There has been a lot of talk about growing Detroit, Southeast Michigan and Michigan's economy through startups and technology. But how do you actually do it - not just here, but in a number of cities across the country that aren't Silicon Valley, Seattle, New York City or other existing hubs?
I thought I'd get some outside perspective with some experience dealing with Michigan, in Brian McCullough. Not only is he the founder and host of the daily Techmeme Ride Home podcast (among others), he's an enterpreneur, investor, and internet historian.
We have a very real conversation about the topic, with a lot of experience and perspective. You can listen in the player below, and follow along with our transcript if you scroll down.
Listen on Apple Podcasts // Listen on Spotify
For more Brian McCullough:
Techmeme Ride Home: https://www.ridehome.info/show/techmeme-ride-home/
Rad History (about the 80s and 90s): https://podcasts.apple.com/ca/podcast/rad-history/id1767242487
Here's a lightly edited transcript of the podcast episode
Jer: Hello, everyone, and welcome to your Daily Detroit sharing what to know and where to go in Southeast. Brian McCullough. He is the host of the Techmeme Ride Home podcast. I also would label you as an author and Internet historian as well. Is that fair?
Brian McCullough: Yeah, I'm also an investor. I run two VC funds. God knows. I also own an Internet company that I founded 25 years ago. So four jobs at least. Let's cap it at four.
Jer: You know, anyone I know who's doing anything has a lot more than one job.
Brian McCullough: That's true.
Jer: I feel like that's a common theme. And one of the things I did not realize until later, listening to your show is that you've had some connection with Michigan in the past. You've been through the, Mitten State, if you will.
Brian McCullough: Actually, this is a little connected to my career. So I founded my first Internet company in 1999 in college. I grew up in Florida. I went to the University of Florida, and that company, I still own it. It's called resumewriters.com, the largest resume writing company in the world to this day. But when I founded it, I thought that what I needed was college students to do essentially editing on resumes.
I found out subsequently that there's an entire profession of certified professional resume writers, and that's who we employ. I graduated from University of Florida and I had friends that for whatever reason were at University of Michigan and emu. And there was just a nucleus of people up there. And so I was like, well, I had founded the company, I was making a living, so I was like, I can go wherever I want, but I should go to where a college town is.
So I moved up to Ann Arbor and met a lady, got very, very close to getting married to this lady. She actually brought me to New York for the first time after she graduated for her career. That relationship did not work out. In 2005, I moved back to Ann Arbor just again licking my wounds from this failed relationship and then met my wife when I was back in Ann Arbor again.
So hey, all I can tell you is Ann Arbor is a great place to go to find potential life partners and then also for her career. After the Great Recession we moved back to New York City and I've been here again for 15 years. So for the better part of 20 years. New York City with very valuable sojourns to, to Michigan in between.
I think a good place to start the conversation is there because the University of Michigan is such a powerhouse of tech talent and people I don't think realize that even connected to names that everybody knows like Google.
Brian McCullough: Yes, absolutely. Is it Paige or Bryn? I can't remember, I can't remember which one. But it's funny because one of the things that putting on my history hat whichever it is Paige or Brin that went to the University of Michigan. And by the way Google had offices in Ann Arbor very early on. Like when I was there in 2003 I think they opened their first office. He wrote a paper or did a project where he wanted to do some sort of self driving bus system for the university. It's no wonder that Waymo and stuff like that have come out of Google because that was always something that was on their agenda for things to do. I know a lot of tech people that come out of there and even the tech blogger and venture capitalist MG Siegler is an alum. I would say that if know Stanford and places like that have more sort of alumni mafias in terms of Silicon Valley and the tech industry. But is right up there.
I keep thinking about this in relation to Michigan and Metro Detroit because of the ways to tie together all these like educational institutions that we, we have but also getting more things to happen here. And I think one of the reasons why I wanted to talk to you was the topic of growing tech. Growing things in parts of the country that are not Silicon Valley or not. I mean I also know there's technology in New York as well and some other kind of hot.
Seattle.
Seattle, yeah. And some of the advantages and opportunities. And since you've been to the state of Michigan, I also thought that you could add some additional color to the conversation. You know, having actually been here more than three days.
