How A Young Community Of Entrepreneurs Is Rebuilding Detroit

Can entrepreneurs save the city? Nothing else seems to be working.

How A Young Community Of Entrepreneurs Is Rebuilding Detroit
Silicon Valley transplant Jerry Paffendorf chose Detroit: “I thought I should look at big problems. You know, let’s get real.”

“My cell phone was blowing up. It was 7:30 in the morning, two hours before I usually get up. It kept ringing, buzzing. I finally checked it. People were sending me pictures of the place I bought, the Imagination Station, on fire. Mary and I got in the car and drove over. It’s two blocks from where I live, and a small crowd was standing around, watching it burn. I didn’t know what to think. Someone suggested it was started by kids shooting off fireworks. I don’t know. We didn’t have any enemies.


“I had a ’95 Ford Explorer that was stolen the morning after the Super Bowl. So Mary called her family–they live downriver–to see if we could borrow the Suburban. We had that for three weeks before it got stolen.

A mysterious fire gutted Paffendorf’s performance space, but he remains optimistic about its
future, and Detroit’s.

“Things like this happen in Detroit. The neighborhood doesn’t rally around to stop it. They just do their thing, not wanting to go digging into some hornet’s nest. When I tried to report the first car, it took me three days. I was calling the crime-reporting line, and I kept getting put on hold. It’s just a quagmire of red tape here. So finally I recorded a message and sent it to a DJ I found online, a guy in Croatia. He turned it into a great little techno song that I posted on SoundCloud, ‘Detroit Police Department Stolen Car.’ I was a local hero for a hot moment.

“My friend Zak Meers came by after the fire. We had planned a mural for the Station. I said we should speed the mural up, do something. We painted two words, real big, on what was left of the building: it’s ok! That’s what it says now–just a big two-word press release.”


Jerry Paffendorf’s Imagination Station was an art and performance space sitting near Detroit’s iconic eyesore: the windowless, 18-story Michigan Central Station. He and some neighbors had bought two houses and a field for $6,000 and renovated the property as a goodwill gesture and an expression of faith in his adopted home. Paffendorf, tall and iPad-trim with wire-rimmed glasses and the musing air of a professor, moved to Detroit four years ago from Silicon Valley. He’d grown sick of the Valley treadmill. The last straw: He was pushed out of a company he founded. Moving to Detroit wasn’t such a wild leap. It had been the Silicon Valley of its day–an innovation hub, the fount of a global industry, a kingdom. Now it is a refuge for techies looking to tackle real problems.

Paffendorf’s startup, Loveland Technologies, created a website called “Why Don’t We Own This?” It addresses one of Detroit’s biggest problems: abandoned property. Detroit is big, covering 139 square miles, enough to hold Boston, Manhattan, and San Francisco. Yet over the past 60 years, its population has shrunk from 1.8 million to just over 700,000. As a result, thousands of foreclosed, government-owned lots go up for auction for as little as a few hundred dollars. Identifying those properties is a labyrinth for anyone without a real estate license. Loveland’s website provides a simplified and information-rich online map of auction property for anyone looking to buy. Renters, too, can learn if a building is on the verge of foreclosure.

That’s useful, yes. But it’s not enough when set against the city’s myriad problems. Detroit is in such bad shape that in March, Michigan governor Rick Snyder declared that the state would install an emergency financial manager to tackle the mess, a move that could culminate in bankruptcy. The city is weighed down by some $14 billion in long-term debt, a sum that increased by $343 million last year despite spending cuts of $122 million, so much are revenues shrinking. This past December, Mayor Dave Bing announced the latest round of layoffs: 5% of city workers. Unemployment is 18%, twice the national rate, and just 12% of residents 25 or older have a bachelor’s degree, less than half the national level. Public school enrollment is a third of what it was 10 years ago, and last year the city lost 21 schools through closings and district changes; 21 more are scheduled to close by 2016. The decline started well before the infamous 1967 race riots that are often cited as the trigger. In the 1950s, 101 fire companies covered the city. Today, 52 remain. With so much abandoned property, arson is common. One 32-hour span in September saw 31 fires. The department’s finances are such that last year firehouses ran out of toilet paper. The firefighters, whose wages had been cut, replenished it with their own money.


