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November 12, 2014 - Image 12

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Publication:
The Michigan Daily, 2014-11-12

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AS STARTUP SCENE GROWS

DETROIT FACES NEW CHALLENGES

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BY RACHEL PREMACK, SENIOR NEWS ED

ITOR

Internet memes typically don't reflect com-
plex urban issues or hint at long-running
race and socioeconomic issues. Yet, upon
glancing at the White Detroit Entrepreneurial
Guy meme, a viewer can tell. It's a response to
often misguided public giddiness over "revital-
izing Detroit."
The image, which surfaced in April 2013,
features a background of buildings, set behind
a white man smiling into the distance. The text
on each meme varies, with satirical phrases
like, "Everything tastes better when you're
across the street from an abandoned build-
ing" or "Those that have the capacity to create
change have the right to do so, like me and Dan
Gilbert."
Detroit-based blogger Aaron Foley wrote
about the meme last year in car culture blog
Jalopnik Detroit, owned by Gawker Media. He
affirmed the meme's message, which intend-
ed to show that Detroit's problems cannot be
solvedby techstartups and microbreweries.
Moreover, revitalization efforts have been
focused in Greater Downtown - a 7.2 square
mile region that are comparatively whiter,
wealthier and better educated than other posi-
tions of the city. The Downtown area accounts
for 40 percent of the city's total employment,
despite being just over 5 percent of the city's
space, according to a 2013 data report from the
Detroit-geared Hudson-Webber Foundation.
"We haven't really seen the effect yet on

the rest of the city," Foley said in an interview
with The Michigan Daily. "It's not quite like it's
spreading outward. There's development going
on here and here and here, but there's no rolling
through."
While 98 percent of Midtown and Down-
town apartments are occupied, blight continues
to be a problem in many other parts of the city.
The majority of jobs in these neighborhoods
pay more than $40,000 annually, but 38.1 per-
cent of Detroit residents citywide live below the
national poverty line.
Incorporating the otheri132 square miles into
the Greater Downtown's economic comeback,
which has been hailed by nationwide media,
may soon come. Leslie Smith, president and
CEO of TechTown, Detroit's first and biggest
tech accelerator, named this a key priority at her
organization.
"For me, if that's not the outcome, we can't
declare a success," Smith said.
At the very least, Foley noted there hasn't
been another White Detroit Entrepreneurial
Guy meme since last year.
A new industry
Detroit Free Press business reporter and
author of Reimagining Detroit John Gallagher
said that Detroit's startup scene was integral to
the city's rebranding.
"It's part ofthe culture that gives Detroit this

reputation as on the comeback trail," Gallagher
said. "Startups are sort of a lively phenomena
and they help give Detroit this air that it has
now of a very interesting urban experiment
that's taking place."
Following decades of racial tensions, a noto-
riously high crime rate and setbacks in the auto
industry, Detroit is looking for a new economic
driver. And it might just come in the expand-
ing ,startup scene, where millions have been
invested from the public and private sector this
decade.
Detroit has lost more than 20 percent of its
population 25 years and overin the last decade,
according to U.S. Census Data. But a more
shocking statistic indicates a different narra-
tive: the population of college-educated resi-
dents under 39 year olds increased by59 percent
in the 7.1square mile area ofGreater Downtown
from2000 to 2010, according to a Forbes report
from 201L.
"There is a certain demographic that comes
to Detroit that is well-educated, affluent and
white and wants to do something," said Asso-
ciate Prof. Nick Tobier, who teaches topics like
social entrepreneurship in the University's
School of Art & Design. "i mean that in good
and bad ways."
Now, Detroit is building an ecosystem of
entrepreneurship, including venture capi-
talists - those who provide early-stage
funding to promising startups - entrepreneur-

ship-focused non-profits; lawyers; a tech-savvy
Chamber of Commerce; office hubs, the vibrant
urban areas that innovators crave and months-
long programs that provide funding and men-
torship to innovators.
Jim Martinez, Detroit Regional Chamber
director of communications, said tech entre-
preneurship in Detroit has grown in the last 10
years, particularly in the past three to five years.
He affirmed that the public and private sector
were making a "concerted effort" to develop
the entrepreneurial ecosystem. Martinez added
that Michigan universities, which provide tal-
ent, are also a key part of that growth.
Most cities began their entrepreneurial push
in the '70s or '80s. Until recently, the Motor
City's fortunes were based almost exclusively
on the auto industry. Large manufacturers and
suppliersdominated much of Detroit's econom-
ic history, and leaders were apt to keep their
money rather than invest in creating new busi-
nesses
"Detroit, for the last100 years, was a big cor-
porate market. We relied on big corporations,
big government and big labor," Gallagher said
of business culture in Detroit. "The notion that
someone would let just a little startup in was
just a joke."
Smith, the president of TechTown, said the
corporate culture created a stable and thriv-
ing period for the auto industry in the mid-20th
century. Entrepreneurial activity and innova-

