Ross Sanders on Growing An Entrepreneurial Ecosystem for Detroit

By Victoria Araj on March 31st, 2013 / Comments

For decades, when people thought of Michigan, they associated it with automobiles, manufacturing, labor and unions. That association is starting to change with the evolution of an economy that demands more from Michigan and more from its main artery – Detroit.

Entrepreneurship has quickly become a key factor in Detroit’s ongoing turnaround story, because of investors and visionaries seeing the potential in Detroit’s landscape and brainpower.

New ideas, growing technology and venture capital are creating a special formula in the Motor City thanks to investments from Bizdom, Detroit Venture Partners, the Kauffman Foundation, the New Economy Initiative, the Michigan Economic Corporation (MEDC) and many others.

Bizdom, founded by Dan Gilbert – founder and chairman of Quicken Loans and majority owner of the Cleveland Cavaliers – provides seed funding and mentorship to entrepreneurs interested in launching tech-based startups in the cities of Detroit and Cleveland.

To illustrate what’s really going on behind the walls of Detroit’s historic buildings, I sat down with Bizdom’s CEO Ross Sanders, at the entrepreneurship accelerator’s home inside the M@dison building in downtown Detroit.

You’ve been with Bizdom since it originally launched in 2007. What were the goals then, and are they different now?

OLYMPUS DIGITAL CAMERAThe goals are the same, but how we’re getting there has changed. The goal is to train, mentor and partner with entrepreneurs to open innovative, growth-oriented tech-based startups in Detroit and Cleveland. We want to be self-sustaining, meaning our program lives off of our share of the proceeds of the businesses we help to launch. It’s important to note that we work with entrepreneurs, not someone considering entrepreneurship. Let’s say an entrepreneur wants to launch a business and get to a certain goal in one year – we can help them get there faster. A couple of things that have changed is that we used to be open to working with businesses that were not exclusively tech-based. We now only work with tech-based startups, where the entrepreneur has a chance to get to a first customer, a beta version or a prototype within three months.

Bizdom was initially a two-year boot camp. Now it’s a three-month accelerator. Explain what that means and why the program has evolved over time.

The program has continuously evolved over time in order to meet the needs of entrepreneurs. Entrepreneurship has changed a lot over the last few years. With developments in technology, increased access to information, the advent of smartphones, and more, an entrepreneur can start a business much more quickly. The barriers to starting a business have changed and our program has changed with them. We encourage our businesses to test a lot, with the understanding that market research doesn’t necessarily dictate market behavior. We encourage them to iterate, using minimal viable products to perform tests in the marketplace.

We now recruit folks into the program who have an idea for an early tech startup, and can get it going within three months. We still have a rigorous screening process, and those who get accepted will receive an investment of up to $25,000 to get their business off the ground right when they come in. We give them three months of full-time mentorship, group training, and one-on-one time plus an opportunity to pitch for “follow on” funding from potential investors through our demo days. We also provide three months of space at the M@dison building downtown, which is a collaborative work environment. In exchange, we take an 8% share of ownership in the business, with proceeds channeled back into Bizdom-born businesses in Detroit and Cleveland.

We are a non-profit with the goal of being self-sustaining. We have approximately 37 businesses in our portfolio, 19 in Detroit and 18 in Cleveland, all at different stages. We have enough distributions from two of our businesses, Campus Commandos and Core Merchant to seed nine more businesses.

How do startups play into the future of Detroit?

We’re trying to convert the muscle economies of Detroit and Cleveland who have been over-reliant on manufacturing to brain economies, rooted in innovation, technology and entrepreneurship. Both places need to have a strong urban core as a hub for innovation, which will help these economies grow and create jobs. Having an accelerator like Bizdom is a big part of creating such a hub.

From an entrepreneurial perspective, what does Michigan have that other places don’t? What makes The Mitten a great or unique place to start a business?

Great assets – universities like Wayne State, Michigan State, the University of Michigan, the College for Creative Studies, and increasing access to investment thanks to the foundation community stepping up to support entrepreneurial efforts. For example, the MEDC and the New Economy Initiative have made access to capital better by investing and putting together grants and special programs specifically for startups. Sure, you can go to Silicon Valley, open a business and create jobs there, but here, you’re helping a city reinvent itself. We really believe in the next 5-10 years that Detroit will have turned around and startups that are in at the ground level here are really going to make that happen.

What are the biggest barriers for budding entrepreneurs in Michigan?

I don’t think the barriers are any bigger here than anywhere else. I think it’s more of a mental barrier in thinking entrepreneurially. The city lost great talent because we didn’t have a good entrepreneurial ecosystem and we’re getting that back now. We have entrepreneurs who have relocated to Detroit to be a part of Bizdom from New York, Boston, and Cincinnati and we expect more entrepreneurs to relocate from out of state to Detroit in upcoming Bizdom sessions.

What obstacles should an entrepreneur be prepared for once they launch their business?

First, be prepared to move quickly. The competition is fierce. It’s important to use iteration, test, revise, test, and tweak your model, and you must do it fast. Second, entrepreneurs tend to overlook the importance of sales – it is the lifeblood of any organization and it cannot be overlooked.

How should startups measure success in our current economic environment?

Traction. For example, the number of people using your app, the amount of revenue you have secured, or the degrees of success on certain market tests are all forms of traction. Investors don’t want to just see a business plan, they want to see traction.

What advice would you give young entrepreneurs who are torn between pursuing a traditional career path and being their own boss?

If you’re debating about it at all, you should take the career path. Owning your own business has got to be such a big part of you, and you need the drive to go through the difficult times, you have to be able to stick with it. Therefore, you have to be extremely passionate about owning your own business in order to fuel that drive, there can be no pondering.

Is Bizdom currently looking to invest in more startup companies?

Yes. We invest in three cohorts per year in both Detroit and Cleveland with six startups per cohort, leading to 18 launched businesses per year in each city.

Right now, we’ve just closed our spring applications for our May 2013 accelerator.  Information for the next opening is available at www.bizdom.com/apply.

Similar articles: Detroit’s Tech Hub: A Look at the Numbers, The Michigan Business Incubator List,

Bizdom startup profiles: How Chalkfly Helps Your Local Schools, Savorfull’s Mission to Nourish Michigan.

About the Author

Victoria Araj

Victoria Araj is a team leader at Quicken Loans and is the managing editor of the Quicken Loans Zing Blog, offering mortgage, personal finance and home improvement tips.