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Will Metro Detroit's Tech Community Ever Be Color Blind?

Hayg Oshagan Director-New Michigan Media

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James Norman and Adrian Walker have a lot in common. They're both young, talented African-Americans born and raised in Lansing, graduates of University of Michigan, started their careers in the auto industry, launched tech startups in Detroit, are now building startups in Silicon Valley, and glaring examples of how far southeast Michigan tech's scene has to go when it comes to diversity.

"In Detroit there are tons of African-American entrepreneurs but they rarely overlap with white entrepreneurs," Norman says. Its the typical race barriers in Metro Detroit just going up in a new industry."

Norman launched Ubi Video, an online service that consolidates the scattered-yet-growing multitude of digital video offerings (everything from YouTube videos to TV shows) into one curated website. That was 2011 in Detroit. By January of 2013 he had moved to Silicon Valley to join the NewME Accelerator, which focuses on helping integrate minority entrepreneurs into northern California's tech industry. Today Norman is building GroupFlix, an a la carte TV service that provides a monthly pass for the user's favorite shows, in Oakland.

Walker co-founded Rippld, a digital community promoting collaboration in the creative class, in 2011. Walker was one of the early members of the Detroit Creative Corridor Center's Creative Ventures program. By February of 2013, Walker was moving to San Francisco to join the NewME Accelerator. You can find him working on Rippld in a co-working space on Market Street now.

"We felt we had tapped into everything available to us in Michigan," Walker says. "It helped get our company to a certain point."

Seed Capital

Both Normal and Walker choose their words carefully when they were talking about Metro Detroit's tech scene. Both love Detroit. They believe in it. They like what the entrepreneurs in the downtowns of Ann Arbor, Royal Oak, Ferndale, Mt. Clemens and Detroit are building. They are quick to credit the resources they leveraged here as the sorts of things the region needs to be doing more of to build its new economy.

But...

And there is always a but when talking about race in southeast Michigan. The pregnancy in that pause is even more dramatic when it involves money. In startups that means seed capital.

Scoring checks from angel investors and venture capitalists is a much more labor-intensive process in Michigan. There is a joke that it takes a tech entrepreneur 10-12 days to raise $50,000 on the coasts where it will take that same entrepreneur 10-12 months to raise that same amount money in Michigan. Chalk that conventional wisdom up to the Midwestern conservative culture or how its wealth was created 100 years ago and is now guarded by business people more concerned with defending wealth than creating it.

Regardless, the reality is investment capital flows far more freely in northern California than in Michigan. Most of the time, the people who cut large checks in Metro Detroit want to feel comfortable with their investment and the team managing it. 

"There are challenges to getting funding because you're not a familiar face," Norman says.

That can mean experience in starting a business. Or shared experiences. Or basic chemistry between the entrepreneur and the investor. When Norman and Walker were fundraising in Michigan, that meant a lot of pitches to white men who tended to be older than they were. That changed when they moved to Silicon Valley.

"That was the first time we were introduced to people of color and women who were in powerful, decision-making positions," Walker says. "There weren't a high percentage of them but they were here. We never saw that in Michigan."

Self Segregation = Bad for Business

The new HBO series Silicon Valley didn't waste any time mocking the vanilla hues of Palo Alto. Seventeen minutes into the the first episode the stereotypical tech billionaire (middle-aged white guy) points out that:

"They always travel in groups of five. These programmers. There is always a tall, skinny white guy. Short, skinny Asian guy. Fat guy with a pony tail (also white). Some guy with crazy facial hair (another white guy). And then an East Indian guy. It's like they trade guys until they all have the right group."

Chances are the common denominators in a group like that are young, educated, male, wealthy and white. Think pasty white and socially awkward. That tendency to self-sort into social silos has recently become the subject of much ridicule in the Bay Area.

Metro Detroit mimics that dynamic and then some. While its tech scene hasn't engendered the same sort derision, the region is well-known for its racial and economic self segregation. Southeast Michigan is rich in diversity but many of those minority groups live and work in silos.

