By Rosalie van der Maas
Economic Affairs, Startups, Netherlands Consulate General in Chicago
Now that introductions are out of the way and we are familiar with the resources and market focus of Oakland, Ann Arbor and Detroit (read Rebirth of a city holds promise for Dutch businesses and Mapping out innovation in the Detroit area), it’s time for some facts and figures that can help you size up the potential of the Detroit metro area for your business.
Let’s start with a quick characterization of the market and business climate: The Detroit metro area is home to 5.2 million people and boasts more than 300,000 businesses, among which 11 Fortune 500 companies and 1,300 foreign-owned firms from 40 countries. Clearly, the region has a good-sized potential client and customer base. Michigan also has a favorable flat 6% corporate income tax rate and the region outpaces the national growth rate by 3.6%.
Without talent no business
Michigan is well educated and interconnected. Its universities, development organizations, and local governments are actively working on a pipeline to create the talent that its economy and companies need.
Michigan is home to nearly 600,000 people with bachelor’s degrees in math, science and engineering fields, more than 360,000 people with liberal arts and science degrees, and more than 20,000 industrial and commercial designers.
To nobody’s surprise, Michigan has the highest concentration of engineers in the US and houses 16 universities with nationally ranked engineering programs. The University of Michigan also has a strong computer science program, providing the talent needed by the local IT heavy weights.
While competing for the right technical talent is always a struggle, Southeast Michigan has a competitive edge. Even as a startup you can attract talent from the universities and workforce.
With regard to logistics, the region is well located with resources pouring in from the East Coast, the Midwest and Canada. The supply base is especially good for automotive, defense, aerospace, energy, and advanced manufacturing. Also, you can catch a direct flight to pretty much anywhere, both nationally and internationally.
— Louis Piët (@NLinChicago) March 28, 2017
Money, money, money
The Michigan venture capital scene has been growing in the past five years. Everything seems to have increased by more than 40 percent: dollars invested (42 percent), the number of VC professionals (41 percent), and the number of venture backed startups (48 percent).
Michigan houses 33 venture firms that manage $4 billion. For each of these dollars, $4.61 of investment from outside of Michigan is attracted (source: 2017 MVCA Research Report). We found that the space between seed and series A funding is the most difficult to get funding in due to a risk averseness of investors.
Invest Detroit Ventures aims to fill this gap with their new fund and a few angel groups have the potential to fill it as well. Series B and C appear to be the sweet spot for Michigan venture money. After series C, most investment comes from out of state.
There are 141 venture backed startups active in Michigan, 54 of which obtained $222M in investments from Michigan-based venture firms in 2016. $424 million is reserved for follow-on financing into existing portfolio companies. Michigan firms mainly invested in IT and life sciences and healthcare. Be sure to take a closer look at the graphs below as well to learn more about how money is invested across sectors (source: 2017 MVCA Research Report).
Money for mobility
In these pie charts, you may notice that investments in mobility are lower that one would expect from the Detroit region. The reason for this is that the great many auto manufacturers, suppliers, private R&D facilities, universities and national research centers have historically been, and are still today, the leaders when it comes to making investments in the mobility and advanced manufacturing space.
The traditional industry is investing billions, but these are mostly private company investments primarily intended for their own internal product innovation. Detroit is working to have startups to help drive this innovation as well. As a result the amount of VC money invested in this space is increasing. The new Techstars Mobility accelerator program, investing solely in mobility startups, is a good example of this.
Are you interested or do you want to learn more about what the Detroit area can mean for your business? Contact us! We’re here to help and to get you connected.