Detroit Is Going Bankrupt–But Its Tech Community Is Going Strong

Detroit just became the largest U.S. city to file for chapter 9 bankruptcy. But its tech entrepreneurs say there’s never been a more promising time for startup life in the Motor City.

Detroit Is Going Bankrupt–But Its Tech Community Is Going Strong

Yesterday, the city of Detroit filed for Chapter 9 bankruptcy, the largest city in the U.S. ever to do so. By some estimates, the city owes as much as $20 billion. But the news is unlikely to halt the growth of Detroit’s burgeoning tech scene, according to some of its entrepreneurs.


“We don’t really see this bankruptcy as being anything but a footnote in the newspaper,” says Jay Gierak, a founder of the Detroit-based social recommendations site, Stik. “It feels so far afield from the excitement of people moving into brand-new apartment buildings and businesses renting new spaces here.”

Stik is one of dozens of Detroit-based tech startups that have called the city’s privately owned M@dison Building home. A 50,000-square-foot building that once housed Detroit’s first major movie theater, the M@dison Building opened last January and has become an epicenter of the city’s tech scene, hosting a bustling mix of about 300 entrepreneurs, investors, and developers, including Twitter. Several startups that began within the M@dison have grown so much they have begun to move into buildings in other parts of the city.

Gierak and his cofounder decided to move Stik’s four-person operation from San Francisco to Detroit in October of last year. Stik, which recently moved out of the M@dison Building into an adjacent space, has since grown to 20 employees. Gierak says he has had little trouble finding tech talent in this city, and he doesn’t have to worry about competing with the bloated salary offers and sexiness factor of the Valley’s tech behemoths–not just Google, Facebook, and Twitter, but also the startups du jour, such as Airbnb and Square.

“We are the Facebook or the Twitter of the area,” Gierak says. “We can get unbelievably good people who are extremely talented and think we’re the coolest job in town, as opposed to being the 550th coolest job in town back in San Francisco.”

Even though the number of startups in Detroit is relatively small–the M@dison Building, one of the city’s main tech thoroughfares, houses around 35 companies–the young, college-educated professionals who choose to look for work here often have the chance to land higher-impact roles at these startups than they might find at comparable companies in larger urban tech hubs such as San Francisco, Chicago, or New York.

“If you’re a young, smart person staying in Detroit there’s an unbelievably collaborative and welcome culture here,” says Jacob Smith, the 25-year-old director of business development at calendaring app UpTo, which is housed in the M@dison Building. “You can make a bigger impact quicker. The rent is cheaper. We get media coverage simply because we’re a company that’s actually choosing to be in Detroit.”


Neverthless, the tech scene in Detroit does face challenges. The most recent Census data shows Detroit has just 11,000 young professionals between 25 and 34 who hold at least a bachelor’s degree, compared to Chicago’s 250,000. Michigan is one of four states that had fewer young professionals in 2011 than it did in 2006. And, as Fast Company‘s Chuck Salter reports:

The city, strapped for resources, isn’t doing much of anything for [startups]. In fact, the local government looms as a threat to their progress. “If the city can’t get back on track, the little ecosystem that’s happening here is going to stall,” says Marsh.

To combat these grim statistics, new organizations like the Green Garage coworking space and Crowd 313, a University of Michigan organization that connects university students with Detroit’s business and cultural scenes, are expanding on the M@dison Building’s groundwork to attract and keep more young talent in the city. And Dan Gilbert, the M@dison Building owner and billionaire founder of Detroit’s Quicken Loans, the country’s third-largest mortgage provider, is continuing to attract more investments in the city’s buildings, tech companies, and small businesses.

Gierak, the Stik founder, says he was recently asked whether Detroit will bounce back. In response, he recited the city’s motto, coined after the famous 1805 fire that ravaged the city: “We Hope For Better Things; It Shall Rise From the Ashes.”

[Detroit Map: ZQFotography via Shutterstock]

About the author

Christina is an associate editor at Fast Company, where she writes about technology, social media, and business.