Rise of tech hubs in southeast Michigan
Detroit as the new Silicon Valley – scoff all you want, but the reality is, as an area with an exponential growth in tech hubs, it's a moniker that is quickly developing. As southeastern Michigan continues to rebound from the effects of the 2008 Great Recession and the ensuing “brain drain” of young millennial talent, large regions are growing as hubs of technology and innovation, countering that drain of talent, and drawing research, jobs and financial investment to what was once known simply as the Motor City. Detroit is still, and likely always will be, the Motor City. But a metamorphosis is underway at General Motors, Ford and FCA (Fiat Chrysler), as well as their tier one and two automotive suppliers, as they are becoming less automotive companies, and are being reborn as mobility companies. What does that mean in a real word definition? In the business world, according to Forbes, it is the driver of the fourth industrial revolution, which takes into account technical convergence, changing travel behavior and new entrants into the mobility space. Over the next 25 years, four key trends are predicted, including the use of sustainable, efficient assets – such as the move to electric vehicles from fossil fuels; integrated personal mobility, including communication and integration with smart devices; urbanization and smarter cities, such as real-time data monitoring and responsive smart grid systems; and increased competition and innovation. Innovation around automotive technology and mobility remains a hallmark of metro Detroit, in companies big and small, from Rochester Hills and Auburn Hills, where companies have headquartered near the former Chrysler headquarters, to the Northwestern Highway corridor in Farmington Hills, to Corktown in Detroit, as Ford Motor Company purchased the former Michigan Central Train Station in order to create a $740 million campus of mobility focused in that neighborhood. But automotive innovation is just one technological arena creators are flocking to southeast Michigan, diversifying into areas including robotics, software, cybersecurity, pharmaceuticals, medical technology among many others, including in Ann Arbor, where various small startups are growing and flourishing – and the state's first unicorn company – one receiving at least $1 billion in investment – was born, at Duo Security. “Tech hubs create an environment specifically targeted at helping young technology companies thrive by encouraging experimentation, not demonizing failure, and helping firms network with other like-minded individuals and enterprises. It also makes it easier for firms to meet investors in order to get their project funded. It helps ideas germinate and companies prosper. That’s the hope, anyway,” said Joe Svetlik of British Telecommunications. Svetlik's definition for how tech hubs develop is a good sign for metro Detroit. “First of all, a city needs a reputation for innovation, which is fed by a ready supply of suitably skilled graduates holding degrees in STEM subjects – these are science, technology, engineering and mathematics,” he explained. “Cities with universities that are particularly strong in these areas are more inclined to be home to a tech hub. As well as being able to attract these kinds of graduates to relocate there, cities need to encourage its own residents to study these kinds of subjects. Without the right kind of labor skills, a tech hub will struggle to get off the ground.” Surrounded by key universities encouraging research, including University of Michigan, Michigan State University, Wayne State University, Oakland University, and others, the state is a magnet for STEM brainpower. Unlike in the past, not all graduates are leaving the state as more opportunity for innovative and creative jobs exist, as well as funding for startups, notably from the Michigan Economic Development Corporation (MEDC), which has university liaison programs working with entrepreneurship and innovations. Denise Graves is the MEDC University Relations Director for Entrepreneurship & Innovation. “I oversee several program’s introductory innovations to entrepreneurship which manage portfolios,” she said, noting that there are university programs that assist in early stage funding to researchers to service providers. “We take a statewide perspective. We have seen an increase in Detroit, Ann Arbor, Grand Rapids, and Up North – in Houghton, Marquette, and Traverse City is becoming a hub,” Graves said. “There are lots of things happening around the state that are attracting talent to Michigan and retaining them while they are here. There's everything from opportunities with entrepreneurship, where they are working in high-paced technology industries like LinkedIn and Google. Some of the organizations – like Ford, GM, FCA – have been here for years, but they're taking a new slant on mobility, and there's a real momentum. “The hubs we have in Detroit, Ann Arbor and Grand Rapids are growing and feeding each other, and giving hope to other areas,” she noted. “Lots of companies in Rochester Hills are working on autonomous vehicles because the auto companies are reinventing themselves as mobility companies,” said