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Detroit / Ann Arbor

Southeastern Michigan, which encompasses metropolitan Detroit and Ann Arbor, has many opportunities for burgeoning startups. The University of Michigan boasts one of the leading engineering schools in the world, and when combined with the entrepreneurial and industrial spirit of Detroit — the city made famous for mass producing the automobile — the future of the region lies in its robust tech sector. The high quality of life, particularly in Ann Arbor, makes it very attractive for talented young people. The area is home to tens of thousands of industrial engineers, 375 automotive R&D centers, and 12 OEM plants, making the primary focus the automotive industry. However, healthcare and agriculture are two verticals that the ecosystem has a strong advantage in. Despite the presence of over 200 startups in Ann Arbor alone, the ecosystem still lacks density in terms of number of startups. Companies looking for Series A funding have to look elsewhere for capital, as there is a serious drought when it comes to funding for that stage.

In This Market

These businesses offer industry expertise and are a source of startup talent and potential customers. They help fuel the local startup community.

Opportunities

  • University of Michigan and other great research universities means that there is a constant stream of high quality research that is readily available for commercialization.
  • The reputation of metro Detroit as being the automotive capital of the world makes the city an attractive location for mobility and transportation-based startups.
  • The cost of living is a fraction of what it is on either coast, making it easier for bootstrapping startups to hire developers affordably.
  • Retaining talented employees is not as challenging as it is in Silicon Valley. New employees tend to be loyal, and do not jump ship as quickly as they would in more competitive markets.
  • Metro Detroit is the automotive headquarters of the world: 375 automotive R&D centers, 12 OEM plants, and tens of thousands of industrial engineers.
  • Other than mobility, verticals that have potential include healthcare IT & agricultural IT.

Risk Factors

  • Although the number of startups is growing at an impressive rate, the ecosystem still lacks density. This means that there are not enough mentors who can give advice based on their experiences in various startups of different stages.
  • There is a bias against software-based startups, in favor for more hardware-based startups. This is primarily because investors favor companies that have a physical product over software-based solutions.
  • As with many growing ecosystems, Southeast Michigan suffers from a deficiency in Series A funding, causing many startups to look elsewhere for funding.
  • The lack of a major, “unicorn” exit among startups means that there is a lack of exited entrepreneurs and recycled capital that could be used effectively.
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