Yet Paffendorf’s website is significant because it represents a new, simplified approach to these problems, from the toilet paper to the schools. Detroit has often sought salvation in big solutions: a car company comeback; the Renaissance Center, a cluster of seven towers downtown; casinos; the 2006 Super Bowl; the 2009 election of Bing, a Detroit Piston star turned steel magnate. Nothing has worked.


But the city’s depression–and the depressed real estate prices that came with it–created opportunities. And opportunity lures entrepreneurs. The startup types, like Paffendorf. And the ones with lots of money, like Dan Gilbert, the founder and chairman of Quicken Loans, the third-largest mortgage provider in the country; he moved 1,700 employees downtown in 2010, giving him 7,000 employees there and making him Detroit’s third-largest landowner (trailing only the city and General Motors). With slicked-back hair and a perpetual poker face, Gilbert has just gotten started on his plan to transform the area.

DAN GILBERT: “The lease on our headquarters in the suburbs was due to expire around the end of 2010. Because I was born in Detroit and my father was born in Detroit and my grandfather was born in Detroit, I had this idea that the company could have an impact on the city, help lead the change here once and for all.

“So we signed for a space in this building developed by [Compuware cofounder] Peter Karmanos, who moved his employees here before us. We put about $30 million into making the office space cool, and several thousand employees now work here. But we always said to ourselves we’re not going to move down here just because we want comfortable office space. We want to make our mark on the entire area.


“To do this right, we have to control the real estate, because we need to offer companies a package and a process for moving their employees downtown. Just telling them to go figure it out with a typical broker was not enough. At the time, real estate prices were so low that it was what I’d call a skyscraper sale. We picked up one, a beautiful building that needed a lot of work, for $8 a square foot. That’s ridiculous! In New York, they rent for $90 a foot. Since we needed space, we went on a buying spree.

“We’re trying to recruit companies and create a downtown retailing experience. Chrysler is here, Twitter has come, Blue Cross Blue Shield has moved several thousand people here. We’ve got lots of interest from restaurants. We’ve got a major New York City coffee shop opening. We’re not doing this in a hodgepodge fashion.

“As the commitment to downtown grows larger, everything becomes easier. It’s inch by inch, brick by brick. The more people come in, the more difficult it is for skeptics and pessimists to have a credible position. We offer a lot of internships–600 interns from across the country. You can intern in Chicago or New York and do fine. But if you come here, you have an opportunity to affect the outcome. That is a big selling point for this generation.


“Me, I’m approaching my 50th birthday, and I’m in a fortunate position to affect the outcome of my hometown, a city that’s been beat up for decades. I’m not going to be on my deathbed one day thinking, Man, aren’t you happy you just stayed in the suburbs in your asphalt parking lot and didn’t try? You can do good for Detroit and do well at the same time. And that’s what’s happening.”

Gilbert has invested $1 billion in downtown so far. His plan, carried out with little help from Detroit’s hapless government, is working. More than 60 companies have moved into his buildings downtown. His gleaming headquarters teem with modern conveniences. Ten floors up you’ll find a glass-enclosed basketball court for employees (Gilbert owns the Cleveland Cavaliers) and commanding views of downtown. Think of it as Gilbert’s Imagination Station. You can see retailers testing the market, young workers lunching in a park, residents jogging and pushing strollers. In June, the city’s first Whole Foods will open a couple of miles away. And every month, Gilbert says, a couple dozen of his employees move to apartments and homes in the city, many along the creative corridor between downtown and Midtown, joining the artists and entrepreneurs, the hipsters who’d be at home in Brooklyn and Austin, the other pioneers who see the opportunity in this broken and complicated city.


Detroit, which was rebuilt after a devastating fire in 1805, is once again like a forest after a fire, in such ruin that anything is possible. That’s what makes it a magnet for folks like Andy Didorosi. Growing up in the suburbs, Didorosi, who favors black T-shirts and aqua sneakers, thought Detroit was dead. But now, at age 26, he finds it irresistible–the only place where he could have created something like his truly unusual business, the Detroit Bus Co.