Right. And I actually did do my third startup in 2005. I founded that in Ann Arbor and that was literally the co founders and the developers, the software developers that worked on that site were living with me to the degree that I've been in the tech industry my entire career for the better part of 25 years now. It is easier now to do a startup anywhere for ways that we can go into. Is it still easy? It is not. And especially for successful startups, I can see you founding a company anywhere. we'll use the Midwest as an example. But when you reach a certain threshold it is more likely than not that you would leave and go somewhere to one of the more tech hubs. And I can go into detail about why that continues to be the case. But I would have thought that 25 years on you could do a startup everywhere and it is much easier than it was 25 years ago. But it is still not the case that, that you are disadvantaged not being in a tech hub.
Well, I saw that personally with a number of friends who once they hit a certain funding round right they, they ended up going to the coast near where those funders were because you need that access to money. When I've talked to say state officials or people trying to energize the state, that is an often problem of like you can go so far maybe let's say you start with a round that's very early and it's a few hundred thousand dollars. But if you want to start getting bigger dollars to take your thing to scale, there aren't the dollars. And there's been some talk about state programs to help with that. But it's a whole different thing than what's out in the valley and other places.
The money is the original sin and the main issue and that's for sure. So again, let's use Detroit as an example and let me caveat by saying there are certain industries, especially automotive, where Detroit would be a great place to do it. But let's say that you're doing an AI startup right now in Detroit and it's not hard necessarily to raise a friends and family or an angel round of let's say 500k, maybe a million dollars that's possible to do anywhere and that's possible to do remotely. It's not like for my venture funds, I'm only investing in companies in New York City, all over the world we've invested. What happens is number one there is a signaling thing to the additional round.
So people ah, that are unfamiliar with how startups and venture capital works, you can get that sort of early angel round and you can get your minimum viable product off the ground. Maybe you can get lucky and get traction and things like that. But when you try to raise an A or even a seed round where we're talking serious money, I want to raise $5 million in my next round, it's signaling to the smart money. If you are in the place where smart money is comfortable with it and the reason that they're not comfortable with you not being in Silicon Valley, Seattle, Louisiana, New York, even Toronto, is because they know that the next step, there are lots of things that you need talent for. And talent can be the software engineers to take it to the next level, but also the legal firms, the marketing firms, the people in the know and legal literally just the.
Okay, if you're an AI startup, are you also commiserating with all the other AI startups? You can be a hot AI startup in Detroit, but then if you're not in cerebral, valley, as they call the section of San Francisco where all the hot AI startups are, well, you're not going to those drinks meetups and things like that at night to find out what the latest thing is and learn about, oh, there's this new deal we can cut or the hot software engineer that will take your company to the next level. So it is money, but it's not that you can't get money anywhere. It is that the money will feel more comfortable because they will feel like the networks of connections that will allow your company to go to the next level. They'll feel more comfortable if you're in a place where that's already happening.
So culture is a key part of this for sure.
And listen, I'm going to caveat. Caveat because things like I think of the drone industry all the time has grown up all over the place. There's no single place for drone tech. And again, let's say you're doing a software company that is, we're going to do the next generation of automotive infotainment or tech systems inside of a car.
Well, obviously go to Detroit and think of self driving, self driving in Pittsburgh, because there were so many different universities in Pittsburgh that had the talent around self driving and AI stuff. I'll give you another one. Hardware manufacturing in terms of like silicon production.
If we're onshoring chip development back into this country, a weird place, if you've been listening to the show that you know that is hot is Arizona. Now why Arizona? Do they want to build all of the chip fabs that people like TSMC and whatever are building in America are in Arizona? Well, it's a desert. Don't you need water? Don't you need electricity? It's because weirdly the universities in Arizona are where all of the talent, the engineers are that can like spin up a chip fab for you and nowhere else has it.
That's interesting to me because you would think a place like Michigan, we've got all the stuff, but it still comes down to the talent, it still comes down to the universities.
Again, I'm imagining someone listening that's thinking of a startup in Detroit. Don't move somewhere and then launch your startup. Launch your startup, get some traction, get going and then consider moving. I'm going to say that number two, I'm going to say that this is also human nature that we all understand.
Like if you were into rock and roll in the mid-60s, you would go to London where all of a sudden the British explosion of music like Jimi Hendrix literally went to London because I think wasn't he from Seattle or whatever? There was no scene there. If you're doing something in any niche, go to where that is happening. I don't care if it's Indianapolis, I don't care if it's Bangladesh.