Rochester Hills Mayor Bryan Barnett. “For us it's really exciting in the city of Rochester Hills because it's going to be the major disrupter for automotion. Rochester Hills isn't made up of a lot of large companies, but more small and mid-size companies that are chugging along,” he noted, such as Dataspeed, which provides a unique and compatible research and development kit for autonomous vehicles. “They're working on autonomous vehicle technology. They started with eight people, and now they're up to 20 people. Big companies are looking for small companies to partner with to move the field along. That's exciting for us.” Because of their proximity to large corporations, Oakland University and Oakland Community College, which provides talent, research and opportunities for training and certification, whether in computers, coding, information technology, building trades, food services and cosmetology, Rochester Hills and Auburn Hills has become a tech hub, defined as a physical space, whether a city, suburb, or even just a suite of offices or shared workspace, which has developed to help technology startup companies succeed. A tech hub is a community – whether formal, such as the area in Rochester Hills and Auburn Hills or in a places like Corktown, the flourishing tech scene in Ann Arbor, or informal, similar to shared workspaces like Bamboo Detroit, which has become an inclusive shared workspace that helps entrepreneurs and innovative companies find a place to launch, land and expand in downtown Detroit. “More robotics are developed in Rochester Hills than anywhere else,” Barnett asserted. “Rochester Hills is the robotics capital of North America.” Mike Cicco, president and CEO of FANUC America in Rochester Hills, is a part of that boom, and is the largest employer in Rochester Hills outside of education with more than 800 employees in the area. He noted that FANUC was one of the first in the tech corridor along I-75, and recently expanded behind their headquarters into Auburn Hills. “We bought 26 acres and we're building a 460,000 square foot facility that will open in the fall of 2019, and will bring another 100 jobs,” Cicco said, noting the company is bringing in “a tremendous amount of millennials. It's part of what we do. They have the opportunity to work with robotics directly. We tell them, one day you may be working in Texas in a GM plant, another day in a food distribution plant in Arkansas or an aerospace plant in the Pacific Northwest. “We do offer a lot of variety and excitement for our employees,” he continued. “The automation field is growing so quickly, and it's growing so far beyond just the automotive field, into pharmaceuticals, aerospace, consumer electronics and food and beverage.” Cicco said beyond research and development and creation of automative robotics, they utilize a system integrator network – which means they work with similar companies in close vicinity, small and large, “and those types of companies buy robots from us and customize them for other types of operations. This brings other types of companies into contact and interaction with us.” Esys Automation, recently acquired by JR Automation, a global systems integrator that develops intelligent automated manufacturing and distribution technology solutions for customers in automotive, aerospace/defense, life sciences, e-commerce and logistics, consumer products, electronic vehicle battery and other end-markets, has long chosen to be in the Rochester Hills/Auburn Hills hub. Chris Marcus, president of Esys Automation, said, “Manufacturing equipment for automotive accounts for around 40 percent of our business, and our facilities in Auburn Hills give many of our OEM (original equipment manufacturer) and tier one customers direct access to our world class teams and facilities. “We've operated in Auburn Hills for 20 years and are thrilled to be part of this vibrant community,” he continued. “We are grateful to be in close proximity to many of strategic partners.” “They all want to be near where the business they are going to be serving,” said Phil Bertolini, chief information officer and deputy county executive for Oakland County. “Many are organic. They're finding a friendly, welcoming environment that doesn't make it hard for me to do business.” Cicco noted that in the early 2000s there was a “misperception that robots replaced labor. Now politicians and others understand that manufacturing has changed.” A noticeable change is manufacturing transformation from “a dull, dirty place, like the image of Henry Ford's assembly line, into a high-tech artificial intelligence industry,” he said. Bertolini concurred. Noting his father used to work in a tool and dye shop for the automotive industry, “and tool and dye shops once were all automotive – now it's more medical equipment. It's all technology, using computer-aided design (CAD).” Bertolini said Oakland County Executive L. Brooks Patterson recognized the changes in the industry going back 15 years, when he started the Emerging Sectors program in 2004, notably focusing on the top 10 sectors of the new economy. “Back in 2004, the majority of those sectors were overseas,” Bertolini said. “We've been bringing them over for years. Now