Grace Hsia was born one month premature. Growing up, she would listen to her parents recount the tale of her birthday and the fearful days that followed, when her survival was uncertain. Instead of wrapping her in his arms, Hsia’s dad connected with his daughter by touching her toe as she lay in an incubator. That medical device kept her body warm until she was strong enough to do so on her own. Today, nearly 30 years later, Hsia’s life and work are a testament to her birth and the incubator that saved her.
She is the co-founder of Warmilu, a startup that produces an incubator-like blanket that’s affordable, reusable, and maintains a consistent temperature over long periods. And because the blankets don’t rely on electricity, they tend to be a hit in underdeveloped locations where incubators and the electricity to run them are scarce.
The company is a product of an increasingly popular entrepreneurial ecosystem, with Warmilu beginning as a University of Michigan senior design class project before growing into a startup idea, and then further developing at Ann Arbor SPARK, a startup incubator.
While a variety of incubators exist throughout the U.S., SPARK is part of a SmartZone initiative in Michigan, one of 19 zones where research universities, government, business and entrepreneurs intersect to bring new, industry-disrupting products to market.
Warmilu is one of 564 startups launched through the Michigan Economic Development Corporation’s SmartZone initiative.
Across the nation, startups drive the innovation and job growth critical for thriving local economies, but, as the economy recovers, the rate of startups is slowing. In Michigan, startups are also key to diversifying the once automotive-dependent economy and securing its future as the nation’s continued leader in vehicle design and manufacturing.
Improving entrepreneurial momentum will mean attracting and retaining startup talent like Grace Hsia and SmartZone incubators are taking on the challenge by capitalizing on what they do best: connecting resources to the people who need them.
The co-working and meeting spaces offered by incubators are designed to build a critical mass of entrepreneurial energy, said Ned Staebler, president and CEO of TechTown Detroit, a SmartZone incubator with a co-working space that hosts some 85 member companies.
That critical mass occurs when entrepreneurial, creative, passionate and sometimes struggling people all occupy the same space and begin talking.
To a great extent, the relationships are forged in fire. Incubator leaders, staff, and mentors, as well as peer-entrepreneurs, are shepherding startup founders through the best and worst moments of their careers, guiding them through the vast unknowns of business, and giving them a place to connect with others experiencing the same challenges and successes.
Warmilu’s Hsia said she was “blown away” by her mentorship experience, which included her realizing that no one on her team had any experience with what was involved with the clinical trial process, a key point in the development of the business.
It was a moment when she thought Warmilu might be doomed to fail. It was then that Bill Mayer, vice president for SPARK’s entrepreneurial services, stepped in and connected her with a mentor who guided her through the process.
Having interacted with tech hubs in other states, Hsia said the Michigan ecosystem is different because it is far more personal. Mentors hold their protégés accountable for fulfilling key milestones, a critical support for new entrepreneurs. In turn, entrepreneurs have access to some of the biggest names in investment and expertise because of the resource networks available through incubators like SPARK.
Hsia’s story is not a pragmatic list of pros and cons about Michigan’s best attributes. Hers is a passionate retelling of the highs and lows of her entrepreneurial journey and how the resources afforded to her were the difference between success and failure. This sense of passion for the place where Hsia made her dream a reality is shared by another entrepreneur, Liz Hilton.
A native of New York City, Hilton’s academic and career paths were pointing her to the fashion industry before she realized, after learning to create garments with a 3-D knitting machine, that it was the untapped potential of the machines themselves that was igniting her passion.
Once that occurred, she further fueled that with a move to Grand Rapids where she started her own 3-D knitting company, KNITit.
KNITit could not have happened anywhere else in the world, says Hilton, who has leveraged the local entrepreneurial ecosystem that exists in Grand Rapids.
While technically a tech startup, KNITit wouldn’t be a fit for scaling as quickly in the traditional “coastal” startup scenes.
In Grand Rapids, however, Hilton was able to tap into the area’s Start Garden’s 5×5 pitch nights, Grand Rapids Opportunities for Women, and the Avenue for the Arts where her studio is located. Here, there is a “contagious culture” of philanthropy where “everyone wants to be a part of something bigger than themselves,” she said.
Investing in Traditional Businesses
There is a world of difference between a startup and small business, said SPARK’s Mayer. Startups open new markets that do not already exist. Consider the way personal computers and smartphones have become so integral to daily life. Yet, before their existence, humanity survived quite well using only typewriters and landlines. Now startups are expected to scale quickly and then be acquired by a larger company, creating wealth for the founders and many new jobs for the region.
Traditional businesses, though, have blueprints. And whether it is a restaurant or retail store, the market already exists, said Mayer. Owners do not intend to scale quickly or sell the business. Rather, they plan to own and operate the business for many years to come. In Michigan, nearly 80 percent of small businesses are owner-operated. For those with employees, more than half have fewer than four, reported the 2016 Michigan Small Business Needs Assessment (MSBNA).
