After mastering the mortgage pitch, Dan Gilbert is now attempting to sell an even bigger product: Detroit.
There’s something in the air in downtown Detroit. Depending on who you ask, it’s a resurgence, a revival, or perhaps a white-washing. Ancient skyscrapers have new life. People are milling in the streets on lunch breaks. Startups are moving to the city at a surprising rate. Downtown Detroit feels alive – if only between 9 to 5. There’s one man primarily responsible for much of the urban renewal: Dan Gilbert, founder and chairman of Quicken Loans.
TechCrunch spent a bit of time in Detroit during our Northern Meetup tour. Our meetup drew close to 1,000 people to Hockeytown Cafe and we met with around 50 startups, entrepreneurs and curious fans during office hours held in downtown Detroit and just down the road in Ann Arbor, Mich. People are excited about Detroit. John Biggs and I also had a lengthy chat with Dan Gilbert from his busy Quicken Loans office in the heart of Motor City.
Dan Gilbert is from Detroit. He attended the city’s Wayne State University and nearby Michigan State University. He founded his mortgage company in 1985, formerly Rock Financial, in suburban Detroit. After selling to Intuit in 1999, Dan repurchased the company in 2002, retained the Quicken brand, and announced in 2007 his intention to move the company from the affluent Detroit suburbs to the city proper in 2007.
Now, in the latter half of 2012, Quicken has around 6,500 employees scattered throughout several towers that the company recently purchased or leased in downtown Detroit. A company spokesperson gave us a tour, pointing out each building, explaining how most now have a 98 percent occupancy rate. Quicken Loans owns a good chunk of the downtown corridor. The company even hired a large private security force to discreetly keep watch on the streets surrounding its buildings. It’s a true corporate arcology, a recycling of space that both breathes new life into Detroit and puts Gilbert in the catbird seat when it comes to city policies.
Part of this growing empire includes the M@dison Building, home to the non-profit Bizdom, Detroit Venture Partners and dozens of startups. As we discussed with Dan, these startups, for better or worse, have access to all the might and magic of Quicken Loans. In the stunning co-working offices complete with the obligatory Herman Miller Embody chairs, these startups have access to top-notch IT support, marketing, PR, web designers and more.
One of these startups, Detroit Labs, has grown to 30 employees, taking up a sizable chunk of the Madison Building. Quicken Loans recently purchased the whole block neighboring the Madison and is quickly renovating a space to house this growing company. Detroit Labs will lease the space from Quicken. How can a single company buy a block? Downtown Detroit is empty. Buildings have sat completely vacant for decades. Quicken Loans is buying, but more importantly, using, as many buildings as it can.
As someone who successfully built a lean company, had a huge exit, but came back to the company and turned it into one of the top mortgage companies in the country, Dan Gilbert has proven perspective on funding, scaling and creating successful companies. The Quicken Loans family of companies now numbers in the 50s. Under his golden umbrella sits Fathead, OneReverse Mortgage, Detroit Venture Partners, Quicken Loans Arena (home of the Cleveland Cavaliers which Dan is majority owner), and dozens of startups like Detroit Labs, Are You A Human?, and UpTo.
What follows is the transcript of our talk with Dan Gilbert.
Matt Burns: Why Detroit? Why did you move Quicken Loans downtown. What was the draw?
Dan Gilbert: So I can only give you a little bit of why, first of all, we [Quicken Loans] moved downtown. So for us two-fold: I mean, number one, I’m from Detroit, born in Detroit, lived in Detroit part of my life. I grew up with my grandpa who lived in Detroit, so I’ve been here forever. I have a strong sort of motivation to help being, of course, in the position that we are able to help. So deciding whether to come to town was personally motivated by just wanting to make Detroit great or make it great again, or make it into something that’s never even been.
The second reason is more on business. Reasons why and that is that people in their 20s, 30s, this generation, I think it’s pretty clear to everybody they want to be in urban core, so they just ditch Michigan. When you sit around tables and you listen to people talk about their relatives or their kids or their grand kids or their friends or their friends’ kids, they say “This one is moving to Chicago, this one is moving to New York, this one is moving to San Francisco.” If we’re going to keep growing and keep doing the kinds of things we do, we’re Quicken Loans, we’re really technology company that happens to do loans. Most of our stuff is technology. That’s certainly who we are.
I felt that we have to affect the urban core to maintain and acquire talent. Why not make it great in Detroit? In Detroit, the price of the things are very, very low.