we've got over 1,000 firms, approaching $5 billion in investments.” He noted many of those are in hubs because they want to cluster near each other. “Novi is the number one place in the county – maybe in the country – for the Japanese population. Troy has a large Asian population, as well, and German companies were clustering in Troy and Auburn Hills. Startups go near larger corporations, depending on their vertical, especially in automotive. “We're seeing software and robotics everywhere,” he said. “In Farmington Hills, there are a number of technology companies, with a whole corridor along Northwestern (Highway).” Beaumont Hospital, with its medical campuses in Royal Oak and Troy, is now Oakland County's number one private employer. He noted there are numerous smaller businesses clustering around the larger hospital campuses. Oakland County has assisted with the industrial transformation in northern Oakland with Automation Alley in Troy. On May 1, in their annual report, Automation Alley revealed the findings of its annual report on Industry 4.0, and introduced something new, the Velocity Index, which illustrated the maturity of Industry 4.0, which they referred to as the fourth industrial revolution, and its technologies and expected rate of growth. For Oakland County, Industry 4.0 is centered on eight core technologies within advanced manufacturing: the internet of things; robotics; artificial intelligence; big data; cloud computing; cybersecurity; advanced materials and additive manufacturing; and modeling, simulation, visualization and immersion. Mike McCready, deputy director of economic development for Oakland County, said companies large and small, “They're all trying to expand beyond automotive. We're getting some startups, some that have been in the high tech mid-market.” McCready oversees Tech248, a monthly networking group which assists startups and other small companies with a variety of needs, from working with local governments, social media, education and sales. “I want to work with local governments and local businesses so they have good relationships. It helps economic development with businesses.” He noted the influx of robotics companies, whether large like FANUC, or smaller – “there are some really cool places,” including a company in Wixom which uses light to train people how to manufacture, package and ship. He's working to find growth in Royal Oak, Ferndale and Hazel Park – perhaps the next tech hub area for the county. “We're finding growth in these small towns and there's high tech in some aspects of them,” he noted, even when some startups are working from home. McCready said he has been working with Ingrid Tighe, executive director of the Birmingham Shopping District, on talent and business retention, notably among advertising and social media agencies. “We're looking to do a Tech248 group in Birmingham,” he said. The county is not the only entity working to help technological and creative companies change the landscape of manufacturing in southeast Michigan. Congresswoman Haley Stevens (D-Birmingham, Bloomfield Hills, Rochester Hills, Troy, west Oakland, western Wayne County), said, “We are at a pivotal and timely moment in southeast Michigan. I want to use my platform to shine a light on our manufacturing segment, which is at an exponential rate really diversifying. There are small and midsize companies growing; there are startups, high tech companies and established companies. I want to see us win in the emerging tech global race which we are poised to do.” Every Monday she is in the district, Stevens – with a background working in manufacturing and heading up the Obama administration's automotive bailout, is chairwoman of the research and technology subcommittee of the House Science, Space and Technology committee – visits small and medium-size companies in what she calls “Manufacturing Innovation Monday,” spending time with students, business owners, at education and innovation centers. “I'm putting my listening skills to play – engaging CEOs, engineers and the workforce of our region – the innovators,” Stevens said. “Many of these companies could have gone anywhere, and they've chosen to be here.” “Everyone wants to be in Oakland County because you can't recruit someone for an executive position to a small town without access to shopping, social life, freeways, good schools, neighborhoods, and to the calibre of talent that is here,” McCready pointed out. “Unemployment is at 2.7 percent and going down – it's basically full employment.” Stevens said to look into the coffee shops all over, whether in Novi or Troy – “They're full of business leaders in town from all over the country. Look at a company like Rivian (in Plymouth), which received a $1 billion investment led by Amazon. It reminds you of when the auto industry was just beginning. It looks like Silicon Valley. The arts are in play. The number of patents coming from southeast Michigan, especially in autonomous vehicle technology, is really one of the attractions to investors and innovators from outside our area. “What I'm looking to do is coordinate and identify challenges, tackle the bureaucracy in our way and tie it all together,” she said. Watching the burgeoning