When a much-touted light-rail project stalled, 26-year-old Andy Didorosi stepped in: “We’re
the other option, all of us scrappy folks.”

ANDY DIDOROSI: “Transit in Detroit is bad. It’s very underfunded; the city is gigantic; and a lot of people can’t afford to get around. But there was a proposal for something called M-1 Rail, a train down Woodward Avenue, the most important street in Detroit. It was the first paved road in the world. The train was finally going to connect parts of the city in a way that made sense. But opponents said it was too expensive and there wasn’t demand. Even so, it seemed there was money for it, from the federal government. We were all waiting on it.


“But then one morning in January [2012], I saw the headline in The Detroit News online: light rail is dead. And unlike the old days, when you’re mad and you throw your newspaper down, I couldn’t because in Detroit the paper only gets delivered three days a week; so I scrolled down real hard. I was furious. This train wasn’t going to fix everything, but it was going to be the symbol of a new era in Detroit. I thought, I need to do something myself. But what can I afford? I bought some old school buses.

“I approached the business the way a 6-year-old would. What would people like on the buses? Well, people would like music. So we put good sound systems in. And the buses couldn’t stay yellow, so I paid Detroit artists to paint them. And I thought people would like to know where the buses were at any moment, so we found some free apps that allow you to see where the bus is. And finally we asked where would people like buses, and we thought, Woodward Avenue–we’ll drive buses up and down Woodward.

“Then, I looked into it: What is it going to take for me to start a bus company? I called up the Michigan Department of Transportation, and they’re like, ‘What? You want to start a public bus company yourself?’ They didn’t even know that I was 25. ‘Well, you need insurance,’ they told me.


“So I called the insurance company, and they’re like, ‘You want to do what?’ They said, ‘Okay, insurance is going to be $90,000 a bus.’ I was defeated. My buses cost $2,000. Why is the insurance that much?

“So I called them back. This time I tell them, ‘I want to create a private bus system that just goes from one bar to another bar. And they’re like, ‘Oh, no problem, we do that all the time.’ So then I had a bus company.

“Now we’re going after new services. There’s no public option to the airport, so we’re working on that. We’re tackling some really serious stuff in a commonsense way.”


Didorosi’s buses stop at hip bars and restaurants in gentrifying neighborhoods, and pack in riders for tours of “hidden” Detroit. In three years, he’s become one of the city’s most prolific hip-trepreneurs (there’s no other word for it). In addition to the buses, he has an incubator, a liquidation business, a Wi-Fi service, and a motorcycle-race series at an abandoned velodrome. (He restored the track with the Detroit Mower Gang, which mows abandoned parks on their own–“reverse vandalism,” he calls it.)

All this is cool and fun. But it’s fair to ask how it and some of the other startups will mesh with the city. Detroit is 83% African-American, and its poverty, crime, and education failures hit hardest there. Didorosi, like so many of the young entrepreneurs and artists who have descended on the city in the last few years, is white, which heightens the undercurrent of racial tension. And given the city’s track record on education, the typical resident lacks the skills for any new high-tech job. “It doesn’t feel good for minority populations,” says Carla Walker-Miller, a prominent African-American CEO based in TechTown, Detroit’s largest business accelerator. “To some people who have been here the whole time, it feels like a takeover, not a renaissance. They see people getting hired, but they didn’t get the announcement that there were opportunities.”


For people in neighborhoods like Brightmoor, a long-neglected area on the city’s outer edge plagued by high crime and poverty, where humble single-family houses sit alongside graffiti-covered, burned-out shells, the entrepreneurially flush downtown can seem more like a mirage than a real hope. In Brightmoor, just about the best thing that can happen is that a huge hole in the ground appears on your block. The hole means that an abandoned building has been scrapped, demolished–often by the not-for-profit Motor City Blight Busters, a fixture run by the enterprising John George. When Dave Bing became mayor, he vowed to tear down 10,000 empty houses within four years. To date, the city has taken down nearly 7,000. About 45,000 remain. This is Alicia George’s neighborhood.