Hayg Oshagan, founder & director of New Michigan Media, sees it play out all the time. New Michigan Media is a network of ethnic and minority media across the state of Michigan and is working to connect those groups, especially the entrepreneurs. Oshagan points out that sales for Latino-based businesses based in Michigan equaled $3.9 billion as of 2007, according to the U.S. Census Bureau's Survey of Business Owners. Asian-American firms hit $7.7 billion. Arab-American spending supports 141,000 jobs in 2005, according to the Center for Urban Studies at Wayne State University. Latino purchasing power equates to $9.2 billion in 2012, according to the Selig Center for Economic Growth at the University of Georgia. Asian-American purchasing power comes to $11 billion. Check out more fun facts about minority-ownd businesses at the Immigration Policy Center here.

"There's a lot of money in these communities that can be used as investment capital," Oshagan says. "That purchasing power is real money. And there is real talent in these communities. Connecting them to what's going on downtown is to everyone's advantage in the region."

Gender divisions are also prevelant. Efforts to attract more women to the tech scene has surfaced, such as Girl Develop It Detroit meetups, which helps recruit more women into the overwhelming male computer programming industry. There is also the Belle Capital USA, a venture capital fund that focuses on investing in early stage startups with women in leadership roles.

Generational divide is yet another part of the picture. The tech startup stereotype that points to 20-somethings didn't come out of nowhere. To Randal Charlton that's a missed opportunity. The senior citizen and former executive director at TechTown believes the new economy will move away from its current focus on social media to healthcare as the population ages. Older workers bring an important point of view to developing that sort of technology, not to mention they make good technological guinea pigs.

"Older adults are a fantastic way to test technology," Charlton says. "If you have technology that works easily for a 65-year-old then you have a technology that works easily for everyone."

Going the Extra Mile

The NewME Accelerator got its start with the idea of bringing more diversity to Silicon Valley. It bills itself as "a residential technology start-up accelerator/incubator for businesses that are led by under-represented minorities in the technology industry" and partners with the likes of Google.

Then there are activist investors like Ben Horowitz of Andreessen Horowitz, a venture capital firm specializing in early stage tech startups. Horowitz is known for pushing the envelope when it comes to integrating minority entrepreneurs into Silicon Valley through his investments.

"I saw him fund more minorities in my time there, than I saw in my entire time in Detroit," Norman says.

The point is that there is a sustained effort and action plan to bring more diversity to Silicon Valley. Whereas efforts to work on racial issues in Metro Detroit normally revolve around round-table discussions, rah-rah press releases, and talking points from local leaders.

"Hoping it happens is a very long sort of time-line," Oshagan says. "Often it [creating more diversity] doesn't even occur."

Oshagan isn't shy in his criticism that lip service doesn't cut it when it comes to connecting the local minority entrepreneurial ecosystems; not with each another and not with the region's white majority. Putting up a website listing business resources available to everyone and hoping more minorities take notice isn't a viable strategy. Oshagan believes it's up to the local political, business and economic development leaders to make a sustained outreach to minority communities over a long period of time.

"It falls on everybody," Oshagan says. "The communities that need investment and talent needs to have these resources available. At some point the minority community needs specific, direct attention."

That doesn't just happen, but LOVELAND Technologies is one of those tech startups that made it happen. The downtown Detroit-based company, which makes digital-mapping software, is led by your stereotypical white tech guy, Jerry Paffendorf. But LOVELAND Technologies' staff of nine consists of four women, two African-Americans, an Asian-American and an Indian-American.

"We're a technology company but we're also a community-engagement company," Paffendorf says. "We don't just deliver software."

That means drawing from the community it serves. Paffendorf and his core team didn't go out looking to fill a specific diversity quota, but they reached out to different communities they were mapping and made connections. They knew the most knowledgeable people from that diverse set of neighborhoods more than likely didn't look like them. LOVELAND Technologies left its comfort zone and sought out an all-star team of local techies and community-engagement pros instead of just hoping the right people beat a path to their door.

"I want a diverse team from different parts of the country," Paffendorf says. "It's important to have that balance."

Jon Zemke is the Innovation & Job News Editor for Metromode.com, and its sister publications Concentrate and Model D. He is also the Managing Editor of SEMichiganStartup.com.
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