growth of tech hubs in southeast Michigan – from the automotive corridors in Rochester Hills/Auburn Hills to Ann Arbor, where cybersecurity, medical, pharmaceutical, and tech focused on the internet of things are growing exponentially, to areas of Detroit, with large company outposts of Google, LinkedIn, Amazon and others, to startups in all sorts of unique areas, began organically, and has snowballed. “What you had before was people working in silos, and like people sharing resources,” commented Matthew Bower, an attorney and partner at Varnum LLP. “When you're working in an early stage company or a startup, it's important to be part of a community and sharing resources, both financially, and ideas and practices. It can be creativity, it can be talent.” Bower, who works in Varnum's Ann Arbor office, noted that one of the early tech hubs was called Tech Brewery. “It's where Duo Security got started. It was a place a lot of people got started,” he said. Duo Security was started by Dug Song in Ann Arbor after attending University of Michigan in the 1990s, and then served in leadership and advisory roles at various tech companies. In 2008, he founded a2geeks, a non-profit which is dedicated to supporting creative and innovative people in the Ann Arbor startup community. In 2009, he founded Duo Security, a two-factor cybersecurity firm. On October 1, 2018, it was acquired by Cisco for $2.35 billion – making it what is called a unicorn company, or a privately held startup valued at over $1 billion. There are currently four unicorn companies in Michigan. Besides Duo Security, other unicorns are electric vehicle maker Rivian in Plymouth, Rochester-based software developer OneStream, and soon, Detroit business StockX, a “stock market of things,” co-founded by Dan Gilbert and Josh Luber, which is projected to be worth $1 billion any day. That Duo Security began as an early tech hub and grew in Ann Arbor is a particular point of pride for those in the community. “Song is best known as the guy who started and nurtured a cybersecurity company worth billions in Ann Arbor – outside of the big, traditional tech. Song is also beloved around these parts due to his commitment to being a connector and doer in the local startup ecosystem,” said Sarah Schmid Stevenson of Xconomy Detroit. Bower noted Tech Brewery worked as a shared workspace model, one that is utilized by others throughout the area, not only because of relationships, camaraderie and networking, but because it's also easier for service providers to provide content and education on a variety of topics. “People could talk, get together, put two desks together and have a company. They would have Beer30 – they still have it – events on Fridays at 4:30 where you have a beer and talk about what you're working on. It's a trend you're seeing with shared work spaces, especially going toward niches,” he said of ones he's seeing with musicians and others, such as Femology in Detroit that is a woman's-only workspace. Femology, on Jefferson in Detroit, is a shared women's-only workspace for up to 100 female entrepreneurs. Regionally, “and I'm painting with a broad stroke,” Bower said, the tech hubs are identified as Ann Arbor being a true tech hub, focused on business-to-business software, medical technology, and from the bottom up technical science. Detroit, he said, is a “top-down” tech hub, at least originally, as Dan Gilbert and his companies, Detroit Venture Partners and Bedrock, at the outset, invested in startups in the @Madison Building and then brought larger tech companies to downtown Detroit, creating the original Detroit hub. “Now it's more organic, communing with Bamboo, Ponyride, WeWork, Grand Circus Detroit,” all various shared work spaces in Detroit. Corktown, the oldest existing neighborhood in Detroit, where the original Tigers Stadium was located, is rapidly becoming a new tech hub – along with a trendy dining and bar destination, live music venue, and location for quirky and funky boutiques and renovated housing. “Corktown has potential (as a tech hub),” Bower said, “with Ford moving in with the train station and that will change that area. Quite a few companies are already there and it's quite diverse. It's near Ponyride (which describes itself as a 'catalyst for deploying social capital to a diverse group of artists, creative entrepreneurs and makers who are committed to working together to make Detroit sustainable') and other artists' enclaves, such as Assemble Sound, which is a church they're converting for musicians. It will be interesting to see what happens to that area.” “Detroit, Midtown and the New Center areas are all taken care of – Techtown is in New Center, and despite its name, it's more community focused – now we want to see it moved into the neighborhoods,” Bower pointed out. “Community development and shared workspaces is important because it's a good way to bring youth, energy, creativity to an area and a neighborhood.” TechTown Detroit is an urban research and technology park in Detroit's New Center neighborhood which helps connect entrepreneurs to resources, learning and networking events in Detroit, and helps businesses launch and grow. Graig Donnelly, chief strategy officer, did