Mo-Town Metamorphosis:

Chat Sports
Jun 22, 2015 · 4 min read

Can Detroit become the Next Silicon Valley?

Cold-brew is the new iced coffee. Slack is the new HipChat, and Healdsburg is totally the new Sonoma. These are just a few of the cringe-worthy phrases overheard in Silicon Valley. But is it possible that SV itself could be replaced or replicated?

The Warriors may have defeated the Cavs last week, but the game is just beginning for the Midwest’s burgeoning tech hub Detroit. At Chat Sports: The Minds Behind the Game, I had the chance to sit down with the two teams’ investment guru owners Joe Lacob and Dan Gilbert. In addition to his roles as owner of the Cleveland Cavaliers and Founder/CEO of Quicken Loans, Gilbert has been called “Detroit’s superhero,” personally investing in its revitalization. After the fertile discussion between Kleiner Perkins’ Lacob and Gilbert—the man behind Detroit Venture Partners and Rock Ventures — I couldn’t help but wonder…

What does the Motor City need to become the next Silicon Valley?

CODE RED: UMich needs an engineering program that can really hack it

1. Nerd Nation: academic strongholds with large, well-funded engineering programs. Computer scientists out of Stanford and Cal power the Bay Area’s technological wheel like water in an old-fashioned mill. Can the University of Michigan and other Midwestern schools step up to attract, train, and retain top talent? Initiatives like the MHacks hackathon are a start in the right direction.

2. Cash Money: liquid venture capital to grease the wheels of originality. Dan Gilbert’s offshoots DVP and Rock have already invested billions in the modernization of Detroit, paving the way for an influx of innovation and talent. Literally. “Detroit is the last city in the world with a million or more people in the metro market that has no mass transportation,” Gilbert explained. “So we’re putting in a rail line downtown … a lot of it privately funded.”

In 2014, California logged 1,804 deals and $27B in venture capital funding. Michigan inked just 50 deals and $218M. To cruise down the road to start-up explosion, the Midwest needs a larger, more diverse VC presence.

3. Can-Do Culture: an atmosphere of bold creativity. “There’s something very magical in the water here [in the Valley],” Joe Lacob explained. “Kids that come out of places like Stanford, they’re just a different breed … It’s a cultural thing that is very encouraging of entrepreneurship.” Whether it’s in the water, the air, or the snow, an environment of empowerment makes young businesses flourish.

4. Gentle Giants A.K.A Talent Incubators: Google, Apple, LinkedIn, Twitter — the list goes on of vast, loaded companies where fledgling ideas and teams can spring from. “With Rocket Fiber, these are just three or four guys working for Quicken Loans.” Gilbert revealed. “It’s a technology company that just happens to do home loans … Those three or four guys were just coming up with ideas.”

Gentle Giants have the resources to recruit and groom fantastic talent. As these individuals work and grow skill sets together, they form the base relationships for future founding teams. Case in point: the founders at my former start-up Bloomspot all came from the same ecommerce team at Yahoo! Shopping. Detroit needs more of these stable launch pads.

Note the California tags…

5. Hungry Local Fish (read: companies). Bear with me a moment, and think of a bigmouth bass or a baleen whale inhaling plankton. Potential acquirers enhance the market for start-ups as much as consumer demand (perceived or real). Would there have been life-saving medical breakthroughs if Kalamazoo, MI-based Stryker went after Stanford alum Elizabeth Holmes and her brainchild Theranos? Maybe Ally Financial (headquartered in Detroit) should have been aggressive with companies like Square and new-comer Circle. And most glaring of all, why is the most innovative auto brand based in California? Ford and GM missed their chance on Tesla’s budding innovation.

Mo-town needs local companies willing to acquire smaller entities and keep them in Detroit. If California or East Coast-based fish abscond with the majority of promising guppies, the whole ecosystem is at risk.

This article is forward-looking, but it’s worth mentioning that Detroit already was a bustling hub of commerce fifty years ago. “There articles out there that call Detroit the ‘Silicon Valley of its day,’” Gilbert reminded us. That was before the great downfall of the auto industry.

So, is the Bay Area in danger? In the face of an economic earthquake, is Silicon Valley built to last? For us cold-brew drinking, wanna-be-coder types, it’s a scary thought. One that we can only combat with scalable business practices, pragmatic hiring, and profitable, demand-based products — abundant capital aside. If and when the bubble bursts, that’s the brand of success that will survive.

Posted by: Suzi Alvarez, https://medium.com/@suzialvarez

See the full 45-minute panel with Dan Gilbert and Joe Lacob from Chat Sports: The Minds Behind the Game below:

Filmed on June 5, 2015 in the fifth MBG Panel, in San Francisco, CA

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