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Building an Innovation Engine in Detroit

When the nation’s Great Recession swept Detroit architects Saundra Little and Damon Thomas from their jobs, the two former college classmates launched an all-out hunt for new employment. Ultimately, they decided to start a company of their own from the relatively informal partnership they had for entering design contests.

“It was either sink or swim,” Little recalls, reflecting on the cold November day in 2008 when she and Thomas learned their seemingly secure jobs were history and they were suddenly among the growing ranks of college-trained professionals swelling the nation’s unemployment lines.

Soon Little, who has a master’s degree in architecture, and Thomas, who has a bachelor’s degree in the same field, were attending an informational event hosted by TechTown, a business incubator started in 2004 by Wayne State University in partnership with the General Motors Corp. and Henry Ford Health System.

In listening to the speakers at TechTown’s “Thrive” business acceleration program for aspiring entrepreneurs, it didn’t take long for Little and Thomas to realize that, while they were sharp architects, they knew very little about running a business.

“We needed help,” Little recalls of their decision to take TechTown up on its offer to help people learn how to set up and run a business. “They gave us a business culture,” says Little, noting the assistance has ranged from helping their three-partner firm get its professional liability insurance arranged to establishing an advisory board they can bounce ideas off.

“It (TechTown) has given us good steppingstones when we needed them,” says Little, chief operating officer of Centric Design Studio. It is one of more than 200 startup Detroit businesses rooted in TechTown.

Anchored by Wayne State, TechTown is one of several hundred business incubators around the world. It is relatively new when compared with those dating to the 1980s, such as the business incubators at Louisiana State University, Ohio University, Rensselaer Polytechnic and Research Triangle Park in North Carolina.

A Model of Success

TechTown got its start when then-Wayne State President Irvin Reid and a small group of business leaders in the city and state officials decided Detroit needed to embrace the business incubator idea that had been so successful in other regions such as Austin, Texas, with the support of the University of Texas and Research Triangle Park. Detroit was a major medical education and research city, and the governor had said he intended to use some funds from a tobacco industry settlement to support life sciences research.

Launched in 2004, Detroit’s TechTown was like most in existence at the time—narrowly focused on identifying and supporting efforts by trained academicians and seasoned entrepreneurs to turn their science and technology ideas into moneymaking ventures.

It had everything it needed to get started: low-cost office and lab space from General Motors and access to myriad professionals—known by TechTown clients as coaches or client champions and drawn from the ranks of Wayne State and its partners. Plus supplies and materials provided by the Henry Ford Health System.

After a few years, TechTown decided to broaden its reach significantly and embrace aspiring entrepreneurs of all stripes. Today, with more than 250 clients and millions of dollars in backing from several dozen public and private agencies in Michigan and federal grants, Detroit’s TechTown is one of the largest and most diverse business incubators in the nation.

“It’s no good being elitist,” says Randal Charlton, the 72-year-old entrepreneur who was TechTown’s first tenant with his biomedical venture. Later, he helped transform TechTown into the broad-reach incubator it is today.

“Wayne State is in the middle of one of the greatest economic challenges in the country,” says Charlton. “We said (to ourselves), ‘Look, we’ve got to help everybody who’s going to help job creation.’ We’re really proud of these small little companies. They don’t have to create a thousand jobs to make a difference,” says Charlton, who retired in the fall as executive director of TechTown. After five years in that post, he was succeeded by Leslie Smith. Smith joined TechTown in July 2011 as general manager. A quick look at Detroit TechTown’s roster of clients illustrates the range of its efforts.

It’s academicians such as biochemist James Eliason helping to develop their biotech industry business ideas. It’s aiding professional business-to-business ventures such as Little and Thomas’s Centric Design Studio gain a new footing in the world of architecture. It’s coaching a number of mom-and-pop retail ventures essential to the vitality of a city, including coffeeshops, dry cleaners, limousine services and hair salons such as Jennifer Willemsen’s Curl Up and Dye.

“I have no desire to leave Detroit now,” says Willemsen, whose small business celebrated its third year of operation in December 2011. “I’m part of the solution now,” she says, proudly, crediting TechTown with helping her put her business on a sound footing with solid advice about how to stay afloat and profitable over the long term. Curl Up and Dye has three employees and a business plan to add more.

“We had some things that had to be done, or we’d be out of business,” says Willemsen, explaining that the high customer traffic her salon drew initially actually masked weaknesses, including the absence of a business plan.

A Path Toward Profitability

To date, TechTown is an emerging economic force in downtown Detroit. It has introduced approximately 8,000 Michigan residents to “an entrepreneurial culture” through its public events and walk-in sessions. It has invested more than $700,000 directly into new ventures and has helped clients raise more than $14 million in venture capital.

Wayne State, which manages TechTown, located a few blocks from its midtown Detroit campus, has put some $2.7 million into TechTown between 2007 and 2011, providing about 23 percent of its programmatic funding. Its College of Engineering has provided prototype services and lab space to TechTown companies. The College of Liberal Arts and Sciences provides translation services, while the Law School conducts small business clinics, and its School of Medicine has provided researchers and tissue samples. The university has partnered with TechTown to secure federal and state research grants.

For sure, there is no one-size-fits-all formula for helping new businesses. “Intake champions” carefully assess where a venture is, what the entrepreneur knows and needs, and then recommends one of five entrepreneurial support programs.

What Little and her architecture company needed was much different from what Willemsen’s beauty and personal care shop required, and both were different from what Eliason’s medical technology business needed. TechTown is like an entrepreneur’s shopping mall, jokes Charlton, who took his company, Asterand, public with the help of TechTown champions.

Even with this array of help available, not everyone is cut out to run a business, says Charlton. “We try to be as honest as we can with people about the risks of trying to run their own business. You may be a great scientist. You need support on how to run a business.”

Linda Knopp, director of policy analysis and research at the Athens, Ohio-based National Business Incubation Association, says business incubator projects can play an important role in helping stimulate economic development.

“They are doing things to help entrepreneurs access the help they need early on when they have a greater risk of failure,” says Knopp, who characterizes Detroit’s TechTown as “broad-based and is going beyond” the traditional focus of most business incubators.

“When they (aspiring entrepreneurs) graduate from an incubator program, they have a greater chance for success. Many have that ultimate goal of spurring economic development in a local community,” she says.

Charlton says he expects more universities to expand the scope of their incubators as funders “are increasingly judging schools not just on research papers but the impact universities have on the local economy.” In the case of Detroit, he says the decision to do that was easy.

“There are so many gaps in the economy of Detroit that it doesn’t make sense just to focus on high-tech,” says Charlton, noting that Detroit’s unemployment rate hovers around 20 percent. “In rebuilding Detroit, we’ve got to focus on the small things.”

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