not return several calls for comment and more information. Heather Wilburger, chief information officer at Bedrock Detroit, said, “The entire story of Detroit, when it's written, will speak to the diversity of opportunity and its ability to attract talent, and tech will be an important driver for talent. In general, Detroit is a very hard-working city that values innovation. The grittiness and hardworking aspect of tech is very similar to Detroit, from the perspective of a working person.” Wilberger pointed out that in downtown Detroit, “We've got Microsoft, Google, LinkedIn, Amazon, Quicken Loans, StockX, Twitter, Snapchat, Uber, WeWork, Rocket Fiber, Detroit Venture Partners, and now the incredible announcement of Waymo, the first factory in the world devoted to the mass production of autonomous vehicles. We have a mix of startups and established companies – and we want to always have room for a mix. The entrepreneurial spirit is alive and well at Quicken Loans and the Bedrock companies. In a healthy ecosystem, we want to create economic opportunities for the city of Detroit. But the ecosystem has to be valued so we don't miss out on the economic opportunities for established companies or for startup companies.” Wilberger said that she moved to Detroit a year ago from Portland, Oregon, “Because I really wanted to be part of what was happening.” A conversation of both talent acquisition and talent retention is one that every company, large and small, is faced with on a daily basis. “Employee acquisition is always tough – and I don't put it on the educational institutions in this area. A lot of companies are seeking excellent talent from Michigan university grads,” said FANUC CEO Mike Cicco. “Hiring is definitely tight – from finding employees. Retention is excellent, with benefits, the environment, opportunity.” “Acquisition and recruitment of employees are at an all-time war,” said Oakland County's Phil Bertolini, noting that during the Great Recession, “there was a sucking sound of people leaving. Now, it's been a crazy wild ride to fill IT.” Bertolini said to succeed “you need to offer flexible work hours, flexible work spaces, especially for millennials, and great compensation in pay and benefits. They want open and bright work spaces. They all want a work/life balance. And if you're a young woman going into tech – they can write their own ticket.” “Having enough talent and retaining it – it's not just a Detroit story,” Wilberger countered, noting the shortage of qualified employees is an issue nationwide. “The industry is shifting to view technology to a complementary asset that will drive the industry – which is a shift from even 10 years ago. Dan Gilbert was a visionary because he said that Quicken Loans is a tech company that sells mortgages. Everyone has to innovate to stay relevant.” Wilberger continued, “Having an educated workforce is critical for the sustainability of the companies coming here, and for the future of Detroit, in order to keep the companies here. If we want to keep the talent here, you have to have the opportunity for the talent.” Another reason for the influx to metro Detroit? Affordability, especially compared to the coasts of New York City and San Francisco, whether in terms of housing, transportation and food and beverage costs. “New York and San Francisco have become very unaffordable for many, and Detroit now has grown to offer a lot to people,” attorney Matthew Bower pointed out. “There's quality of life. Those cities are hard to live in; they're expensive. There's great access to other metropolitan cities if you still want that access to them, and there's access to northern Michigan, as well.” Support for startups is increasing in the metro area, both from the private and public sector and from universities. Ara Topouzian is executive director of Michigan Venture Capital Association, a statewide trade organization of venture capitalists, service providers and some economists. “The purpose of venture capital firms is they're seeking out entrepreneurs and startups to give them help they can't get from banks, with seed money and startup money,” Topouzian explained. “What they bring to the table is their expertise running businesses, and they also often have some ownership interest (when they invest).” The organization does not recommend venture capital firms, but has produced a guide on their website that allows firms and startups to look up members, many located in Ann Arbor, Detroit and Grand Rapids, and understand what their preferred industry is, and when they like to fund, from early stage investment to later on. “Many of our venture capital firms are investing in life science, IT development, software development and medical devices,” he said. Level One Bank, which is a small business oriented bank “champions the entrepreneurial spirit,” said chief financial officer Dave Walker. “We're all dealing from the point of view as small business owners/entrepreneurs ourselves,” he said of he and his fellow bankers. Walker met Venture for America (VFA) fellows in Detroit in 2013, and quickly became captivated with the startup culture burgeoning in Detroit. “VFA is similar to Teach for America, with college grads paired with