We have this need and we’re ending in the suburbs. Quicken had to make a decision whether to build a campus on a bunch of farmland or disperse ourselves out in the suburbs. We have a very strong culture and core and DNA. My view was we all have to be together, as close together as we possibly could be, and this availability, this urban core, looking at some of these beautiful buildings, the ridiculously cheap prices that they were selling for, and they’re empty.
So we first came down into this building [Compuware World HQ], which, actually, we don’t own. We made a deal and it’s about 250,000 square feet, about 1,500 – 1,600 people. And as soon as we got to a hundred, people were lit up. We’re still having a hard time finding one or two people who really say, “I hate it. I’d rather be in the suburbs.” I’m not saying they don’t exist, but maybe they don’t tell me or whatever.
We move the rest of our people in and we’re up to 6,500 people down here in the core. We’re not just here; we’re engaged in community. We’re trying to impact the outcome and impact change. I’m working with some national urban planners now. I’m trying to really address this retail and residential stuff.
So that’s why we’re here — that kind of tails into your question as to why people want to come. The Midwest has, I think, incredibly hardworking people. You know they’re going to be successful because quite honestly I can not work with people from the East Coast — A little bit variance on the coast — I’m from Ohio and I understand that.
So you do have that, all those exceptions on both sides. But overall, I think you’ve got great hardworking people who are educated and some of the great staff is here at University of Michigan, Michigan State and others.
For us it’s retaining and maintaining those people.
For instance, I always tell this group the same stories and same slides, and you need to see that. I mean, the Groupon guys, despite what’s happened recently on the stock and all of that, but the overall success of what they been through. So I happened to bump into two of the three guys in Mexico and not knowing said, ‘Where are you from? What do you do?’ ‘We’re from Detroit.’ They actually grew up two blocks from where I grew up. ‘Why did you leave,’ I said? ‘Three companies ago, but we thought Chicago was a place to be, so we moved to Chicago,’ they said So here it is, this company that I think has 6,000 to 7,000 employees and billions in market capital and more, a few months ago, a billion each quarter.
And in Detroit, the idea is, “Look, how do you measure that? Detroit lost that. We should have that.” So we can’t miss the next entrepreneurs. The next ones are going to come out here and leave. The first thing is to hang on to everybody who is talented, who is entrepreneurial, who wants to make an impact and a change and start attracting ones.
Now, we have attracted a lot of people, surprisingly, because we really haven’t gone out and really gone for it yet. We thought we’re going to — we’ve only been here two years and three months and it’s just that people are starting to come. I mean, from San Francisco, Boston, New York — people who have no connection here. In fact, there is a company that’s come here recently. It’s very interesting.
It’s called Fossil. [Tom] Kartsotis or something. He was the CEO or still is the Chairman of Fossil.
He found a new product. He tested it out. It’s made in America. It’s made in Detroit and people love that. So he just literally came to Detroit and is over in the State Building building watches and bicycles.
It’s this attraction of getting in and being able to impact change and make a difference both from people who are coming out maybe overseas or entrepreneurial, but also wealthy, established guys who want to do different things.
Did you know about the intern program at all?
MB: Yeah, we’ve heard about that, 600 people here.
DG: So we have 157 colleges and universities represented among 600 people.
Of all the things that we’ve done by far or all the things we’ve been engaged with and trying to do anyway. This one [the intern program] is by far is the most important one because they go back and they just tell everybody [about Detroit].
In fact, we had 250 the first time, December of 2011, and without any advertising, we had 8,700 applications for internships last summer. We only had room for 600. So there’s this — I don’t know. There’s this sort of feeling that I [the worker] can make a difference and I can make a change and I can get into the ground floor versus something that’s more advanced.
Now, I always tell these people or the interns that come and say, “You can go to New York, Chicago, whatever and do well. You’re all graduating from good schools and you’re smart people, but here, you can do that. Hopefully get a job, a good job where you also can impact the outcome and impact change.” And I think that sells to them. Maybe people wouldn’t think that would sell, but it really becomes an important thing that they actually can make a difference.
MB: What is the approach with startups?
DG: Same way with startups, instead of worrying about your talent being hijacked and always looking over your shoulder, who’s going to be the next star, going to steal your guys. You can get some great people, some hardworking, Midwest people who first of all tend to be loyal here; they just do. And number two is just less competition for the talent and so you have a better chance and maybe keeping the same group of people with you for a long period of time. And it’s exciting and there are startups happening. You saw Madison.
DG: Do you know about the coffee shop?
