current director of the Detroit Creative Corridor Center at College for Creative Studies and Business Leaders for Michigan, agreed. “The biggest sign of hope we have is that you see a lot of this activity happening without the need for tax credits or incentives. There’s a business case for this that goes beyond the handouts - to Detroit or to Michigan. There’s a natural competitive advantage that Detroit has for business, particularly the creative sector.”
In 2011, Rock Ventures purchased the city’s historic Madison Theatre Building, invested an estimated $12 million into making it a sleek, collaborative tech hub to encourage partnership among local entrepreneurs.
It is home to Detroit Venture Partners, an investment firm headed by Linkner. The author, noted blogger and four-time tech entrepreneur is best known as the founder, chairman and former CEO of ePrize, a multi-channel, interactive-promotions and loyalty-solutions company that works with some of the world’s biggest brands.
On paper, DVP’s main interest is in giving startup cash to companies that focus on the Internet, digital media, marketing technology, direct-to-consumer, sports and entertainment, social media, e-commerce and software.
In reality, Linker says its purpose goes beyond the financial. He and partners Dan Gilbert and Brian Hermelin are trying to light the fire of entrepreneurism in Detroit. Their over-reaching goal is to change the city into a place where innovation, creativity, and most importantly, hope are vital components of what Linker believes will be a sustained turnaround.
While DVP hopes that at least one or two of its investments will be the next Groupon, the firm has a loftier objective in mind, Linker said.In nearly two years, DVP has reviewed more than 2,000 pitches and invested in 15 companies. Several of those who received investments, mentoring and support have moved their operations from places such as Florida, Philadelphia and San Francisco to the city (a condition of receiving funding). Their first nest is the Madison; as they grow, they find new homes nearby.
“Our goal is twofold. Certainly, there is an economic goal. But more broadly our goal is to help transform Detroit through entrepreneurial fire. Our theory is by backing passionate entrepreneurs we can create jobs but also urban density and hope,” Linkner said.
Hope? That seems a strange outcome to hear from a venture capitalist. Yet it makes perfect sense when you talk at length with Linker or any other business owner who has come to Detroit in the past five years. They are there to make money for sure. More importantly, they share an all-encompassing desire to help change Detroit into a better city.
They don’t want Chicago. They don’t want New York. They don’t even want Silicon Valley. They want Detroit. And they want change now and into the foreseeable future. Linker and those like him want the city to evolve into the best version of itself - a place where businesses thrive and residents enjoy amenities like the Detroit River and anyone who visits marvels at the options when it comes to retail, hotels, food and entertainment.
It is a daunting task. The city’s government is near bankruptcy. The schools are arguably failing. Crime rates are considered abominable by some. The neighborhoods are challenged by empty housing. There is blight as far as the eye can see.
Linker acknowledges this. Yet it isn’t staunching the full-bore commitment he and other leaders have made to Detroit.
“There are all these myths about Detroit that are just frankly not true. One of them is that we don’t have the talent base here. That couldn’t be further from the truth. We have incredible talent and incredible universities feeding the talent. What people crave is a rich, urban ‘live work play’ environment and that is happening right now in Detroit,” Linker said. “We’re seeing people who wanted to move from other cities to Detroit. It’s because of the spirit of change that is happening.”
Going beyond capital
It is clear that DVP is approaching investment from a different point of view. Linkner believes its goal of funding between eight to 12 new Detroit-based companies annually will be one of the things that pushes the city to redefine itself and help others believe in its potential.
LevelEleven’s CEO Bob Marsh came out of ePrize to start his own company, thanks in large part to Detroit Venture Partners. LevelEleven received $1 million in funding, helping the six-employee firm fully realize its Contest Builder app. Its app helps businesses use games or competition to motivate its sales teams.”Many venture capitalists see their job as money managers and financiers. They think their work is done when they seal the deal. For us, that’s when the work begins. The act of VC isn’t providing dollars; it’s providing coaching, insights, mentorships. We view ourselves as creative-company builders, not financiers. The most valuable asset is we give them a home, contacts, credibility, coaching. We support growth and mitigate risk. When these companies win, it’s not just a win for us personally but it’s a win for us all,” Linker said.
In October 2012, Marsh and his team moved into the Madison. And they have been happily learning from their neighbors how to grow their offerings, he said. They now have 50 paying customers, and half of those have signed up for the service since LevelEleven moved into the city.
“We needed to be in community of other companies in early stages, learning from and being surrounded by that energy,” Marsh said. “The Madison gave us that like-minded environment. Being in Detroit was a bonus because we really feel like we’re part of something bigger. It’s not just about our little business. We feel like we’re making our little dent in Detroit’s revitalization.”
Having mentors like Linkner and Gilbert also is motivating, Marsh said.
“It’s a visceral, deep feeling. Dan has this lean-forward mentality. He takes control. Let’s not just hope that something happens, let’s make it happen,” Marsh said. “That mentality - of making things happen - seeps into your being.”