tion blossomed within the auto companies as
the company enjoyed their heyday. In 1955, the
bosses of General Motors weren't losing sleep
over their own job security as they dominated
50 percent of the American vehicle market and
was the world's largest employer. At its peak
in 1979, GM employed around 600,000 Ameri-
cans.
In the decades following oil shocks, fierce
new competition, and increasingly outdated
technology and management practices led to
the Big Three losing their prestige, market
share and steady cash flow. And as that hap-
pened, their employees were laid offand needed
new jobs.
-The biggest factor was that the change was
forced on us," Gallagher said. "We had to do it."
The nascent stage of entrepreneurship is
attracting young people who are excited about
creating something new in a city with a com-
plex past.
"There's not a lot of followers," said Jacob
Smith, a University alum and director of Busi-
ness Development at tech startup UpTo. "If
you're going to be in Detroit right now, you're
not a follower because it's not popular among
the masses. Everybody is here to make their
impact."
it's easier to begin your startup in Detroit
than in more prosperous cities due to cheaper
rents for office space, and the presence of a
wealth of non-profits keen on building Detroit's

startup corridor. The concept of openinga tech
firm in Detroit is also still somewhat revolu-
tionary and press attention is easier to attract,
which concerns Foley.
University alum Michael Williams, a Detroit
native, wrote his Afroamerican and Afri-
can Studies honors thesis on gentrification in
Detroit. He said there was a "hipster aesthetic"
and drive for social justice to those who moved
to Detroit.
"It's hot to move to a place that's struggling,
that's a bit off the beaten path, that's unique or
atypical. It has its appeal with all its challenge
and struggle," Williams said. "We have an
opportunity here not just to work or have a job,
but really be invested in something greater than
yourself, a movement to improve humanity and
quality of life."
Gallagher said the culture and identity of
Detroit is changing.
"Detroit's public space is being identified a
little bit more," Gallagher said. "All else being
equal, they (entrepreneurs) would probably
take the chance on Detroit right now over other
cities. It is viewed as a place where startups and
entrepreneurs are welcome. It's fun - it's get-
ting to be a fun place."
However, building a startup in Detroit is not
as clear-cut a process as creating one in, say, San
Francisco or Austin. Here, Foley said, there are
questions ofwhat happens when a business that
serves and employs almost exclusively college-

educated people - like tech firms - in a pre-
dominantly middle and working class city.
Greater Downtown Detroit vs. everybody
Forty-two percent of Greater Downtown
residents aged 25-34 are college educated, com-
pared to 11 percent citywide, according to the
data report from the Hudson-Webber Founda-
tion and U.S. Census data.
The report also reflected that from 2000 to
2010 in Greater Downtown, the Black popula-
tion decreased 5 percent - 12 full points lower
than the rest of the city - and the white popu-
lation increased 3 percent. The proportion of
whites downtown is twice that of the the rest
of the city.
The differences in privilege cause a chasm
between old and new residents, as well as a dif-
ference in what each segment of the population
can accomplish.
"A lot of entrepreneurswere sort of self-serv-
ing andnot fully conscious of what their actions
had on the community around them," Foley
said. "When people would move into a neigh-
borhood and be completely insular to their
neighbors and what not, it would create tension.
A business would open up shop and say, 'okay,
we're gonna cater to a certain clientele without
being conscious of what other businesses were
doing' It created a problem that shouldn't have
to exist."

Organizations like TechTown are starting
to recognize the tension between the white,
wealthy Greater Downtown and the nearly 132
square miles which don't attract 40-dollars-
a-plate Brazilian restaurants. Leslie Smith of
TechTown emphasized the need especially to
ensure economic developments in Detroit's
neighborhoods as its fractured transportation
structure prevents all Detroiters from benefit-
ing from jobs created downtown.
TechTown partners with community devel-
opment nonprofits to assist initiatives in seven
neighborhoods throughout Detroit. These busi-
nesses aren't start-ups, but daycare providers,
retail storefronts and small- and medium-scale
manufacturers. One tactic TechTown employ-
ees might teach the business owners is how to
effectively track sales, inventory and financials,
easing the local business' process of obtaining
a bank loan.
More difficulty may come with reconcil-
ing longstanding racial tensions in the city,
which Smith said has impeded opportunities in
Detroit. It is a "priority focus" for her organiza- .
tion.
"One of the obvious issues is that most of the
action in downtown and midtown applies to a
primarily white population," Smith said. "How
can you have a city center that doesn't reflect
the balance of the city?"
Smith said her colleagues in Pittsburgh, Phil- Mt
adelphia and other revitalizing Rust Belt cities

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