How 3 Detroit Founders Built Tech Startups Despite City’s Bankruptcy
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Investors, an Ann Arbor-based venture firm. Because only five venture firms exist in Detroit (Detroit Venture Partners, Invest Detroit Ventures, Ludlow Ventures, the Renaissance Venture Capital Fund, and Fontinalis Partners), capital can be hard to come by.
“I don’t think it’s easy [to raise capital] anywhere, but it’s definitely more of a challenge here [in Detroit],” Labenz says. “There just aren’t that many people locally in the venture investing business. If you’re just starting out, it’s definitely harder here. But if you’re as fortunate as we’ve been to get that first deal done with someone like a DVP, it’s not that much harder.”
Following its Series A round, Stik would evolve into Social Proof Marketing and then Waymark, an automated marketing platform for local businesses. In Waymark’s infancy, talent was not easy to find.
“When we first showed up here, not many people were moving here. There wasn’t a lot of lead flow,” he adds.
After several years of population decline, however, metro Detroit grew by 0.3 percent between 2013 and 2017, with an influx of 7,000 new residents in 2017. In the same period, metro Detroit saw the second-highest growth among peer cities for populations between the ages of 24 and 35, with positive growth of 9.7 percent.
“We have this whole ex-pat community of people who grew up in metro Detroit or went to the University of Michigan and live in L.A., San Francisco, New York, who want to move back to Detroit. And they reach out to us and we connect them to our portfolio communities. Three or four times a week I talk to someone like that,” says Jake Cohen, partner at DVP.
As Detroit ex-pats and millennials look to move to the Motor City, Waymark’s talent search struggles have reversed. The company, which now totals 32 employees, has team members from Squarespace in Brooklyn, Apple in the Bay Area, and Rackspace in San Antonio.
“The people that are coming from other places too, they come from good companies. They’re showing up with credibility,” he says.
In fact, Labenz is happier with his employees in Detroit than he was in the Bay Area. Labenz notes that since relocating, Waymark employees’ job satisfaction and tenure are both up.
“People in the Bay are getting poached and re-poached. There’s a culture there — a sort of expectation — that you’re going to be all in 100 percent of the time. But there’s a reality that people jump ship often. So maybe there’s not as much of expectation here that you go balls out everyday, but there’s a higher expectation that you’ll be here next month,” says Labenz.
Waymark has also benefited from a downtown revival in Detroit that has made the city more attractive to millennials. While the city still has a long way to go to catch up to New York or San Francisco, it no longer resembles the “ghost town” of just ten years ago.
“The number of bars that have opened up around here, it’s pretty easy to take people out and show them a good time. There are so many businesses opening up and on the weekend it’s kind of like a madhouse here. A weekend night around here, good luck finding a place to park. You can tell times have changed when parking is 30 dollars,” he says.
Detroit’s tech culture, Labenz believes, can be summed up by its camaraderie. Whereas the Bay Area can feel individualistic, he says a “strength of network” exists in Detroit.
“People will help each other out just cause [or] have a conversation just cause, for example, much more than they would in San Francisco. When someone’s not a good fit for us, we still try to pass their resumes along. We all try to chip in a bit and rep the place,” Labenz notes.
In September 2018, consumer marketplace startup StockX announced that it had raised $44 million in Series B funding—the most-ever raised by a Detroit startup. The company had been backed by Google Ventures, Battery Ventures, and celebrities like model Karlie Kloss and DJ Steve Aoki. In just over two years, the company had grown to over 400 members and was averaging over $2 million dollars in daily transaction value.
Yet few would imagine that the man behind StockX would be Josh Luber, a backwards basketball hat-wearing CEO. Luber doesn’t cut the typical profile of a leader of a high-growth startup; along with a hat, Luber generally wears a warm-up, sweatpants, and slides or sneakers depending on the day.
Born in Philadelphia, Luber holds three degrees from Emory University—an undergraduate business degree, a JD, and an MBA. Before StockX, Luber founded three startups—one that he sold for a nice profit, another that he sold for next-to-nothing, and one that he shut down—and lived in five cities over the course of his professional career.
Working as an IBM strategy consultant in New York City, Luber began playing around with sneaker data. A lifelong “sneakerhead,” he wanted to create a price guide for sneakers. Because shoe companies often release only a limited supply of certain sneakers, their resale value can be quite high—and create an inefficient market for both buyers and sellers.
In early 2012, Luber created Campless, a “sneakerhead data” company which collected, analyzed, and published data and derived insights on the sneaker resale market. Operating as a “Kelley Blue Book for sneakers,” Campless soon became the de facto price guide among sneakerheads.
“But really the whole time I was trying to figure out, what do you do with this business? Like what is the bigger idea here?” Luber says.
Working to figure out a sustainable and profitable revenue model, Luber met with representatives from Nike and Footlocker. He quickly found, however, that shoe companies were uninterested in the stock-market model for sneaker sales that he was pitching. They just wanted Luber’s data.
“My idea was if you understood sneaker prices, if you understood the value of one sneaker, you could create sneaker portfolios. You could look at someone’s sneaker collection the same way you look at a stock portfolio. The logic was, if you know the value of one pair, if you know the value of a portfolio, you could operate the whole thing as a stock market,” says Luber.
Somewhat serendipitously, Luber connected with Gilbert’s team. Gilbert, who was interested in creating a “stock market of things,” had put together a small team to tackle the venture. Realizing the dynamics of the sneaker industry were a good fit for the stock-market model, Gilbert’s team had chosen to focus on sneakers.
“Dan put together a team, unbeknownst to me, to start working on a sneaker stock market. And those guys got a week or two into it and realized, ‘Woah, we need a sneaker guy,’” Luber says.
That sneaker guy, turned out to be Luber. Luber eventually sold Campless to Gilbert, moved to Detroit, and joined on as StockX’s fifth employee. StockX officially launched its sneaker marketplace in February 2016 and just over a year later, expanded to watches and handbags. StockX says it offers transparency, allowing buyers to purchase at rates set by the market rather than the seller and track the aggregate value of their collections (their “portfolio”) based on price fluctuations.
Detroit seemed like a natural place for StockX because of Gilbert. But the city also offered the chance to work synergistically with the Quicken Loans family of companies (run by Gilbert, who also owns the Cleveland Cavaliers basketball team) and access to some of the world’s foremost experts on sneaker authentication. Quicken Loans functioned as a de facto accelerator, introducing StockX to potential customers and taking care of StockX’s human resources and legal work, allowing Luber and his other co-founder, Greg Schwartz, to focus on the business.
“I doubt we’d be as successful if we were in a different city,” Luber says.
Detroit’s culture, too, reflected StockX’s startup nature.
“If you are an entrepreneur, a startup guy, now you get to be part of a startup city. And even in the few years I’ve been here, it’s like night and day. The city itself has this feeling of a startup—the excitement of like every day, of making monumental progress in a short period of time,” Luber says.
As the StockX headcount has grown from four to 400 in just over two years, recruiting talent has remained an important priority.
“The last three companies I founded had 12 people, eight people, and four people. We’ve [StockX] genuinely hired more people than that in the past two weeks,” Luber says. Only 10 percent of StockX employees have moved to the city to join the company. The other 90 percent come from the metro Detroit area.
“Being the big consumer e-commerce company in the city, we sorta get anyone who wants to be that. We get to be the big fish in a small pond. So if you want to work on cutting-edge, internet startup stuff, we’re the leader in the city,” Luber says.
Thanks to the partnership with Gilbert, capital has never been an issue for StockX. Yet … Next Page »