Despite these differences, every successful startup begins as a small business. Companies with fewer than 500 employees comprise 99.6 percent of Michigan’s private companies and account for approximately 23 percent of Michigan’s export business, according to the U.S. Small Business Administration. Nearly all small businesses share common challenges in developing talent, accessing capital, and defining their markets, reported the MSBNA. And both startups and traditional businesses are needed for successful communities.
These realities are what led TechTown to start its “Blocks” program. Much like its Labs program that focuses on startups, Blocks provides a boot camp course that prepares traditional entrepreneurs to launch their bricks and mortar businesses, as well as a SWOT City course which guides “been-ups” through an analysis of their current model and processes, allowing them to stabilize or grow. The vitality of these businesses is critical for talent attraction in all fields.
Placemaking was on Aisha Warren’s mind when she opened her clothing boutique on Jefferson Avenue in Detroit, she said. Perhaps her business could serve as a catalyst for the neighborhood in which she grew up.
When her employer of 20 years closed, Warren took her 401k and a wealth of retail and customer service experience and opened Posh Fashions in August 2015. By February 2016, she was “drowning,” she said. And that is when she sought out TechTown for help. Like most business owners, she was looking for financing help, but, much like Hsia, what Warren spoke most passionately about was the help she received from her mentor. He connected her to legal resources, helped her set up a microloan, connected her with someone who helped her rewrite her business plan, diagnosed her breakeven point, guided her through the process of marking up merchandise, and walked her through the wholesale process, said Warren.
Despite the help, though, Warren is no longer thinking about physical placemaking. She is thinking about closing her bricks and mortar shop and moving her business completely online, one reason being that the store is not getting the consistent foot traffic it needs to be sustainable. Her boutique sits at the end of a strip mall which is separated from the main thoroughfare by a vast parking lot. On that same lot sits a vacant bank building which closed at the end of 2016. And next to the strip mall is a large furniture store that also recently closed.
Despite the strains of nearly two years without a salary or enough banked cash to keep inventory stocked, closing Posh’s physical doors is not the future Warren would have chosen. The day before she was interviewed for this piece, she hosted a website party where she invited customers into the store to train them on how to shop and purchase her merchandise online. Still, she said, she had not made up her mind.
Warren’s story, though far from over, illustrates the challenges for communities untouched by economic prosperity and the role of momentum in placemaking.
Inclusion & Equality
The lack of diversity in startups and small businesses reflects an untapped talent resource for Michigan (and the nation). Most small business owners are white men. Women make up about 37 percent of ownership, and ethnic minorities (women and men) comprise about 19 percent, reported the MSBNA. But the issue is not solely about filling talent pipelines, it is about creating thriving communities.
In Grand Rapids, it is a “tale of two cities,” said Darel Ross, a director at Start Garden, a Grand Rapids’ SmartZone incubator. That tale was made a national news story, in 2015, when Forbes ranked the 52 largest metropolitan areas by the economic prosperity of their African-American residents. Grand Rapids ranked second to last. (Grand Rapids’ largest ethnic and racial populations are Caucasian at 65 percent; African American, 21 percent; and Hispanic, 16 percent).
Jorge Gonzalez, another Start Garden director, and Ross were just hired in February. Each has personal and professional roots in Grand Rapids’ minority communities. Ross, who is African American, served as co-executive director of LINC UP, a community development organization. Gonzalez is Hispanic and served as the executive director of the West Michigan Hispanic Chamber of Commerce and as the director of economic development at LINC UP.
Their addition to the leadership team is an outward signal of an evolution that has been taking place at Start Garden, said Ross. With about 90 days on the job, it was too early to report outcomes on their work, but small changes are already underway with Start Garden’s 5×5 Nights, monthly pitch sessions that are a mainstay of the organization’s entrepreneurial offerings. Five people have five minutes each to explain to an equal number of judges how $5,000 could move their concept from idea to reality. The winner takes home that $5,000. Beginning last summer, Start Garden announced that these events would be held in areas “not previously reached.”
Since then, the event has been held at LINC UP where the room teemed with people who were “reflective of the neighborhood,” said Gonzalez. In November, the first Spanish-speaking 5×5 Night was held. These events triggered an increase in African American and Latino participation. The last eight winners have been women or members of ethnic minorities, said Gonzalez. “We have momentum in communities of color,” he said.
This kind of placemaking not only seeds new businesses, but possibly sparks relationships and connections that bond entrepreneurs to the places and people that witnessed and nurtured their companies’ birth. At Warmilu, Grace Hsia has already begun giving back to the Michigan entrepreneurial ecosystem that helped create her company.
Warmilu hosts summer interns, leases out manufacturing space, and provides feedback to startups. Hsia is not only building her business in Ann Arbor and creating jobs, but she and her team are fostering relationships by offering up their space and human resources to other startups. In its own right, Warmilu has become an incubator, building community by nurturing new entrepreneurs until they are strong enough to lend a hand to others.