Whatever your specific passion and niche is, you gotta be and this is for art, this is for science, this is for you want to be at the best university. If you're working on a certain level of science, you got to go where it's happening.
And I'm sorry, but that's always going to be true because that's just cultures sort of conglomerate. The last thing I would say is what would it take for Detroit to be like say Seattle?
Seattle was not a tech hub. Now it did have a lot of defense contracting in the mid 20th century and that is what led to Silicon Valley and even Massachusetts as being a tech hub, as early defense contracting, things like that. But why is Seattle, Seattle? It's because you had Microsoft and Amazon that minted hundreds of millionaires that then had this experience that then could invest the money into new startups that then had the know how to mentor new startups.
Toronto is a huge hub, not just because it's the biggest city in Canada, but also because Shopify is there. There are multiple universities there. I would love there to be a thousand flowers blooming everywhere and every mid size or even larger size city to have a tech scene. And they do. But you still have to go to where it's happening basically.
And it sounds like some of these issues are not Detroit specific, just the way things are.
It's the way things are for sure. Let's say you're doing a crypto startup or an AI startup. A crypto startup has all sorts of regulatory issues and so you need a good law firm behind, right. So does even AI because like let's say you're doing stuff and then all of a sudden you get sued because someone says you're scraping their condo. Like you need to have somebody that not only understands what you're doing but if you have to find the law firm to save your company or take it to the next level, you might not have that in Detroit. You might have to be in a place where people a know what you're doing and understand what you're doing and be are willing to take the risk on you. The best law firms in Detroit might not be willing to take a risk on a crypto startup or an AI startup. And so you should be where you can find like that again talent.
So whether it's Detroit or another mid sized city, what are some of the things to help encourage whatever it might be? Because from what I'm hearing here, it's like you might have a niche that this city is really into or this place is really into but maybe you don't get to decide what that niche is. Maybe you, maybe those things grow up organically. to me I feel like a lot of programs that say the government do or say Dan Gilbert's a really huge force here.
Sure.
Whether it's ah, Rocket Mortgage, StockX, Dan’s had a number of successes. But you can't build it on one guy or a couple of guys. There's gotta be a lot or a couple of women. It needs to be more of an ecosystem. So what are some of the things that place could do to help encourage that ecosystem?
It is an accident of history. Again history hat and if I get this slightly wrong, but one of the reasons the auto industry grew up in Michigan, because there were auto startups around the turn of the century, the last century, all over the country.
But because Grand Rapids I believe it was, was big in the carriage industry before cars. So the horse and carriage industry and so they knew things like how to make a chassis and wheels and, and things like that. Like that was one of the reasons that Detroit had a historic advantage because it was close to where the old horse and carriage and I would add iron stoves.
We were a hotbed for iron stoves. You do all that metal work. That directly translates into vehicle stuff 100%.
It helps if you have a region that is good at a certain specialization and we mentioned like Arizona, for whatever reason for doing chip fabs and things like that.
What everyone wants to do is jump immediately to, well, this is the 20th first century tech industry that we want to build. Well, you can't necessarily birth that like Venus out of the shell, but it would be easier to build it on top of something that your region already does.
Well, number one.
Number two, everybody thinks, okay, what we should do is have a regional startup fund or venture capital fund. And that's fine if you have smart people making bets. But if it's just that, let's say the state of Michigan spins up $100 million venture fund or investment fund for startups, you better have the people there.
If you're just writing checks, then it's just a shotgun approach, which a lot of venture investing is. But just writing checks is not going to do it. You have to write smart checks. And you also have to be willing to lose money.
Venture investing, startup investing is a power law game. I've made investments in close to 80 companies now if I'm lucky, three of those will return all of the money that investors have given me.
Out of the 80, I'm going to assume that half of that 80 are going to die. They're going to go completely bust. I'm going to assume that 10% of those maybe will 3x my money, 10x my money, which sounds great, but it's not going to return the entire fund.
You have to understand if you are a region or a municipality or whatever, that you just need that one grand slam hit. “But Brian, we invested $100 million and we wanted eight Amazons, eight Microsofts!”
You don't get them. There aren't eight Amazons and eight Microsofts. There's the magnificent seven on the stock market now that are the biggest companies of the last two decades. All you need is one of them in your region.