small companies and startups in cities on their way back up,” he recalled, noting Detroit was then one of six cities in its program, begun by original CEO Andrew Yang, now a Democratic presidential candidate. He said he saw many of the VFA fellows then begin their own startups in Detroit. “These are very entrepreneurial, committed people.” That catapulted him and the bank to sponsor a TechWeek Pitch Competition at Ford Field in 2015, have tech meet ups in Ann Arbor with Duo Security and work with Ann Arbor Spark as well as to meet Bamboo Detroit, a shared workspace in Detroit. “Our management team loved the pitch competition and saw a lot of great companies,” Walker said. “We then opened a branch office in downtown Detroit – we're co-located in the J.C. Madison Building with Bamboo Detroit.” Recently, they're working to partner the Birmingham Angels, a startup community in Birmingham, similar to Ann Arbor Spark, as an accelerator to get more healthcare companies involved. “To see all of these folks so passionate about their ideas, and work so hard to get them to the marketplace keeps you young as you help them,” Walker said, noting Level One Bank's board is comprised of entrepreneurs and business leaders. “I don't always understand the tech, but I understand a good idea and I want to help.” Private entities are not the only arena for assistance for startups – universities and government grants are a potent area of research and collaboration. Kelly Sexton is the associate vice president for research, technology transfer and innovation partnership at University of Michigan. “At University of Michigan, we're focused on ensuring the research, the development and the nurturance of technology and discoveries,” she said, placing a value of $1.55 billion on these activities. “We work to make sure those new technologies and discoveries are commercialized and in ways that maximize societal benefits,” Sexton said. Her office works to mentor early state commercialization teams and startups, both for teams at University of Michigan as well as to offer mentor teams at other public universities in Michigan, “because we're interested in growth. Because we're a public university, we're concerned with helping the community throughout Michigan. We're concerned with helping startups with a home base in Michigan, that can create jobs and diversity the economy in Michigan.” Sexton explained that they do that by mentoring startups teams at their earliest point – between graduate students and professors in order to maximize their research. “We're really creating a vibrant tech startup culture,” she said. How vibrant? As of fiscal year 2018, U-M had launched 21 startups, a number of which were in the medical tech space. At Michigan State University, officials there are administering Advance Grant, a program through Michigan Economic Development Corporation. Rich Chylla, executive director of Michigan State University Technology, said Advance Grant is a “translational research grant. The idea behind it is to taken an invention or research, and to take money which will take it to a productive, commercial path. The money can let them make a prototype or research an idea further.” While he and Ann Spalding, MSU Advance Grant program manager, administer the grants, any Michigan public university can apply. “Even though they're small amounts of money, they can help determine if they have commercial viability,” Chylla said. As part of the grant process, the applicant must discuss “how the money will move the needle, how it will work in the real world. It must be directed toward a commercial outcome,” he explained. “Translational is key – from the research lab to a commercial outcome. It won't be commercial when the grant is done, but it must show that it is moving in that direction. These small grants can help show the potential and show a company its marketability.” He said one grant is in the early stage for a human or veterinarian drug, and is in early stage clinical trials. Advance Program is just in its second year, but Spalding said it has received about 20 applicants each year. “Technology that's received this kind of money is twice as likely to eventually get licensed by a company or become part of a startup,” Chylla said. “If we have a really interesting technology, an existing company may get a license from the university to get a patent or develop it further. Or, if a technology we think is interesting or is positioned to incorporate it, we can form a startup to license it from the university.” Funding is provided as 50 percent from Michigan Economic Development Corporation and 50 percent from the university grant making the proposal. “We're seeing many people bringing softwares to the market,” Sexton said. “It's helping create the growth of tech clusters to Ann Arbor's downtown. If you remove the restaurants from town, you would see many of the basements and upstairs are filled with startups. “When you have the acquisition of Duo Security for $2.3 billion, it says to the world that Ann Arbor has arrived – that the region can launch, nurture and grow jobs.” As for southeast Michigan, “We've stuck to our knitting, and our knitting is innovation,” Congresswoman Haley Stevens said.