Detroit
visiting a turnaround in progress
It was an unexpectedly sunny morning as I made the drive up I-75 from northern Ohio to Detroit in July. Our arrival in northern Ohio earlier in the week had been greeted by real, angry Midwestern rain. Rain would come again later in the week, but this day broke clear. The drive was smooth sailing. I took a variety of voice memos along the way, which I’ll get back to in a sequel post.
About three hours later, as I approached my destination, I saw familiar street names - Woodward, Broadway - and realized it had been close to 30 years since I’d been in Detroit city center. In recent years, I’d been to the state, and Detroit airport, and Ann Arbor, home of my undergrad alma mater, but it had been decades since I’d set foot downtown.
The trip had come together on short notice, a testimony to the graciousness of my host, Jared Stasik at Detroit Venture Partners (DVP). Jared and I share undergrad and graduate educations (Michigan + Berkeley; albeit more than a few years apart). When I asked if I could come visit DVP in person and see what DVP and real estate developer Bedrock are up to in the Detroit urban core, he graciously made time. (Here, a shout-out to a former student, Sandeep Shah, who interned at DVP in 2021. It was through Sandeep that I first learned about DVP.)
Jared Stasik of Detroit Venture Partners
Jared joined DVP as he was finishing up his Haas MBA, spending much of his final Haas semester effectively full-time at DVP. Jared is a Michigan native and spent time in Europe before his MBA. Wanting to come back to Michigan, in the face of post-Great Recession opportunity in the Bay Area, admittedly made him unusual among his Haas classmates. With that said, roots are powerful, and returnees can be a powerful force.
Contextual note: the unemployment rate in the state of Michigan was still 9.2% as of May 2012, and 9.8% in Detroit-Warren-Dearborn MSA. This also was not long after the 2010 Census showed that the population of Detroit had dropped 25% to 713,777. This compared to 1.85 million in 1950. (The drop continued with the 2020 Census, though Mayor Mike Duggan stated it represented an undercount, noting the census counted 254,000 households whereas utility DTE Energy provides electricity to nearly 280,000 households.) The drop in population perpetuated a negative vicious cycle - a decline in city receipts, which further hampered the city’s ability to provide civic services. Without funds, the city couldn’t invest in basic services, let alone upgrades. This ultimately culminated in Detroit’s filing for bankruptcy in 2013.
This is the environment in which DVP was started, following on Quicken Loan’s move to the Detroit city center, announced in 2009. Thus, venture capital was adopted as a tool to help catalyze an ecosystem.
DVP started a $55M fund with LPs such as the Pure Michigan Venture Fund, and, of course, DVP founding partner Dan Gilbert, founder and chairman of Quicken Loans; founder and chairman of the Rock family of companies; and also owner of the Cleveland Cavaliers. Since then DVP has invested into some 100 companies, both in the Detroit area and elsewhere. Early investments focused on seeding the Detroit ecosystem. Generally, DVP seeks to invest where it can provide strategic value via the Rock family of companies; mortgages; Quicken; or Bedrock’s real estate holdings in Detroit or Cleveland. As of my visit, Bedrock has accumulated over 100 buildings between the two cities. There is also the Courtside Ventures fund.
Significant investments include StockX, a marketplace for collectors (with perhaps a focus on sneakerheads). Recent exits include Benzinga, Finicity, and Vroom. Jared noted a fintech and mortgage issuing cluster in the Detroit area between the presence of Quicken (Rocket Mortgages) and Ally Financial.
Jared noted the importance of external benchmarking in developing and marketing Detroit, and cited the value that the Amazon HQ2 bid process provided in testing hypotheses Detroit held about itself. In a similar vein, in my own research, I’ve found contests or challenges, such as the US Department of Transportation’s Smart City Challenge, useful - what do cities say about themselves? What do they cite as their strengths, and as areas for improvement? How do those compare?
After showing me the view from DVP’s outdoor event space - Comerica Park (MLB) and Ford Field (NFL) are visible below, with two more stadia nearby - we went on a walking tour. (Here, another shout-out to a current student, Will McKelvey, author of the Midbest Substack. Will and his co-author Gaelen also visited Jared, in 2021.)
Comerica Park and Ford Field, as seen from DVP
Anchor tenants at One Campus Martius: Rocket, Meridian, BMC, Microsoft, StockX
Lunchtime at Cadillac Square Park
Property developers need critical mass of tenants (employers), workers, services, amenities and infrastructure for areas to come to life and become self-sustaining. It’s a series of chicken and egg problems - for example, for retail to flourish, there needs to be critical mass of customers; for workers to enjoy being in a place, critical mass of retail and services needs to be there. Getting these parts to come together takes work and coordination.
Seeing Bedrock extend into residential development, and help establish a light rail, shows the different markets and functions that need augmentation to bring a city core to life and create connectivity tissue with surrounding areas.
Construction at the former Hudsons
Jared shared that in pre-pandemic times, the family of Rock companies would host 1000 interns each summer and house them at local Wayne State University. This is, of course, a powerful recruiting tool and also a way to inject energy in the city’s continued turnaround.
As a visitor seeing with fresh eyes, I was struck by the vibrancy and general energy of the area. I was told foot traffic had not returned to pre-pandemic levels - that part-time WFH had lessened foot traffic downtown. A phenomenon which San Francisco can certainly empathize with.
To be continued with Part 2.