Alicia and John George faced down financial hardship and endless bureaucracy to create the only
coffee shop for miles.

ALICIA GEORGE: “For many years I had worked with John George and Blight Busters. The organization demolishes abandoned houses, but when a house can be saved, we renovate it and sell it or rent it to the community.


“And I had a personal dream, which was to open a coffee shop. It would be a place that would also contribute to economic development on the northwest side of Detroit. Nowhere in Brightmoor was there a cafe, a gallery, an artists’ market. I wanted to offer open-mike poetry night, jazz, art shows, galleries, a little bit of everything. There’s a lot going on in downtown, in Midtown, in the Corktown area, but I wanted to be the person who brought that to my corner of the city.

“I didn’t have experience owning a business. But I had worked for Marriott and learned hospitality, and I took college courses, I went to roasting plants, I visited every coffee shop that I possibly could. I talked to folks in the restaurant business. And John and I tried to figure out how we were going to finance this coffee shop. We rented out a space and sold candy, dinners, water–whatever it took to raise the dollars.

“The first place we found was an abandoned Victorian home, very cute, very nice. It was going to be cozy and comfortable, a place where everybody can hang out. We were all set to do the landscaping. But a lot of things happen in Detroit, and shortly after we discovered this place, it burned to the ground, and I was just devastated. I had worked so hard. But I couldn’t give up. God had placed that vision and that dream in me, and we were going to make it a reality.

“It took 10 years, but we finally found our space. We spent about a quarter of a million dollars in total. A lot of blood, sweat, and tears went into this place. We opened the Motor City Java House on Angels’ Night in 2010. It’s part of something we call the Artist Village Detroit. It has a courtyard, a studio, two apartments, and a community garden. There have been payless paydays, and the city once made a permit mistake and shut us down for 23 days. But since we opened, a dozen businesses have started up nearby.

“I married John last September. He helped build the Java House, with hardwood floors recycled from abandoned houses. A lot were drug havens, just negative energy. But those floors helped revitalize and stabilize our neighborhood.”

These may sound like small-scale ventures, but there’s big money behind Detroit’s bet on entrepreneurs as well: not from the government, and not from the auto manufacturers, even as they recover from their near-death experiences. In 2008, the Ford, Kresge, Kellogg, and Knight foundations, along with six others, stepped up with a combined $100 million investment. But after 18 months, the coalition had made just seven grants. “We didn’t know what to do to transform the economy,” admits David Egner, the president and CEO of the Hudson-Webber Foundation. After taking over the reins of the New Economy Initiative for Southeast Michigan, he steered the investment toward grants for entrepreneurs, helping create 425 companies and 6,900 jobs–half in Detroit.

Egner brought in Josh McManus. Six-foot-four with a soft Georgia drawl that belies his bluntness, McManus, 35, had helped engineer a turnaround in the industrial town of Chattanooga, Tennessee, founding an innovation outfit called Little Things Labs and directing a program that incubated 300 enterprises. He came to Detroit looking for the next big challenge. “My interest,” he tells me over sandwiches one night at Slows Bar BQ, which is flourishing on a dreary stretch of Michigan Avenue, “has been, and remains, that this is possibly an unsolvable problem.”

JOSH MCMANUS: “I can remember the look on people’s faces when I said, ‘I’m gonna move to Detroit.’ It was sorta like when I was 19 years old, coming from a rural southern conservative family; I looked at my dad and said, ‘I’m gonna be in nonprofits.’ The first day I got here, I was interviewed for an article back home, and I called Detroit ‘the Wild West of social entrepreneurship.’ Some local people took offense. But I stand by that statement.

“Where everything’s broken, anything’s possible. Like the owner of this restaurant, a barbecue entrepreneur who took over a 30,000-square-foot building nearby for $100,000 and has people there doing everything from sewing jeans and coats for homeless people to doing metalwork and building furniture.