Imagine that if you want to invest regionally, you have to be willing for 99% of your bets to completely fail if you can get that one. Whale people have to internalize the power law of what it means to invest in startups.
And that's a difficult thing for a government to do because governments by their nature are risk averse.
I understand that. But if you get that one Microsoft, then your region will have a company that will have 90, 100, 200,000 employees someday. But also along the way, all of those 99% of the other companies that do die. You're still employing people. You're still attracting the smartest people, you have to understand that again, we're trying to agglomerate the talent to a region.
If you are a region that is willing to take risks and say we're willing to fail 99% of the time, but come here because we will help you, then that's the way to go. The problem is that, and I've seen it time and time again, like you said, regions or municipalities or states or whatever will do a big fund. And boy, we didn't get a Microsoft. And they stop.
And that's the point is that you only have to be lucky once, but you have to be willing for that first big attempt to not get the Microsoft.
What outside of cash could these kinds of Detroit or these kinds of cities do? Whether it's culture, whether it's infrastructure to help create conditions. Because in my mind, and this is just my own personal opinion, I do believe that it's people who know how to pick winners and losers or have more experience with that, that's a good thing. But when it comes to providing services … what could these places do to help make the field good for startups and investment and tech to play on?
Cheap real estate is huge. And here I think Detroit, you know, I haven't lived there for 15 years, but in theory Detroit still has cheap real estate.
And I'm talking about empty factory sized places where you can give away, hey, come start your startup here and for two years you won't have to pay rent.
And I saw that even locally in like when I lived in New York the first time, the startup hub in New York City was all Manhattan based, it was Silicon Alley, it was south of 23rd Street. Since I've been here the last 15 years, Brooklyn is not only the center of the podcast industry, but there is a lot of crypto.
And the reason reason is there was a lot of empty buildings that the city repurposed.
The entire Navy Yards has been repurposed. Industry City has been repurposed. And you, go to Industry City now. I go there a lot because it's in these giant cavernous buildings over in the corner here there's a video studio for YouTube creators.
We're thinking about things like, okay, starting the next Microsoft, but create a place where it's conducive for again, creators like us. I go to Industry City once a month to record podcast episodes because that's where that sort of energy is.
So if you have which the Detroit area has or had - at least when I was there 15 years ago - a bunch of real estate that is being underutilized that you can not give away but provide for cheap startups.
It's the Richard Florida thing. It's why SoHo in Manhattan got gentrified because the artists moved in there in the 70s and stuff like that. It's really simple stuff. And real estate is something that I think especially Detroit would have an advantage with.
Yeah. And that's something that I know that the government here has been doing to get parcels put together, get stuff back into circulation, that kind of thing. What about other types of infrastructure? You know, I keep thinking about, you know, last time I went to Brooklyn, I stayed near the A train. I love being near the A train. It made everything so easy to get to.
Yeah.
Things about transit or roads or any of that other kind of stuff. Does that stuff help?
I mean for sure, for the last 10 years it has been like there's Ann Arbor, places like Columbus, Ohio or Madison, Wisconsin or whatever. Have this people want the walk or have wanted the walkability. That has been a key thing for attracting talent is at least for the last decade or the last generation of people coming up, they wanted to be in a vibrant city where you didn't need a car if you didn't want one or whatever.
Maybe that's changing. Maybe in the app everything economy that's not quite as necessary. But what I would say is that when you're talking about starting companies, it's not impossible, I'm 46 years old, for a 40 year old to start a new company.
But if you want to create an environment for companies to be founded, it's a young person's game. You want to attract the 20 year olds. What do 20 year olds want? Other 20 year olds, they want a vibrant night scene, they don't want to cook, they want to be always able to get great, food delivered from good restaurants and things like that.
So yes, you need a cultural nightlife, you need culture, you need the bands, that they listen to, touring, coming through town to use again. Because the podcast I'm on, the southeast Michigan region has that in spades. A huge airport is useful, one of.
One of the best in the country, honestly.
Yeah, Southeast Michigan is great as far as I'm concerned for starting a startup. Somebody's going to strike oil there and then will they move away? That's where if I was talking to like the government officials in southeast Michigan, we would have to think deeper in terms of how do you prevent the home run Company from moving away, as we discussed earlier in the show.
