Eyebrows and glasses of champagne were raised last June when it was announced that Detroit was first among the top 100 startup ecosystems in the world, beating out cities like Minneapolis, Houston, Brussels and Hong Kong.
The optimistic news came from the 2022 Startup Ecosystem Report from Startup Genome, a San Francisco-based research firm that has analyzed hundreds of cities worldwide and evaluated data on nearly 3 million companies.
Detroit’s top ranking marked a 13-point jump from the previous year, cementing its position in the back of early-stage financing and investor activity.
The results impressed Startup Genome, and so were two local foundations working to help the economy by serving as catalysts to boost startups and jobs—the William Davidson Foundation and Endeavor—that they decided to work together and take this research a step further.
They spent a good part of 2022 looking at how these fast-growing homegrown startups performed and how the region supported them along the way. Their findings will be published Wednesday through Virtual town hall held by those three organizations.
“We look forward to all opportunities to take our region to the next level and compete on a national and global level,” said Diana Callahan, Managing Director of Endeavor. “Entrepreneurs have driven the tremendous economic development in our region – we now want to see how our region can help build that momentum.”
Title of their findings: Detroit has had some organic success over the past few years, but other communities are pursuing aggressive strategies with these fast-growing companies, which could threaten the region’s No. 1 status. To continue to compete on the global stage, the local startup ecosystem needs to think bigger, take risks, and drive politics to attract more resources, while helping the cause by elevating the storytelling about it.
The group tapped Justin Mast, the founder of Bloomscape, to interview dozens of “founders” as they’re described — entrepreneurs who’ve grown their own successful companies — with some — like Dug Song, who sold his company Duo Security for $2.35 billion to Cisco Security in 2018 — to hear their thoughts.
Justin asked our region’s top founders, “What worked for you?” “Where are we missing the mark?” and “What suggestions would you have to elevate our region?” Callahan explained. “We wanted to know how our funders, foundations, philanthropic leaders, and government leaders can better work together to give our companies and entrepreneurs an edge in their highly competitive markets.”
Marc Penzel, co-founder and president of Startup Genome, spent three months in Detroit talking to entrepreneurs, venture capitalists, and more. Among some of the outcomes that will be discussed during Wednesday’s event:
- The “founders” felt that there was no clear strategy driving the region’s efforts and believed that the supporting organizations (accelerators and incubators) were fragmented and provided limited services.
- The “Founders” believed that the local angel and investor groups had outdated mindsets and provided limited support to help the founders grow and expand. There is not enough capital here, they added, and investors are reticent to take the necessary risks on startups.
“Unlike other countries, we haven’t been cautious about our domestic strategy,” said Lisa Katz, chief program officer for Economic Vitality and Entrepreneurship at the William Davidson Foundation. “We’re good at supporting community-based companies like those that sell baked goods and the things that make our neighborhoods thrive. But how do we support companies like future Duo Security or future Amazon?”
There are some subtle signs that things are pointing in the right direction.
The number of “unicorns” here — startups that have sold for more than $1 billion — has been much lower here than in New York or Silicon Valley, Penzel said, proliferating with investors and venture capitalists backing startups in their own backyards.
“But the good news is, there have been more unicorns in the past few years than in the last 25 years added up,” Penzel added. These unicorns often highlight the health of the entrepreneurial community.
Chris Rizk has been laser focused on helping startups since he opened Renaissance Venture Capital in 2008. He was among those interviewed for this endeavour.
“We’ve helped attract more than $2 billion to Michigan,” he said of his venture capital organization. “But we had to consciously focus on attracting more back-end capital, because that was a flaw here.”
Katz said other states like Ohio have a more cohesive approach to helping entrepreneurs looking to grow their companies stronger.
And Katz pointed to success stories like Workit Health, May Mobility, Our Next Energy, Lip Bar, and Air Space Link as a few of the types of companies who would benefit from their efforts as they waved the flag.
“Historically, Southeast Michigan has been very focused on the auto and mobility sector,” Callahan added. However, companies like Duo Security and Rocket Mortgage have had a significant economic impact in our region. If we work together to create more companies like Duo and Rocket Mortgage, we can really change our neighborhood.”
Callaghan told me that if the metro Detroit ecosystem creates 60 of these high-growth companies, it could boost domestic GDP by more than $5 billion annually.
She added, “If we work together to support these entrepreneurs, we will have more companies like Duo or Rocket, that can change our region.”
Contact Carol Cain: 248-355-7126 or firstname.lastname@example.org. She is the main producer/host of “Michigan matters,” which airs at 8 a.m. Sundays on CBS 62. Watch John Gallagher, Bill Haney, Paul Vachon, and Jimmy Rothenberg on The Sunday Show.