Linker believes that is why having a building like the Madison has been so important to the startup society. Here, the companies DVP finances work together in an open-air environment. There are meeting rooms, but they have open glass windows. The offices are loft-like spaces where conversation over coffee from the main floor’s CafÃÂ© Zara is encouraged. Recent college graduates wearing Tigers baseball caps work remotely, setting up their slim Macs at tables and couches beside raw brick walls.
The Madison is just one of the buildings Gilbert has acquired as part of his “Detroit 2.0” plan. With his partners and management, Gilbert has publically said he is making a 50-year commitment to Detroit. His immediate goal is to create density in one area, mainly the office buildings on and around Woodward Avenue, Grand Circus Park and Campus Martius. Linker describes it as the “big-bang theory.”
“We’ve got 50,000 square feet here, and it has been 100 percent occupied from the day we got our certificate of occupancy. We could fill three of these buildings with the number of inquiries we get,” Linkner said. “We see the Madison as ground zero. We’re just seeing the tip of the iceberg. The momentum is palatable.”
Linkner said DVP selected its high-tech focus in part because he and other significant players on the management side had significant experience with these sorts of startups. He helped grow Pleasant Ridge-based ePrize into the largest interactive promotion agency in the world; at one point, it provided digital-marketing services for 74 of the nation’s top 100 brands. (As an aside, he also has been the Ernst & Young Entrepreneur of the Year, the Automation Alley CEO of the Year, Michiganian of the Year and the Detroit Executive of the Year.)
But having a high-tech focus also made sense for Detroit, Linkner said.
“These are companies that are very capital efficient to launch. You don’t need $50 million; you might need a few hundred thousand. These companies can scale quickly. If you get into drug therapy, for example, it can take eight years for FDA approval and even more for clinical trials. A tech company can go from nothing to 10,000 employees in two years,” Linker said.
“These are the types of jobs that will keep our young people in the state. We’ve got to put a plug in that leaky bucket. Because right now 50 percent of the college kids that graduate here flee after graduation,” Linkner added. “They don’t go live in the suburbs of Chicago or New York. They want a rich urban experience and they want to be part of the creative class. That’s why the jobs that we’re creating are so important. If we can build cool, fun tech jobs that are inspiring, we can keep our best and brightest in the state of Michigan. Detroit is then a viable alternative to other cities.”
In fact, Linkner chafes at the idea that Detroit needs to be something other than exactly what it is. He is adamant that this city can and will have the amenities, residences and businesses needed to rebuild what time and inattention had tried to destroy here.
“I don’t want to be New York or Chicago or Silicon Valley. I want to be Detroit. We need to recapture the hearts and minds of the people. I want every office to have a waiting list. Instead of being boarded up, every retail store should be alive and rich with excitement. This is going to be the world-class city it has been in the past and it will be again,” Linkner said.
Brandon Boudreau is Metro-West Appraisal’s chief operating officer. The nation’s independent residential real-estate appraisal firm announced in December it is moving its national headquarters to Detroit’s Central Business District, going into the former Dime Building, now known as the Chrysler House.
Putting your money where your mouth is
“We (at DVP) want social change through entrepreneurism. Seattle wasn’t that big before Starbucks and Microsoft - and they were both venture backed. Their collective impact was transformative. They created jobs, their owners started art galleries. We might not get a hit as big as Mircosoft, but we could get a Groupon. You string those hits together, and it will make a huge difference,” Linker said.
Metro-West will occupy 8,000 square feet inside the 23-story office tower located at 719 Griswold Street, owned by Rock Ventures, the umbrella entity formed to provide coordination of Gilbert’s portfolio of companies and investments. That move will bring the building’s occupancy rate to 89 percent.
Founded in 1987, Metro-West has more than 175 employees across 24 states and growing. The company’s headquarters team of 40, currently located in Northville, will move to Chrysler House in early March 2013. Metro-West has plans to hire another 35 Detroit-based employees following its move.
Linkner and many others believe having so many companies come on board is one more reason why Detroit can and will succeed this time around. Between all the private investment of people like Compuware CEO Peter Karmanos, Little Caesars’s Mike Ilitch and Gilbert, there are hundreds of others with their skin in the game, Linkner said.”What appealed to our team that made this decision is that we’re really putting our money where our mouth is,” Boudreau said. “We wanted to be a part of the energy downtown. And with the building nearly completely occupied, we felt the pressure to get in. We decided that if we were going to do it, we had to do it now. We didn’t want to be on the outskirts of the action. We wanted to be downtown.”
“All of us are putting our careers on the line, betting everything we have on Detroit’s rebirth. I care about this place,” Linkner said. “We over-emphasize the problems. Let’s be honest - New York and Chicago public schools aren’t so hot. There’s crime in Los Angeles and Seattle too. I’m not ignoring Detroit’s problems. But that doesn’t mean our city can’t be open for business at the same time. We have an honest mayor that’s business minded. We have a government that’s business minded. While there’s a long way to go, I think there are people at all levels that are working hard to rebuild this town. I get chills on a daily basis - I’ll see a previously boarded-over storefront go to a vibrant restaurant with a wait. This is happening in real time and it’s a thrill to be a part of it.”