Yeah. Yeah. So do you think that there is hope for what I would say, I don't want to put it this way in order, but like those mid tier secondary cities, you know, you mentioned Columbus in there.
That's a place I visited a few times. they have grown in population a lot in the last couple of decades and they've been doing a lot of, you know, a lot of technology has been going in there.
They've also benefited from, you know, kind of that talent concentration in the state of Ohio. Yeah, you know, I think about Austin as well. Blue dots. Not to make it political, but blue dots and red seas tend to have a lot of tech talent.
Let me give you one that's a red dot.
Sure.
Are you aware of the fact that one of the hottest AI scenes is Salt Lake City? And the reason for that is that Salt Lake City has a long history of being a niche tech hub.
It was one of the four first hubs of the Internet, all of graphics. Computer graphics was started in Salt Lake City in the University of Utah and places like that. Things like Silicon Graphics came out of there, a lot of video games and things that became Adobe and Unity Engine and things that all came out of the universities in Utah because they specialized weirdly in what at the time was a, ah, completely niche technology, which was computer graphics.
But then as we've seen, not only has like, you know, transformed Hollywood, but also was a stepping stone to AI because of graphic processors being the things that have made the AI revolution happen.
That's a red dot that also has good infrastructure and has a 20, 30 year history. Even if it was a niche at the time, it came into its own or whatever.
Again, even, talking to you right now, I'm thinking focus on niches. If I were southeast Michigan, is there something that right now is a new technology, a new niche that maybe is not, oh, this is going to be the Microsoft five years from now, but 30 years from now, you never know that again.
Pixar came out of Utah, you couldn't imagine in 1990 would create Pixar, would create AI, but it was a niche that allowed 1,000 flowers to bloom. If you've got that locally, nurture that and then wait and the garden will eventually bloom.
Sounds like to me “do the weird thing.”
Do the weird thing, for venture investors, that is sort of a maxim. Chris Dixon of Andreessen Horowitz famously says the next big thing always starts out looking like a toy and people dismiss it and they dismiss it and they dismiss it until it takes over everything. Always think of that or drones. I saw drones. There was a startup at the University of Florida that is now, I can't remember the name of it.
It's a pretty big drone technology company and it got founded in a swamp outside of the campus in Gainesville. And a niche of drones is now a huge industry because that is the future of warfare essentially. So drones, which seems like a toy, is like literally super important to all nation states in a geopolitical way now.
And just for listeners of this show, people might not know that there's a ton of drone stuff happening at City airport in the middle of Detroit's east side where you would not assume any of that kind of stuff is, but you go into some of those hangars and there's some really cool things happening, happening right there.
Because it's an airport, there's space, there's availability, there's opportunity. There's also some stuff with Homeland Security because you got an easy view on Canada which is although we're not really at war with the Canadians, it's still a border that you need to maintain and monitor. So it's got the things.
I'll give you another one that's southeast Michigan specific, which is let's assume that self driving car technology does win and 10 years from now none of us need a car because we'll just pay a monthly subscription to a self driving car that takes us wherever we want.
Okay, what are the second and third order effects of that taking over? I'm not even talking about what would the software needs be for it. But are you smart enough to start the ad network that would play in the car? That would be the Google Ads of as you're being driven around, as you're going pie target like it surfaces you a target ad.
Do you see what I'm saying? Which sounds dystopian, but think of the second and third order effects of if self driving takes over.
And self driving tech is very hot and very prominent in southeast Michigan. So if you were starting a startup tomorrow to think of what would the ecosystem need if self driving tech takes over? I would do it in Detroit because again, you would have the talent and the resources that would allow you to be successful.
Well, entrepreneur, investor, podcaster, historian, Brian McCullough, I really appreciate your time today. It's an honor to talk to you. I've been a big fan of your show since you started it.
Yes, Techmeme Ride Home is a 15 minute news roundup of the tech industry every single day.
I just started a second podcast a month ago called Rad History, which is, a, history show that's just 80s 90s history. This is my little sort of pet side project. But if you like 80s 90s stuff, I just did something on the Rubik's Cube. We did Calvin and Hobbes. We're, going to do the movie Labyrinth soon. So tech meme ride home every day. but also search Rad History for my side project hobby.
I am definitely tuning in for Calvin and Hobbes. I grew up on that stuff.
It was the second or third episode, so it's out. Yes, it's great.