“Thomas Edison supposedly said that opportunity is missed by most because it’s usually dressed in overalls and looks like work. As I think back through the history of innovation, and look at people such as Charles and Ray Eames and Frank Lloyd Wright and Edison and all the others who broke into a space that we had not seen before, they worked in transitional places. That’s why I think opportunity looks like Detroit.

“I tell people, if you are not needed where you are right now, you are needed in Detroit. But before you show up, you need to know that it ain’t damn Disneyland for hipsters. It’s a very real place. When I say ‘Wild West,’ I mean it. I mean it in that when I walk to certain places I stick a pistol in my boot. And because the first time that I ever called the police in Detroit, it took them 57 minutes to arrive.

“So there’s a cost to opportunity, but it’s balanced by unlimited potential. An emerging entrepreneur can’t have a 100,000-square-foot building in San Francisco, unless he’s got a trust fund. For most of us, it just couldn’t ever happen. It can happen in Detroit.”

At 62, Bill McGraw is trim and boyish, brimming with stories and wry commentary. He’s like a walking Detroit almanac for good reason: He co-edited a book by that name. During 32 years as a reporter and editor at the Detroit Free Press, he heard every mayor, business leader, and civic cheerleader promise that his hometown is coming back. He’d like to believe them. He can wax on about the gilded art deco Fisher building–“the most beautiful building between Chicago and Philadelphia”–and about how Sunday morning bike rides in the summer are sublime; there’s little traffic, a happy by-product of a smaller population. Yet Detroit breaks his heart every day.

On his commute, the transition from Dearborn, a prosperous western suburb, to Detroit is startling. With Ford world headquarters barely in his rearview mirror, McGraw crosses the city boundary and sees the businesses suddenly drop off, the buildings crumbling and defeated. Prostitutes linger on street corners. He passes an antiques store on Michigan Avenue where last year a robber killed its longtime owner with a baseball bat. He drives by burned-out stores, a vacant hospital, and then the granddaddy of them all, Michigan Central Station. His commute ends downtown at the Compuware building, where he now runs Deadline Detroit, an online news site he started last year. He chronicles the contradiction that is Detroit a few floors from Gilbert and his basketball court. The building is the most impressive place McGraw has ever worked, with a cafeteria, health club, day care, and a 14-story water sculpture in the atrium. “If Detroit had 10 other buildings like this, you wouldn’t be writing this story,” he tells me.

When I talked to McGraw in November, the city was on the verge of running out of cash, and the mayor and city council were locked in a stalemate, freezing up $30 million generated through bond sales. That sum wouldn’t come close to making Detroit solvent. In a city desperate for dynamic leadership, Detroit has Mayor Bing–at least until the fall election. “He’s been totally overwhelmed,” McGraw says. “He’s probably the worst mayor politically and technically in my lifetime.” That’s saying a lot, considering that one of Bing’s predecessors is Kwame Kilpatrick, who resigned in 2008 amid a sexting scandal, went to jail, and was convicted in March of fraud, bribery, and racketeering.

McGraw runs a Doomsday Clock at Deadline Detroit to track how close the city is to going bust. After Moody’s downgraded the city’s bond rating late last year, McGraw ticked the minute hand forward–a little bit closer to what would be the largest city bankruptcy in U.S. history.

BILL MCGRAW: “I’ve lived in this city for all but five years of my life. Not for love; for family reasons. And if you’re into journalism, this is one of the five or six great news towns in the country.

“Detroit’s been going downhill my whole life. I did one project, where I looked back at the 1951 Yellow Pages. There were 120 movie theaters in Detroit; now there are 2, I think. There were 120 bowling alleys; now there are 3 or 4. There were 3,000 bars; now there are 800. In every statistical way, it’s gotten worse, if not every successive year, then certainly decade by decade.

“Even today while there’s a really impressive number of people who are doing things to help Detroit, the city continues to decline. The most recent decade saw one of the worst declines. In 2007, I did a project called ‘Driving Detroit,’ where over four months I drove every street in the city–2,700 miles. And now, when I go back into those neighborhoods I don’t get to often, I’m shocked at how much they have declined in five years.

