Back to Blog May 24, 2016 in

Focus on Detroit!

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The City of Detroit is quickly becoming a new hub of entrepreneurial and investment activity in Michigan.  In honor of the first Detroit Startup Week, MVCA decided to take a closer look at the 2016 research data with a focus on Detroit.

Source: 2016 MVCA Research Report

Each year, the Michigan Venture Capital Association (MVCA) gathers data from all Michigan-based venture capital firms to compile the MVCA Annual Research Report.  According to the 2016 MVCA Research Report, Detroit is an attractive place for startup companies to locate and raise capital, and recent trends show rapid growth in the entrepreneurial and investment community.  Currently, five of the 36 venture firms in Michigan have their headquarters in Detroit.  In addition, well over one third of the venture capital firms in Michigan have invested in startups in the city of Detroit, a number that is trending up as more investors find opportunity in the city.  There are currently 25 active venture-backed startups in the city of Detroit (a 32% increase over prior year) who have collectively received more than $58M in venture capital funding.  In 2015, 8 new Detroit-based startups received venture investment for the first time – which doesn’t include the numerous investments made by accelerators, angels, and of course the many startups who are self-funded.

Source: 2016 MVCA Research Report

Investors from all over the country are taking notice of the new entrepreneurial growth happening in Detroit (even Forbes noticed!).  Since 2010, for every $1 invested in Detroit startups by Michigan venture investors, $1 has been attracted from out-of-state venture investors.  This is new money flowing into Michigan and into the City of Detroit that is diversifying and rebuilding the economy.  Over 70% of the venture-backed companies in Detroit are information technology companies (many leveraging Detroit’s rich history in mobility) and the remaining companies are a mixture of advanced materials/manufacturing, business services, and consumer products.  Michigan venture capital firms have invested in almost all of the venture capital rounds raised by startups in the city of Detroit.

Source: 2016 MVCA Research Report

According to Ted Serbinski, Managing Director of Techstars Mobility in Detroit, his nationally acclaimed accelerator has brought an additional 22 startups around the world to Michigan in the last 18 months. For their 2016 program, they saw nearly 500 applications across 52 countries and 6 continents for 12 spots. “Techstars Mobility operates the intersection of two of Detroit’s greatest strengths: it’s automotive dominance and it’s entrepreneurial resurgence. The response to startups wanting to come to Detroit and build there businesses here is staggering,” said Ted Serbinski.

Ted Serbinski Headshot
Ted Serbinski, Techstars

The positive environment for investment and startup growth in Detroit is driven primarily by the large amount of tech talent and lower cost of startup resources that exist in the city. According to the Anderson Research Study released last year, Southeastern Michigan is on par with Silicon Valley when it comes to the number of jobs and employers working in the tech industry. According to a SmartAsset study performed earlier this year, Detroit dominates all the other cities in three critical areas: women holding tech jobs, pay ratio, and 3-year tech employment growth – an issue many tech-hubs in other states have yet to achieve.

Monica Wheat, Detroit Startup Week

According to Monica Wheat, Co-Lead of this week’s Detroit Startup Week and Founder of Parallel Ventures, solid economics is just one piece of Detroit’s successful startup environment.  “People forget Detroit is home to two Fortune 10 companies and 20 Fortune 500 companies, the vast majority of which are in technology and manufacturing.   That environment mixes multi-billion dollar talent and budgets in marketing, strategy and product development with a new influx of young energy, low cost of living, highly educated tech talent and a commitment to Detroit’s renaissance.  Then we add in explicit grit and dedication to rebuild our city, and nothing but good comes from that,” said Wheat, who has worked with tech accelerators and mentor startups on both coasts.