September 2, 2011
It is my first time in Detroit, and I am riding shotgun down the main drag that is Woodward Avenue with a long-enough-to-keep-safe lens equipped camera in hand. Glide down one street akin to Park Avenue, make a sharp right turn and find yourself smack in the middle of an episode of TheWire. I was intrigued. Detroit moved me.
The Motor City has all the moving parts to be a Midwest startup hub: Creating jobs, tax revenue and adding to the culture of entrepreneurship born on the backs of your blue collar blood line. What you need is entrepreneurs – the kind that view building the next soup-of-the-day mobile app as a waste of their ambition. These passionate, persistent folks are out there looking to be intrigued by a problem and supported in a way that makes solving it possible. You can attract and retain these entrepreneurs, thousands of them from across the country. Around the world. And you can do it without relying on tax payer subsidy or other market negative solutions.
Duplicate and Drown
Cities tend to make the mistake of trying to replicate the tech mecca that is Palo Alto, and the surrounding towns collectively known as “The Valley,” as it exists today.
More than a few times I have read and overheard officials in different cities say “What we need is an anchor company. If only we had a Facebook, investment and talent would follow.” This is true to the extent that any company growing as fast as the world’s largest social network is always looking to hire, but Mark Zuckerberg did not move from his Harvard dorm room out to California simply because you can trip and fall over a computer programmer on your way to lunch. It is safe to say he traveled across country in pursuit of what Silicon Valley represents. The smartest people tackling problems side by side and sharing in the sense of community that comes from succeeding and supporting the same.
Import Is No Longer A Dirty Word
A vibrant entrepreneurial community is an evolution. It is where the void that is commonly experienced problems intersect with the oxygen of ideas, entering into the bloodstream that is a supportive network of entrepreneur advocates. In addition to supporting your existing start-up community, you must import these solution-minded people from other parts of the country to spark your movement, and to do that you have to market the problems your city faces and not just the assets you sustain. Entrepreneurs are a special breed. They look at the things most people discard as annoyances and say: I can fix that. You need entrepreneurs, and they need you.
Urban Incubation, Global Application
The problems your citizens face are not unique to Detroit. They are relevant to any urban environment in the US or abroad, and as such, they can be referred to as market viable problems, and they have application in a mass market.
In my work, I communicate with dozens of entrepreneurs each month about their ventures. I find that most of the problems being addressed by these upstarts are a slight variation on something the market has already proven. In other words, a niche vertical of a business model made widely popular by a company you know – Groupon for this or a YouTube for that. It is as if the inspiration for these models are coming solely from TechCrunch.
Some would argue that this is actually a function of the early stage capital infrastructure, but for the purposes of this article, let’s just focus on the opportunity that exists in packaging and presenting the problems encountered by your citizenry to attract those hungry for unique problems to solve.
Pick a Problem, Any Problem
First, you must look to your citizens for intriguing problems to solve, and there are any number of ways to do that. I prefer to enable people to participate in a mostly passive manner. Here is oneway. I am working on another here in Philly as I write this. The key is interaction points where people in your community can tell you about the problems, big or small, they encounter. Ideally, as they are affected by them, this is where insights are most valuable. Now, after reviewing and cleaning up the way these problems are presented, aggregate them into a live feed on a website and broadcast them to entrepreneurs around the world.
Stand up to the Crowd
When these ambitious folks come to your website from one of the hundreds of large tech startup sites that follow and report on a city-fueled platform (especially coming out of Detroit, where the national press have found a disaster darling six years post-Katrina), they will see information about your city side by side with your problems.
You will, of course, highlight those assets you have touted for years, but now, in addition to the tax incentives, low cost of home ownership and beautiful waterfront, you will list your problems, or more specifically, those problems your citizens see in the course of their daily lives.
Remember entrepreneurs like problems, and with the click of their mouse, they can open a particular problem and create a crowd-funded profile, similar to what you might find on Kickstarter. My suggestion would be to integrate this into what you are already doing with KivaDetroit, but it also be done as a stand alone.
By leveraging your existing network of advocates, citizens and expatriated business folk, you can raise, say $10,000 to relocate a potential founder to Detroit for an incubation period of 90-120 days. It will be easier than you might think.
In addition to capital, it is important to support the incoming entrepreneur with the personal logistics of temporary to permanent relocation. Jack Miner at TechTown made me aware of the DetroitOrientationInstitute, an organization that might be perfectly equipped to lend a hand in this part of the process.
Incubate and Connect
Now that entrepreneurs are arriving with solutions – full of ambition and feeling supported – you must also incubate their professional venture. I will leave you to determine what you consider incubation, but I think there will be so much interest in joining this platform, you need only house them, preferably with fellow entrepreneurs, while connecting them to your existing network of entrepreneur advocates.
Open office space in Detroit is a commodity, and as for facilitating interaction between the new and existing entrepreneurs and mentors, you need do little, if any mor,e than create a directory where people can profile themselves and integrate their Twitter profiles and email addresses for communication. Set it up and get out of the way. My City of Brotherly Love has a great example of what I am talking about with WeWorkInPhilly.
The newly arrived entrepreneurs will split off into teams and iterate concepts to arrive at a minimum viable product, a bare bones version of the solution they want to eventually scale into the market. You could have a demo day every few months to allow entrepreneurs to pitch early stage investors, but I don’t see it as a total necessity. If they are building something that solves a real problem in a usable way, finding investment need not be a dog-and-pony show.
Seed to Stay
Ventures deemed market viable by early stage venture capital funds and angel groups will receive enough capital to incubate the startup for 6-12 months. In most cases, these are going to be relatively nominal investments in the $100k – 200k range.
If an investment fund were focused on investing locally and so inclined, they could model an investment vehicle after the StartFund, which was established by uber-angel investor Yuri Milner; $150K convertible notes are given to each accepted startup into the Y–Combinator accelerator program. Mr. Milner wisely sees that particular startup shop as a filter for his investments.
The city of Detroit is not an incubator, so this arrangement with an investment firm would be specific to those companies they deem viable. If you wanted to do it, I would pitch it as a “first look” deal, similar to the arrangement television studios have with independent producers. The twist here is adding a residency clause to those companies you seed. In return for being the first investor (along with all the other standard fare, like right of first refusal and discount share options), your seed round will require the new company to stay and build in Detroit – regional economic and workforce development right on your doorstep.
If it seems as though I am overly simplifying the process, it is likely that you have been mired in bureaucracy or are accustomed to building industrial age companies. Three hundred page reports and exploratory committees in a thriving economy do not build anything. As it stands, I fear that Detroit, flush with tax breaks and subsidies, sits in the cross hairs of those that tinker with the boom and bust economy. If nothing else, Detroit, rooted in the can-do spirit of factory workers, steel workers and small business owners, has the perfect ethic in place to drive the next generation of startups.
If you want to reach out, email me here and follow me here. A big thank you to @HayleyBierkle for first showing me around Detroit and for helping me with drafts of this article. Your city would be hard pressed to find a more brilliant and fervent advocate, so be sure to say hello to her on Twitter or at CliffBells.
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