“Gilbert is the third in a line of guys going back over 20 years who have done interesting things downtown. [The first two were Mike Ilitch, the owner of Little Caesars and the Detroit Tigers and Red Wings, and Pete Karmanos, who stepped down in March as executive chairman of Compuware.] Gilbert may be able to tip downtown. He has an emotional connection to the city, and he’s an obsessive entrepreneur. But that’s 3% or 4% of the 139 square miles of Detroit. As you move away from downtown, some areas are so overgrown and desolate and destitute they’re like Appalachia.

“I don’t know how things are going to turn out. Sometimes I’m tempted to write a story called ‘What If Detroit Doesn’t Get Any Better?’ Because I’m not sure Detroit has reached bottom yet. The city may be bankrupt by the time your article runs. I am struck by what Gilbert’s doing, though. And hey, we’ve added two more employees at Deadline Detroit. Traffic’s up. We’re a little Detroit business that’s growing. In that way, I’m happy to help keep the wolves at bay.”

McGraw is right. Despite the recent positive national attention, despite the goodwill, despite the good intentions of Mayor Bing and Governor Snyder, things are getting worse in Detroit every day. The best reason to hope that this new group of entrepreneurs can help is that they are dispersed, not gathered into any one-shot save-the-city effort directed by a single organization. This is grassroots entrepreneurship filling in for the failures of established institutions.

Margarita Barry is another of these entrepreneurs at work on several fronts. She operates a retail shop in D:hive, the welcome center and training hub that McManus opened for creative types and new arrivals. Barry’s shop consists of clothes and knickknacks by local designers–an example of entrepreneurs buying goods from other entrepreneurs, feeding the new economic machine. Barry, 28, also runs “I Am Young Detroit,” a website on which she profiles up-and-comers like Paffendorf and Didorosi. She celebrates the sort of success stories she never heard growing up in Detroit, as if she’s rewriting the narrative of Detroit herself.

In addition to her retail shop, Margarita Barry runs a design business and a website for young

MARGARITA BARRY: “I bought a house recently on an eBay-style auction. I used Jerry’s [Paffendorf] site to check it out. I decided to move out of Midtown. It’s more of a challenge to live in a different neighborhood, somewhere that’s not trendy. Maybe if I move here, and people come to events and parties at my house, I’m exposing them to other neighborhoods.

“The auction was exhilarating. I paid under $10,000. I know the neighborhood–you don’t see that much blight. The house doesn’t need that much–plumbing, some paint, refinished floors. I’ll put in another $10,000.

“I have been touched personally by crime, but I don’t want to go into it. That’s not helping things progress. Sometimes it feels as if all this positive stuff can get negated by the violence, by the crime. I dealt with a break-in at my house, but then they broke into the D:hive. That felt like something else–it was terrible. This place is a special grassroots place. It’s not a big corporate place making tons of money.

“You have to find a way to get through that feeling of frustration. You have to harness it, ask what can I do to make the situation better? Everyone in the city is coming together now, and I want to help. It’s not just tech. It’s Dan Gilbert, who’s doing incredible things, and it’s Brightmoor.

“Detroit hustles harder. Have you heard that? It’s like our slogan. You can’t be afraid of failure here. A lot of us don’t have a lot to lose.”

More. Detroit always needs more, like a hole in the ground that can’t be filled. More big investments in downtown and in neighborhoods. More cool software and startups. More stories like Alicia George’s. More stubborn optimists declaring, “It’s okay.”

Despite the setbacks, Barry finds it in herself to keep believing and to keep giving. After all, she’s not just doing it for herself. She’s improving Detroit for others. Fellow entrepreneurs. Neighbors. Longtime residents. Newcomers. Like the beautiful brown-eyed Detroiter who arrived in her life last October–a baby girl. Posey. This is her city now too.

[Photos by Corine Vermeulen]


About the author

Chuck Salter is a senior editor at Fast Company and a longtime award-winning feature writer for the magazine. In addition to his print, online and video stories, he performs live reported narratives at various conferences, and he edited the Fast Company anthologies Breakthrough Leadership, Hacking Hollywood, and #Unplug


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