When the Motor City becomes Startup City
DETROIT -- Metro Detroit, the automotive capital of the world, ironically isn’t a hotbed for mobility upstarts, but several efforts are under way in the auto industry to help develop more transportation startups -- and improve the industry's risk tolerance.
Silicon Valley still reigns supreme in startups, even automotive-related startups. Of $1.6 billion of venture capital under management in the state, only 3 percent goes toward transportation startups, according to the Michigan Venture Capital Association. Local players want this to change.
Ignition 2015, an event hosted Wednesday at Cobo Center by Crain’s Detroit Business and the North American International Auto Show, singled out Detroit’s role in the startup world and how the region could be as relevant to startups as it is to the automotive industry. Crain's Detroit Business is an affiliate of Automotive News.
The event was created to focus some of the Detroit auto show discussion on the startups and tech that’s a key part of the auto industry. Ignition drew roughly 150 attendees from the startup, venture capital, economic development and automotive industries.
Detroit’s culture needs to change for a successful mobility startup ecosystem, Chris Thomas, founder and partner at Detroit-based venture capital firm Fontinalis Partners LLC, said during a panel discussion. That means improved risk tolerance in the industry.
“Failure isn’t rewarded here,” Thomas said. “We need to accept failure as part of the startup culture. Experienced entrepreneurs learn from failure.”
Dave Drach, vice president of business development for national incubator Techstars, said the success of this market’s mobility startups is pinned on strong partners and their distribution channels.
The Boulder, Colo.-based organization, which provides seed money and mentoring for promising startup technology companies, is opening a Detroit office this year.
Ford Motor Co., Magna International Inc. and Verizon Telematics are sponsoring what is being billed as Techstars Mobility, Driven by Detroit, an accelerator program to foster innovative transportation-related startups. The three companies are committing a total of $2 million in funding plus mentors and other resources to support participating startups.
Ten companies will be selected from across the country to move to Detroit and take part in a three-month boot camp at a location yet to be determined. Each will receive $120,000 in funding, intensive training and mentoring and help with customer acquisition and executive recruiting. At the end of the three months, graduates get to pitch for funding to angel investors and venture capitalists at what’s billed as a Demo Day.
Several Michigan venture capital firms will provide guidance to participants. Fontinalis, Detroit Venture Partners and Ann Arbor-based Renaissance Venture Capital Fund will provide investment capital.
Thomas said the support Techstars has received from the region’s major players indicates the region is ready for a mobility hotbed.
Cooperation between manufacturers and startups is becoming more common.
Erica Klampfl, global future mobility manager for Ford, told attendees that the success of Ford’s OpenXC program has caused the automaker to delve deeper into aiding startups.
OpenXC is a hardware and software programming interface created by Ford that’s open to all developers to create new mobility-based technologies. Information developers have access to ignition status, torque, fuel level status, engine speed and much more.
“We have a venture capital, entrepreneurial spirit,” Klampfl said. “Ford couldn’t do this alone, so we decided to start crowdsourcing good ideas.”
Klampfl pointed to Ford’s 2013 acquisition of Livio Radio in suburban Detroit as a win-win and model for how large companies can benefit from a startup culture. Ford acquired the developer of in-vehicle connectivity software for less than $10 million and is integrating its software into Ford vehicles.
Jake Sigal, founder of Livio, has since gone on to form startup Tome Inc.
Thomas said successful startup exits, like Livio, will continue to fuel the tech expansion of mobility.
“Young companies are going to grow because of the lessons learned,” Thomas said. “They need experience, and mentorship from entrepreneurs, like those from Livio, gives them what they need: experience.”
So what are these players looking for in a mobility startup? Good teams.
“We look for scalable and sustainable companies and great teams,” Thomas said. “We look at the attributes of a team and that’s not market specific.”
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