November 25, 2011/Miller-McCune
By Paul Vachon
According to the latest census figures, Detroit’s population continues to plummet while its public school system remains largely dysfunctional and FBI statistics report an increase in violent crime after several years of decline.
But Detroit, the buckle of the “Rust Belt,” is also a city of paradoxes. In the city’s midtown, an innovative project, Tech Town, stands out as living up to its motto, “Reigniting Detroit’s Entrepreneurial Culture.”
The city has been counted out before — “Decline in Detroit” was Time magazine’s headline in 1961 – so talk of a comeback has a precedent. In 1999, Irvin Reid, president of Wayne State University in midtown Detroit, decided that a “business incubator” that drew from the university but wasn’t part of it could help the city and the region’s economy. Unlike many other innovation-driven incubators, which usually brought new technology to an untouched area, Reid’s Tech Town would be a “brownfield” incubator, building up in region closely associated with heavy industry.
Reid wanted to create an environment where tenant businesses could benefit from affordable rents with highly flexible leases, access the university’s technological and engineering expertise, and tap training, networking, and financing opportunities. To further this economic diversification beyond metal bashing, Tech Town’s initial emphasis would be on advanced engineering, life sciences, and alternative energy.
Soon after, Reid negotiated partnership agreements with companies with metal-bashing roots: General Motors and Henry Ford Health System. Start-up funding came from a public/private coalition that included local interests such as the Detroit Economic Growth Corp., the City of Detroit, the Michigan Economic Development Corporation, and the Wayne County Land Bank, as well as national players such as the entrepreneur-oriented Kaufmann Foundation and the U.S. Department of Housing and Urban Development. To attract tenants, the city granted a 20-year tax holiday to businesses located in the greater Tech Town area. Investment from all these sources totaled some $35 million.
Thanks to the involvement by these major community players, such a massive infusion into the depressed core was met with almost unanimous approval by the greater business community. While industrial migration to the suburbs has hurt the city, there is, curiously, a keen interest by many people in southeast Michigan in seeing the city revive.
As part of its involvement, GM contributed an historic but abandoned five-story building between its headquarters and the Wayne campus. Constructed during the early years of the auto industry by Detroit businessman George Richards, the structure first served as the headquarters of Oakland Motors, later known as the Pontiac division of General Motors. After being sold to GM in 1930, the building became a storage facility and a design center for Chevrolet. The early editions of the iconic Corvette were conceived in the studio on the top floor.
By the late 1950s, however, the building had been abandoned and became one of a growing number of eyesores in midtown. Its renovation as Tech One represented Tech Town’s first phase; the event was marked in 2004 to the cheers of dignitaries such as Michigan Gov. Jennifer Granholm.
Tech One today is home to 220 businesses with a total employment of more than 700. It also boasts a waiting list; and despite the development’s name, more than 85 percent of the current tenants are non-high-tech businesses. Three vacant buildings on adjacent blocks (to become known as Tech Two, Three, and Four) have been identified for expansion. A nearby parking lot is site of the eventual Tech 5, the final piece of the complex.
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Four years before that 2004 gala, entrepreneur Randal Charlton brought the first major anchor, Asterand, to Tech Town. Asterand serves the pharmaceutical and biotech industries by providing tissue samples necessary for advanced research; it also performs in-house research and manages biorepositories — basically libraries of specimens — for clients.
After taking Asterand public in 2006 (it trades on the London Stock Exchange) and retiring from the company he founded the next year, Charlton assumed the CEO position at Tech Town.
“I felt up to the challenge, although I had no background in running a business incubator,” he concedes.
The assist of a nearly 150-year-old public research university helped.
“Our proximity to Wayne State University and the resources it offers through its Technology Transfer Office is a major benefit to being located here,” says Shannon Richey, director of marketing at Asterand. “Being in a dynamic, entrepreneurial environment filled with like-minded people keeps our company here.”
