Startups: Made in Detroit

Guest blog from ELP student Ty Dunn
Sophomore | Cognitive Science (LS&A)

In May 2006, Paul Graham, Co-Founder of the Silicon Valley based seed accelerator Y Combinator, wrote the following on his blog: “It would be a waste of time to try to reverse the fortunes of a declining industrial town like Detroit or Philadelphia by trying to encourage startups.”

Nearly a decade later in May 2015, he tweeted the following:

So what has Dan Gilbert been doing in Detroit?

Since moving the headquarters of his company Quicken Loans downtown in 2010, Gilbert has been working on his vision of having “hundreds and hundreds of entrepreneurial businesses along this corridor, where there’s a lot of residential buildings and people are living down here with great retail”.

Gilbert has been doing more than just encouraging startups in Detroit. He has been investing in them. Gilbert started a Detroit-based VC firm, Detroit Venture Partners, and invested in another, Ludlow Ventures. His parent company, Rock Ventures, now includes more than 110 companies, most of which are in Detroit.

 

Rocket Fiber Co-Founders: Marc Hudson, Randy Foster, and Edi Demaj (Photo: Cody Ross, Quicken Loans)

Displaying One in particular, Rocket Fiber, is trying to encourage entrepreneurship in Detroit itself. By offering gigabit Internet speeds that are up to 1,000 times faster than the average residential connection in the US, Rocket Fiber thinks it can make Detroit a destination for startups.

Not too long ago, Rocket Fiber’s founders decided to pitch Gilbert, who ultimately invested $30M in them, even though they were all unproven. Gilbert believed in them before nearly anyone else. Just like he believed in Detroit before almost everyone else.

Detroit, although only 40 miles from Ann Arbor, is still not as popular as New York City or San Francisco with recent Michigan grads. In fact, it’s often overlooked by recent college graduates all over Michigan and beyond. This may be changing.

Tim Dingman (Brown University), Scott Lowe (University of Oklahoma), and Max Nussenbaum (Wesleyan University) joined Venture for America, the entrepreneurial equivalent of Teach for America, in 2012, and were placed in Detroit. The three became friends. They bought a mansion in Detroit’s historic Virginia Park through a tax auction, spent a year fixing it up, and now rent out rooms to other young entrepreneurs.

The Virginia Park mansion restored by Max, Scott, and Tim in 2014 (Photo: Castle, entercastle.com)

Through their work on the house, the trio got to know landlords, real estate investors, and the outdated property management industry. Armed with insight, they started Castle, a startup that manages rentals for landlords using automation and on-demand labor.

Castle was accepted to and went through Paul Graham’s Y Combinator in Silicon Valley. Afterwards, they returned to Detroit because it’s where the problem they were working on was most needed to be solved. In true entrepreneurial spirit, they found opportunity in reversing the fortunes of a once declining industrial town.

Detroit’s challenges can be seen as problems waiting to be solved, or they can be seen as obstacles that will crush a startup before it can take off. So the next time you are bored in Ann Arbor… hop on the UofM Detroit Connector, spend a day downtown and decide for yourself.