Can startups pull Detroit out of its debacle?

By July 05, 2013
Gare de Detroit abandonnée

While the city’s decline continues, a very young startup scene is beginning to take shape there. Could these small dynamic companies help the city get back on its feet?

The city of Detroit, Michigan, has been in decline for over 70 years. The world’s former automobile capital and at one time the fourth largest city in the United States, Detroit was for a long period an innovative city. It was there in 1896 that Henry Ford built his very first car in a workshop in a rented garage – a story seemingly foreshadowing that of Steve Jobs starting up in his garage. Hard hit by the post-war fallout from the Civil Rights movement and then by the 1970s oil crisis,  the city slid into a decline from which it has not managed to emerge. In the wake of the recent move by Tony Shieh, founder of online shoes and clothing store Zappos to step in and revitalize the Las Vegas downtown area, some people are asking whether startups could help Detroit to get off the ground again. Of course, it is not as simple as that. Establishing a few startups there will not be enough to re-launch the economy and boost the city’s declining population. Nevertheless, the city could benefit hugely from the talent of entrepreneurs currently working in Silicon Valley and other US cities, argues Jerry Paffendorf, co-founder and CEO of LOVELAND Technologies, a Detroit-based startup.

Mapping the real estate disaster

Paffendorf, a New Jersey-born entrepreneur and Silicon Valley veteran, moved to Detroit four years ago. “There are very few cities which are so in need of entrepreneurs’ talents but attract such little attention,” he points out. Paffendorf was particularly struck by the 79,000 unoccupied properties, which were proving a magnet for crime, and the general deterioration of the city’s housing stock due to lack of maintenance. A second contributory factor is that, as a study from February 2013 reveals, half of all Detroit property owners do not pay their property taxes. As a result, Wayne County, of which Detroit is the capital, has begun a wave of property seizures, putting many houses that are still occupied up for auction without the owners’ knowledge. In a bid to remedy this situation, LOVELAND Technologies has created a website called Why don’t we own this?(WDWOT?). The site maps the status of all Detroit real estate with the aim of shedding light on the property seizure process and clarifying the city’s real estate situation. The interactive WDWOT? map, which is compiled from Wayne County public records, lists all Detroit’s real estate units, indicating whether the property has been abandoned, is threatened  with seizure, etc. This will provide owners with the information they need to apply for a recovery package, while potential buyers can find out about the financial status of any house up for sale.

Attracting talent to get the city back on its feet

“We’ve become the city’s main real estate resource,” claims Paffendorf. This kind of technology skill, creativity and dynamism which such entrepreneurs can bring might well prove decisive for a city as blighted as Detroit. Right now however, “local government is on the point of collapse,” laments Paffendorf, explaining that an Emergency Manager has now been appointed to take care of Detroit’s finances. “The inventories and public archives are not up to date. The city is going to need an immense effort in terms of IT. Everything needs to be computerized,” he underlines. However, the city, which lacks skills, education, and financing opportunities, remains unappealing for entrepreneurs. In addition to the obvious financial needs, Paffendorf therefore sees a need for communication. Of course the city needs to attract investment, but it also needs to send out a convincing message to entrepreneurs, along the lines of “there’s everything still to do here.” Paffendorf seems quite confident, arguing that “these are revolutionary times.” 

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