The attraction works both ways. Tech Town tenant (and life sciences business incubator) Great Lakes Stem Cell Innovation Center taps Asterand’s biobank capabilities to provide blood and tissue samples for its ongoing pharmaceutical research; the center opened in 2009, a year after Michigan OK’d spending taxpayer money on stem cell research. Great Lakes’ first tenant arrived in early 2010 when former Asterand research scientist James Eliason started MitoStem, which develops technologies in regenerative medicine that don’t involve using stem cells from human embryos. MitoStem located near Asterand, Eliason explains, both for professional collaboration and for his company to serve an important client. It’s been an uphill battle at times, but Eliason has said he feels well placed at Tech Town for when economic winds are more favorable.
In the field of alternative energy, perhaps the biggest player at Tech Town is Next Energy, which develops long-term solutions to replacing fossil fuels with clean and renewable energy. These can apply to grid electrification (electricity derived from wind, solar, and biofuel sources) and to automotive use (vehicle electrification and alternative fuel development, such as hydrogen). Next Energy collaborates closely with its clients in shepherding breakthroughs such as a device known as a direct coupling power supply, developed by Nextek. Its technology allows electricity to be carried via the ceiling grid of an ordinary commercial building, eliminating the need for traditional wiring. Business owners can then easily locate (and relocate) things like lights, fans, or audio speakers anywhere while avoiding the danger of electrical shock.
In addition to these heavyweights like Asterand and NextEnergy and their satellites, Tech Town is home to a wide array of smaller concerns operating independently but making use of their neighborhood.
“Tech Town has been responsive to the needs of the entrepreneurs coming to our door for help, and that means welcoming supposedly un-sexy companies that aren’t high-tech. We embrace this diversity of entrepreneurial talent that really sets us apart from other incubators in the nation,” said Allison Guilliom, director of marketing and communications for Tech Town.
A noteworthy example is Rivers Conservation, where conservationist and proprietor Ronna Rivers operates a laboratory devoted to the preservation of artwork, photographs, and written documents. Many of these pieces have significant historical or artistic value, and her clients include museums, private collectors as well as individuals looking to preserve family heirlooms. Rivers set up at Tech Town after several years of working out of her suburban home.
“Relocating my business to Tech Town allows me to be taken more seriously by prospective clients, to take advantage of the flexible lease offerings and to be part of a dynamic community where tenants feed off each other. For example, a biotech company in the building just offered to sell me a surplus microscope which has proven very useful.”
While Tech Town has realized considerable success in its core mission of business development, other desirable trends have emerged as a result. Today, ownership of TT’s client businesses is 60 percent female and 66 percent minority. Also, a growing number of “lifestyle” businesses have arrived, including Young Men in Transition, which offers services to at-risk young men including mentoring and academic counseling with the intention of building character and accountability.
Charlton looks to the future with optimism. Within the next decade, he pictures Tech Town as being the catalyst for a thoroughly revived midtown, with loft apartments, abundant retail, and entertainment facilities.
Within the last several years, some 12 new retail, residential, and business developments have sprung up in the adjacent neighborhood. These include several renovated apartment towers, and the innovative new Green Garage Detroit — a much smaller incubator focusing on sustainable technology businesses. Also nearby is the 71 Garfield project, a facility for artists to live and work.
Recently Charlton retired from Tech Town to devote his energies to a new project called BOOM! The New Economy. Located on the TT campus, this new venture specializes in helping workers over age 50 reinvent their skill sets to prepare for new careers.
Charlton’s successor is Leslie Smith, former general manager for Tech Town. Smith looks fondly at Charlton’s formative work and plans to continue that tradition. Specifically, she plans to encourage tenant businesses to coordinate their purchasing with the organization’s three largest stakeholders: Henry Ford Health System, Wayne State University and General Motors. Smith also hopes to foster further research growth among TT’s biomedical companies and to see those developments implemented in the health care system.
“In some ways, we’re working to go back to our roots. Tech Town started with just high tech concerns. But as the economy declined, we developed partnerships with more lifestyle businesses. Now we‘re trying to reverse that trend by promoting our high-tech tenants more aggressively,” Smith said.