How Cities and States Can Encourage Startup Superclusters to Take Root

Detroit, Michigan

Detroit, Michigan

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WASHINGTON — Detroit’s revitalization, since filing for bankruptcy in 2013, has centered around the idea that startups are nothing without the right space to attract customers.

Nothing epitomizes the sentiment more than Motor City Match, a program offering $500,000 in grants each quarter to startups or expanding businesses looking to move into vacant commercial space in town.

Often building owners are holding out for the lessee, or entrepreneurs are unaware of how to negotiate the move, so Detroit operates as a mediator between the two parties.

“Once the lender knew Motor City Match could get the entrepreneur up to $100,000 in funding, they knew they could pay back the a loan,” said Jill Ford, Detroit head of innovation and entrepreneurship, during a Tuesday Information Technology and Innovation Foundation discussion in the nation’s capital. “The ripple effect gets entrepreneurs to the funding and peer groups needed.”

Faced with declining tax revenues, the state of Massachusetts has learned to leverage capital dollars when investing in innovation “superclusters”—mutually beneficial networks of startups.

In the two years that Katie Stebbins has served as Gov. Charlie Baker's assistant secretary of innovation, technology and entrepreneurship, $150 million of bond funding has been invested in startup equipment build-outs and spaces among 800-plus innovation assets statewide.

“It's capital money, but it's capital money that we control the destiny of,” Stebbins said. “We're very very focused on democratizing innovation."

Stebbins’ background was in assisting declining economies, not in a place like Boston, rated by Bloomberg as the nation’s No. 1 innovation economy and home to thriving startup ecosystems.

Such superclusters are nurtured differently by different governors, former Gov. Deval Patrick putting $1 billion into the life sciences sector. Baker’s administration realizes CEOs want to be leaders of other sectors across the state, so Stebbins’ role involves networking and encryption company with not only a corresponding security client but also one in, say, health care.

Networking with small businesses around Detroit led the city to the discovery that entrepreneurs of color were displaced from their property far more often.

“Access to capital was one of the things that repeatedly came up,” Ford said.

Detroit’s Entrepreneurs of Color Fund attempts to help a restaurant looking to grow start a food truck, for instance.

Then there’s the Detroit ID program, which helps entrepreneurs and other residents lacking a valid form of identification access city services. At launch, 130 participating businesses announced discounts or other value adds for those with the ID.

The city assembled its startup offerings in a “Starting in Detroit” book showing which entrepreneurs benefitted from which resources, as a guide for others to follow to access resources.

Superclusters form by finding commonalities between startups and bringing them together, Stebbins said.

“Government should not be coming in and saying, ‘I am a cybersecurity expert. This is what we should do,” she said. “It should source that information from members of the community."

Dave Nyczepir is a News Editor at Government Executive’s Route Fifty and is based in Washington, D.C.

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