To Entrepreneurs Everywhere: Don't Forget the Motor City

Posted on September 23, 2016

Ten years ago, if someone in Detroit said he or she was an entrepreneur, a listener’s first thought might have been, “This person is out of a job” — and with good reason: From 2000 to 2010, Michigan lost over 850,000 jobs — more than all other states combined.

Even before Detroit entered bankruptcy, it was clearly time to rethink “business as usual.” The region could no longer rely on just one industry (read: “automotive”) and a handful of companies as the source of its wealth and prosperity.

In this regard, Detroit was not alone, of course. Around the nation, theories abound on the best approaches to revitalize Rust Belt economies. Many of these debates — the proper role of government, how to build a 21st century workforce and more — continue today.

It was against this backdrop that many in Southeast Michigan in recent years coalesced around an economic development strategy that has been, in fact, part of Detroit’s DNA: entrepreneurship. To regain its position as a global leader, businesspeople said, Detroit needed to diversify its economy through innovation, small business growth and culture change.

But, absent a well-functioning private market, it was the third sector, philanthropy, which stepped in. Ten foundations, both local and national, came together to commit $100 million to a new fund. And so the New Economy Initiative (NEI) was born in 2007, with the ambitious goal of transforming an economy that had left too many residents behind into a diversified engine of opportunity through entrepreneurship.

Today, nearly 10 years later, it’s worth asking: Has this model of entrepreneurship-centered economic development worked? And what lessons, good or bad, can be learned from the experiment?

The first answer is clear: Yes. Entrepreneurship is beginning to transform metro-Detroit’s economy. Since 2009, NEI’s investments in organizations supporting entrepreneurs have helped launch 1,700 companies (40 percent of which are minority-owned, twice the national average) and create 17,500 jobs (many in high-tech sectors), according to new studies by the W.E. Upjohn Institute for Employment Research and PricewaterhouseCoopers. This, in turn, has boosted output in the regional economy by nearly $3 billion.

Perhaps more importantly, there is a change in culture happening in Southeast Michigan. We’re no longer skeptical of entrepreneurs here; in fact, entrepreneurship is both encouraged and celebrated.

In a recent survey, over 60 percent of local entrepreneurs said they were receiving more attention from local governments and media today than they had five years ago. The percentage who felt there was sufficient financial and technical support for businesses like theirs increased three-fold over that same period.

Since 2007, the number of business-service providers — including accelerators, incubators and training programs — has jumped from only a handful, to nearly 60 in 2016.

A truly robust network of support has been built — and Detroit entrepreneurs can feel it. As Justine Sheu, the founder of two local tech startups, recently put it: “Three millennials with zero business backgrounds were able to build and grow two companies because of the ecosystem here … The entrepreneurial energy is palpable.”

So, should other U.S. cities replicate this entrepreneur-first model? While every region is unique, there are universally applicable lessons to be drawn from Detroit and NEI’s experience:

1. Investing in inclusion is critical.

Historically underrepresented groups — women, people of color, immigrants — must be central to economic development efforts. Cities cannot afford to apply a neighborhood or urban core strategy alone; they must take a regional approach. Inclusiveness extends to the type and size of businesses, as well. We must support the barbershop and biomedical research center, the tamale-markers and tech companies, alike.

2. We need to define cities by their assets, not deficits.

When people used to talk about Detroit, they were fixated on the city’s shortcomings. Yet the region has the largest concentration of engineers in the world, a wellspring of creatives and three top-tier universities. Investment decisions should be directed toward areas where value already exists, not toward simply solving for the deficiencies.

3. Collaboration should be celebrated.

Building something as complex as an economic ecosystem requires the private, public and nonprofit sectors to work together. Financial resources are important, but so too is leadership, vision and connections. As NEI has learned, to foster innovation, you must first embody it.

There is no question that much work remains in metro Detroit. Entrepreneurship has not and cannot cure every ill afflicting the city. Solutions to issues like education, public safety and housing are desperately needed.

But there is no question that entrepreneurship has led to remarkable economic and social progress in the last decade. Our collective task now — in Southeast Michigan and across the nation — is to ensure that this progress is felt by each and every person who calls Detroit