The Ann Arbor Detroit Startup Connection

The views expressed in this post are solely those of the author. 
 
Ann Arbor and Detroit are two very different cities separated by only 42 miles. Yet recently both have more in common given the recent headlines for tech innovation, new startups, and growing opportunities for entrepreneurs, makers and creatives.
A few of the recent examples coming out of Ann Arbor and Detroit since 2015 include:
Universities, accelerators, incubators, seed funders, and venture capitalists are amongst the local stakeholder entities focused on continuing to encourage and accelerate the growth of the ecosystem.

Universities

Much of this entrepreneurial activity is centered around two research universities, the University of Michigan (U of M) in Ann Arbor and Wayne State University (WSU) in Detroit. Combined WSU and UM generate over $1.5 billion in total annual research funding. While the majority of research dollars is associated with U of M  - the second largest research university in the country - students, faculty, and alumni from both schools create technologies and are involved directly or indirectly in many of the startups in the region.
Both schools have embraced entrepreneurship for their students and surrounding communities and offer various programs and funding for start-ups. Programs and funding through TechTown and Blackstone Launch Pad at WSU and the Zell Lurie Institute, Center for Entrepreneurship, Fast Forward Medical Innovation and the Tech Transfer Venture Center at U of M all play significant roles in supporting entrepreneurship at their schools.
Students at all levels are in high demand from the start-ups in the region, and many have started to realize that there are great opportunities in Michigan rather than immediately fleeing to the coasts upon graduation.

Accelerators, Incubators and Seed Funding

In the past five years Ann Arbor and Detroit have seen an explosion in accelerators, incubators, and open work spaces. There are at least 25 operating office spaces and accelerators open in the region. Some are local enterprises like Detroit Creative Corridor and Workantile, while others are national in scope such as Techstars Mobility in Detroit. 
Along with these start-up friendly working spaces, there is also a broad menu of entrepreneurial services and with some early stage fund support in both cities. A few examples are the Small Business Development Corporation, U of M Ross School of Business Zell Lurie Institute, Michigan Corporate Relations Network , Spark Ann Arbor, and TechTown Detroit.

Venture Capital

At the venture capital stage the Ann Arbor/Detroit region hosts most of the funds based in Michigan. The good news is venture capital in Michigan has grown by over 250% over the past five years, while nationally venture capital has decreased by 14% during the same time period.  
While this growth is a positive sign, there is still strong need for additional funding at every stage. The Michigan Venture Capital Association maintains a public list of all of their members at this link MVCA Directory.

Challenges and Opportunities

There is still a significant amount of untapped potential in both cities. For example, Michigan has the largest commercialization gap of any state in the country. This gap is defined as the difference between research and development (R&D) dollars spent versus pre-seed and venture capital dollars invested.
Last year 23% of venture investments in Michigan start-ups came from Michigan based venture funds, the remaining 77% come from out of state funds.
Seed stage and pre-venture start-up funding is still extremely challenging to find anywhere in Michigan; the state loses companies and talent every year as a result of the funding environment.
While southeastern Michigan has had numerous start-up successes, it has yet to benefit from a significant exit that has dynamically changed the startup ecosystem, similar to the impact that a company like Groupon had on Chicago. This kind of “unicorn” win is needed to get more angel investors into the game, and attract more venture capital into Michigan.

What does all this mean for innovation, entrepreneurship and opportunity in Ann Arbor and Detroit?

The good news is that opportunity abounds.  Investors, entrepreneurs and the national business press are taking note of the positive changes and successes that are coming out of the region. Small and large tech companies are moving here as well, Google, Twitter, Tesla, Facebook and eBay all have permanent offices in either Ann Arbor or Detroit now.
A trip to Detroit or Ann Arbor will reveal the undeniable positive vibe taking hold across both cities.

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