DG: So that’s one thing. Chez Zara. That’s nice. With Madison, I think it’s very special for the area and you could see all these companies come in and then you give them the support and Quicken Loans which is great.
MB: Also, one of our concerns is scaling startups.
DG: Explain what you mean –
MB: Some people can build companies and they can start companies and they’re very good with that, but then they don’t know how to take it from 30 people to 300 people, or 300 people to 3,000 people.
I think that’s one of the attractions though with your program is that you can assist them to do that.
DG: Exactly. We even try to — both through Detroit Venture Partners, DVP, and Roxbury which is a private equity down the hall here. We try to tap into the operational expertise of our business and not just creating, obviously, but the majority of that [re: scaling]. That’s why we’re called the family of companies and we really try to look at it as one company, one business, one family where people can tap in and either recruit other people maybe to come over and help in or even for short periods of time. For instance, we’re even going to put what we call our mousetrap. People who just process excellence, we’re going to put them in the Casino in Cleveland for a period of time to help them. There’s going to be two or three people go over there for 90 days just to help them set-up their process excellence.
So where they can either help temporarily on loan and there’s been strength here. So those guys are — we used to have some of them. They work very, very hard for a long period of time and now they’re ready to maybe take up a leadership role and entrepreneurial and we’re down with that, too. We try to say that we’re not just venture capital or money, but there’s value added to it because you can get money in a lot of places but the expertise is probably more.
MB: Do you think the hand-holding could be counterproductive?
DG: That’s a good question. So for sure, I’ve seen examples of that. Sometimes you think they got so much access that maybe they’re not making it on their own and getting strong enough on their own. So we have talked about that and we’ve got to balance that.
MB: Do you take startup pitches at all?
DG: We do this twice a year. It’s called Venture Startup or something. We’re all sitting here in the auditorium and hit them all. But they’ll [Detroit Venture Partners] do one-on-one meetings too. So it is not often but as much as I can, here and there, but they keep us pretty updated.
MB: When you’re looking for startups, investors, and entrepreneurs, what do you look for, specifically for Detroit?
DG: We look for definitely technology oriented and not necessarily always on the Internet, but that would be helpful. Josh Linkner will tell you more. I think we’ve made 15 investments in the first year and a half-dozen or so at DVP. So you’re talking about on the venture side? I don’t know.
We like scalable companies that we think we can grow — because of our expertise operational is consumer-facing. For the most part, consumer-facing technology driven process, driven sometimes if they’re call center or into the sales type of stuff associated with it. We think we can really help them, but then being in the family is then again not a 100%. There’s no white line or great line. But mostly we’re probably not going to be doing like a startup dry cleaners or startup — although we need that here [in Detroit], too. From the fund, that’s what we’re focused on.
John Biggs: What is the value in terms of manufacturing, in terms of opening business if you have a huge raw space that you can build in? We don’t have that in New York. That’s gone.
And when you do have that, it’s really expensive. So there’s a company who does open source hardware, for example, and they just bought a huge lot in Manhattan which is pretty incredible for them, and then a buddy of mine does 3D printers, and they built their [NYC] — they’re opening a big space with offices and warehouse space in Brooklyn again.
Dan Gilbert: It would take a lot of money to do that.
JB: Yeah. It would be really smart if they had something like this where they can create their assembly line, one of these big buildings that are empty to create an assembly system. That would be amazing for them. But I’m not sure if they’re looking this far over outside of New York.
DG: It’s hard for companies to have other business in one city. We’ve done it in the past.
Matt Burns: One last question: What is your elevator pitch for building a startup in Detroit.
Dan Gilbert: Well, you can go anywhere else if you’re smart and you’re going to build a company. But if you want to really get in at the ground floor of something very special, you want to come to Detroit because you’re going to find things — not only very exciting but less expensive. So you’re going to be able to get in and for maybe less capital. At the same time you’re going to find great motivated people. Your people are going to be the most important thing you have in these kinds of businesses. The collaboration activity is going to connect and create other opportunities, too, that you may not see here or you may not see right now that it’s going to take you to a level. I think you’d be very excited about it.
You can impact the outcome. That’s the main thing for people who can and want to and are motivated to impact the outcome.
One of the figures I give to people here is that you pay less per square foot for the building than the average rental rate is in New York for a year. So you think about that difference. I’m not bragging, I’m just saying, “Hey, there’s a significant advantage” even in Cleveland where we’re active, the real estate prices didn’t decline like in Detroit.