Detroit startup report: Money grows, but diversity lagging

More money is funneling into Detroit's tech startup community, but the list of companies gaining traction still doesn't reflect the makeup of the city, according to a new report.

Ann Arbor-based data analysis startup EntryPoint on Tuesday released its 2018 Detroit Entrepreneurial Ecosystem Report.

The number of venture-backed tech startups in Wayne County has grown 54 percent in the last four years, from 24 to 37, the report found. Last year, 18 startups scooped up more than $41 million in venture capital investments; the 37 have raised a total of $179 million.

Venture capital and entrepreneurship expert Emily Heintz launched EntryPointin March to help economic development organizations and others understand startup ecosystem growth through numbers. An underlying goal of hers is making the startup space more inclusive — a need driven home by her new Detroit-focused research, which uses data from Detroit and Wayne County as a whole."We're really seeing that Detroit has a flourishing high-tech entrepreneur ecosystem and it's really not hard to see why, whether it's robust engineering talent, a lower cost of living, proximity to (research institutions), Heintz told Crain's. "What does give us ... cause for concern is really the lack of diversity ..."Emily HeintzWhile African-Americans make up nearly 80 percent of Detroit's population, only three of the 37 venture-backed startups in Wayne County are led by people who are racial

minorities — about 8 percent, the report found. None are led by women or members of the LGBT community. "Detroit really has an opportunity at this point to take a real proactive approach," Heintz said.

"More mature entrepreneurial ecosystems like San Francisco, for example, are really at this stage in the game looking back and saying, 'You know, we made a mistake, we really haven't created an environment that is as inclusive as it could be,' and now they're trying to remedy that ..."That means solving a disparity in access to opportunities and networking, not necessarily in the pipeline, she said.

The full report can be found on EntryPoint's website.

How it works

Data in the Entrepreneurial Ecosystem Report is qualitative, from clients and community partners, and quantitative. It describes high-tech startups in fields such as IT, mobility and life sciences/health care.

The report outlines data for Wayne County and Detroit, depending on the figure, but Heintz said often Wayne County startup data is descriptive of its major city because not many startups exist in the county outside Detroit. Three of the 37 venture-backed startups in Wayne County are outside the city limits, according to the report.

Quantitative data comes from sources including the U.S. Census Bureau, Bureau of Labor Statistics, 2018 Michigan Venture Capital Association Research Report and Entrepreneur Magazine.

Organizations and companies that helped fund the report include Techstars Mobility Accelerator, Invest Detroit, Grand Circus, the Michigan Venture Capital Association and New Economy Initiative. These, others and the city of Detroit helped analyze the data and provide context, Heintz said.

Reports of this nature generally cost $10,000-$15,000 to produce, not including staff hours, Heintz said, and EntryPoint's was within that range. She said she could not immediately estimate the specific cost.

Outside of the Entrepreneurial Ecosystem Report, EntryPoint's work has included publishing data, helping improve the Accelerate Michigan Innovation Competition with client Invest Detroit Ventures, and working with the Michigan Venture Capital Association.

Heintz declined to provide revenue figures or estimates, or a specific number of clients.

"The momentum we've built in the last five months will set the stage for 2019," she said in an emailed statement.

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