DETROIT – Detroit has not in recent history been regarded as a center of technological innovation. But that perception is both false and fast changing, due in part to the dramatic growth of electric vehicle demand but also due to the increasing role that electronics play in even gas-powered vehicles.
As a result, venture funding in the Detroit area is growing. Interestingly, the boom in auto tech is now creating offshoots with applicability in other areas of the economy, driving a broader appreciation of the opportunities that new businesses in this area are developing. Venture funding is pursuing these developments. JL
Marc Vartabedian reports in the Wall Street Journal:
The Motor City ranked second, ahead of destinations such as Berlin and Miami, in a PitchBook Data report on venture-capital ecosystems worldwide that have shown the most growth, scoring high on metrics like the amount of venture-capital dollars that startups raised. As automakers based in the Detroit area pour billions into developing EV technology and government subsidies boost demand for gasoline-free models, commitments at the startup and venture level have grown. Startups based in the Detroit area raised $429 million in the first three quarters this year, a 12% increase from the same period last year and a 40% rise from what the area raised during 2021.
An unlikely city sits near the top of a venture-capital list: Detroit.
Long a symbol of industrial decline, the Motor City ranked second, ahead of destinations such as Berlin and Miami, in a PitchBook Data report on venture-capital ecosystems worldwide that have shown the most growth, scoring high on metrics like the amount of venture-capital dollars that startups raised, according to the analytics firm.
Electric-vehicle-related tech has been one recent driver of Detroit’s growth in the venture sector, investors said. As automakers based in the Detroit area pour billions into developing electric-vehicle technology and government subsidies aim to boost consumer demand for gasoline-free models, commitments at the startup and venture level have grown.
PitchBook’s report, released this month, said that Detroit’s second-place ranking behind Dubai was evidence that the region is emerging as a venture-capital hub. The ranking took into account Detroit’s surrounding areas including Ann Arbor and Warren.
From the third quarter of 2017 through the first half of this year, Detroit-area startups raised $4 billion over 694 deals, according to the report. The ranking analyzed metro areas’ one-year, three-year and five-year growth rates for venture deal, exit and firm fundraising activity. The analysis took in data through this year’s second quarter.
“Detroit is usually not the city you hear about,” said Chris Thomas, co-founder and partner at Detroit-based Assembly Ventures. “Detroit has an important role because you have unique entrepreneurs that understand the old and the new.” Thomas said Detroit’s venture market has grown significantly thanks to electric-vehicle tech, but also startups developing tech in sectors such as financial technology.
To be sure, Detroit’s venture scene is tiny compared with big markets like Silicon Valley and New York. The electric-vehicle future that startups are working toward also faces challenges as sales growth of electric vehicles in the U.S. has slowed because of sagging consumer demand for these models.
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