Shattering conventional wisdom: Venture capitalists are teaching Detroit not to rely on a corrupt, crony local government

Originally posted here.

 

The aging, inactive population of Detroit couldn’t have guessed what would happen once the city’s government announced its insolvency. By 2011, the city’s retirement system had been overwhelmed with the pensions of a crushing majority of workers who were, by then, retired, leaving only 39 percent of its working age population left to foot for the city’s ever-increasing bills.

By then, the city’s $3.5 billion in unfunded pension liability and its nearly $3 billion in government debt had put a strain on the city’s relationship with its residents, a relationship that has never been anything close to candid.

The habit of crony deal-making and the city’s never-ending list of stifling regulations, have slowed down its habitants and kept them from creating opportunities for others by making it hard for entrepreneurs to pursue their own interests. City residents who were often under-skilled – a result of the government’s botched educational system – were left with fewer options as many fled town in fear that their livelihood, businesses and savings would soon be eaten up by the toxic environment Detroit’s disregard for freedom had fostered.

Some of the few companies that stayed, such as Quicken Loans, have been able to bring about a different color to central Detroit. Its CEO, Dan Gilbert, along with other visionary individuals, have launched Detroit Venture Partners, a venture capital firm in the heart of Detroit’s downtown that is currently responsible for helping to kick start about 20 local businesses. All of these firms are start-ups that found fertile grounds amidst Detroit’s rubble.

During a conversation a group of bloggers and I had with Detroit Venture Partners’ Jake Cohen, I found it hard not to feel excited about the company’s successes, which are easily measurable once you step into the firm’s main working space. The creative atmosphere is inviting, which is why the many start-ups working from the firm’s main offices appear to have a hard time leaving.

They are working hard, exchanging a huge deal of aspirations and successes with others, and learning how good it feels to run a business that makes a profit.

The possibilities now seem endless precisely because they are in Detroit. The city where once hope was tied to the residents’ expectations of government is where entrepreneurs now rely only on their own will and hard work to build something new. Without expecting much from city officials, not even protection, individuals learn to love freedom and take the responsibility that comes with it.

Their dependency on government could be finally dying out.

While talking to the partners of the start-ups Detroit Venture Partners helped to launch, I couldn’t help but notice the main difference between what those men and women were doing that were causing them to achieve more success than others who, in the past, had attempted and failed at maintaining a successful business in Detroit. What seemed obvious to me may not be a rational factor for them, at least not just yet, but to me, it is crystal clear: the notion that they are responsible for their success alone promotes their success.

And how did I get to that conclusion?

Talking to business owners around town.

Those who ran restaurants, bars, taverns and liquor stores – which accounted for most of the open businesses around downtown – were always either very comfortable with the idea of having to deal with the downfalls of responding to the government regularly or simply sick and tired of depending on the government’s compassion to get things done.

Those working out of Detroit Venture Partners’ headquarters, however, never mentioned particular issues with the local government, but most importantly, never mentioned any particular hopes related to the government either.

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