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Distance between Ann Arbor and Detroit shrinking as entrepreneur links strengthen

Sept. 23, 2018

Crain’s Detroit Business 

By: Dustin Walsh

Bill Ford Jr. envisions the 104-year-old train depot in Detroit that Ford Motor Co. bought this year could create a mobility corridor on Michigan Avenue from Detroit to Ann Arbor.

But the connection between those two cities — one that was tenuous at best only a year ago — is already beginning to blossom as Detroit’s entrepreneurial community grows.

Ann Arbor-based Duo Security, which is being acquired by Cisco Systems Inc. in a $2.35 billion deal, recently opened its first Detroit office at the Julian C. Madison Building at 1420 Washington Blvd., transferring 30 of its staffers to the location with plans to grow that presence.

A “unicorn” startup, Duo raised $70 million with a more than $1.17 billion valuation in 2017. Its co-founder Dug Song believes the success of the region is hinged on a confluence of Ann Arbor and Detroit.

“Dan Gilbert’s move of Quicken to Detroit started this in a big way,” Song said. “We also saw Amazon, Microsoft and Facebook move in. Then we see this rise of all these small businesses and it just really seems like Detroit is a place of tremendous opportunities and activity. Detroit used to be a place where you’d get big before you’d get loud, but now things are changing and there’s this kind of groundswell. Entrepreneurship is everywhere and we’re all starting to see that and should embrace it.”

Ann Arbor’s established entrepreneur community, which sprung up from technology spun out of the University of Michigan, led to a crop of venture capital firms, growing since the mid-1990s. But they’ve also been focusing their attention lately toward Detroit.

Nearly 50 percent of Michigan’s 29 venture capital firms, most of which are located in Ann Arbor, have invested in companies in Detroit, said Emily Heintz, founder and managing director of Ann Arbor-based entrepreneur economic development organization EntryPoint and former associate director of the Michigan Venture Capital Association.

“I definitely see the two communities slowly collaborating more,” Heintz said. “Detroit and Ann Arbor working together as a collaborative front only raises Michigan’s profile as we’re all working to build up the Midwest as an entrepreneurial hotspot.”

The University of Michigan is following suit. Earlier this year, it acquired the rest of the Horace H. Rackham Education Memorial Building in Midtown, likely leading to a “more substantial” physical presence in Detroit for the maize-and-blue, UM President Mark Schlissel told Crain’s.

Schlissel sees an opportunity to expand from UM’s tiny outpost at the Detroit Center on Woodward Avenue and make the 77-year-old Rackham building the university’s “home base” in Detroit with a larger mission in Michigan’s largest city. Schlissel cited Ford’s planned $740 million investment in Corktown as a catalyst.

“… But in the fullness of time, for example, as Ford does its building in Corktown and perhaps GM expands its footprint in town, I can see the university playing a more substantial role physically in Detroit going forward,” he told Crain’s.

UM paid $5.1 million to the Rackham Engineering Foundation and the Engineering Society of Detroit for the east wing of the building (UM already owned the west wing for its extension service). Wayne State University’s Department of Communication Sciences and Disorders has a lease for space in the building that ends in July of next year. UM also acquired a parking structure from the Rackham Engineering Foundation.

UM is also getting involved in Detroit’s schools, working with the public school district, the Kresge Foundation and others to open a unit of its school of education at the Marygrove College campus.

Ann Arbor-to-Detroit is not a one-way street. Metro Detroit’s automotive industry started investing in Ann Arbor long before Detroit’s most recent entrepreneur scene erupted.

UM’s Mobility Transformation Center began researching new automotive technologies, such as connected and autonomous cars, years ago and received buy-in from the area’s largest automakers and suppliers, including Ford, General Motors Co., Delphi, Bosch and Denso. The opening of MCity, the world’s first controlled environment specifically designed to test the potential of connected and automated vehicle technologies, on campus opened up more connections between the two cities.

Sandy Baruah, president and CEO of the Detroit Regional Chamber, said Ann Arbor’s talent and Detroit’s economic resurgence, thanks to a return of automotive sales, opened a long-shuttered pipeline between the two communities.

“When you really look at it, there’s been a symbiotic relationship develop between the talent that’s attracted to Ann Arbor and the university environment with the explosion of jobs and opportunity in Detroit,” Baruah said. “We’re really now seeing how these power centers in Michigan need each other and thrive off each other.”

But Detroit and Ann Arbor have historically represented a disparate culture and image — Ann Arbor, a city of intellectuals and entrepreneurs and Detroit, a monolith of decaying industry and blue-collar grit. Opposing ideas were very visible to outsiders.

In October 2017, successful investors from outside Michigan got a taste of the disjointed attitudes. Steve Case, CEO of Washington, D.C.-based investment firm Revolution and co-founder and former chairman of AOL, led a panel as part of his Rise of the Rest tour that visits startup hubs in the Midwest. He was joined on stage at the Michigan Theater in Ann Arbor by Dan Gilbert, Quicken Loans Inc. chairman; Ohio native J.D. Vance, venture capitalist and author of “Hillbilly Elegy: A Memoir of a Family and Culture in Crisis”; and Mary Grove, director of global entrepreneur outreach at Google.

“I did notice there is a tension in how you brand in the relationship between Ann Arbor and Detroit,” Vance said after a daylong tour of several successful startups in Ann Arbor. “That needs to be fixed and the two areas need to be viewed together more on a national scale.”

Case said distinct regionalism can really hinder industry expansion, noting Silicon Valley used to just include San Jose, Calif., and surrounding communities, now it ranges from south of San Jose to north of San Francisco nearly 60 miles away.

Gilbert agreed.

“There’s nothing indigenous about technology,” he said at the event last year. “Geography is meaningless.”

By comparison, Ann Arbor and Detroit city centers are only 43.5 miles apart.

Song said the barriers are gone for good.

“The culture in Detroit may have always been tied to autos and more top-down thinking, but that’s all starting to break down,” Song said. “There’s not many people drawing hard lines anymore. We’re erasing more of these artificial boundaries regionally every day. With that we’re seeing something more meaningful happen here.”

 

You can view the original post from Crain’s Detroit Business on their website.