Talent is Detroit's X-Factor (for entrepreneurship)

For the startup community to succeed in Detroit, our primary goal should be getting the best community of talent that we can. Talented people, not cash, will make or break the startup community in Detroit. --------

PART I - TALENT IS ENTREPRENEURIAL DETROIT'S X-FACTOR*

I think of Detroit's startup community as a school because how both work is similar. In both cases - startups and schools - the fundamental ingredient is the talent of the people in the ecosystem. Here's an explanation of the analogy:

In a school students take resources (books, stimuli, computers, etc.) and convert those resources into something valuable (knowledge: papers, grades, test scores, projects, etc.) with the help of talented peers (other students) and talented mentors (a teacher).

Startup communities are similar.

In a startup community, entrepreneurs take resources (information, money, space, labs, etc.) and convert those resources into something valuable (products and services: software, hardware, media, algorithms, etc.) with the help of talented peers (other entrepreneurs) and talented mentors (successful entrepreneurs, VCs, consultants, etc.)

The structure of both is the same - In any learning community, like schools or startup ecosystems, agents take resources and convert those resources into something valuable with the help of talented peers and talented mentors.

Notice that people are the critical ingredient. Talented people with few resources produce things that are much more valuable than great resources with people who lack ability. Resources don't become valuable on their own, people make resources valuable.

In a startup community, talent seems to matter for a few main reasons (I tip my hat to my entrepreneur friends - Stu, Scott, Max, Erik, Reid, Al etc. for helping me understand this over time.)

• Getting a team - starting a company is really, really hard. You need a good team to do it, and if you don't have smart people around you, you're sunk. Moreover, once you get started, you need talented people to work for you. It's really hard to hire people from across the country, compared to getting good referrals from some friends nearby
• Getting help - Like I said, starting a company is really, really hard. You need good people outside your company for when you need to solve a problem that nobody inside your company can figure out
• Getting inspiration - Even getting to the point of a good idea isn't easy. People get inspired by talking to other smart people and learning things they never knew before

Talent will make the difference for entrepreneurship in Detroit. Indeed, it is our most precious asset.

For what it's worth, I'm not suggesting that the people here are dumb. There are actually a lot of smart folks, and I'm not so sure about the not so smart people. What I am suggesting is that there aren't enough smart folks here; we don't have a critical mass of really talented people.

I'm also suggesting that VC financing, incubators, and the like are NOT our most important assets.

PART II - BUY IT OR BUILD IT

There are only two ways to get talent - buy it, or build it. Detroit should probably do both.

Buying It

The idea here is offering incentives to get stars to come to you. Think of the New York Yankees. Stereotypically, this is what they do. The pay good players insane amounts of money to come to a team of stars. Their salary costs are unreal, but you can expect the Yankees to win games...and they do.

As you can guess, this approach is expensive. The startup community is no different.

To get stars (people with a lot of talent that have a higher chance of success) here, investors would have to take crummy valuations (i.e., take an equity stake in the company at a higher rate than an investor in another geography would have to) on those deals. If they don't take crummy valuations (or overpay in some other way), those star entrepreneurs will never come, because the talent in our ecosystem isn't yet as rich as those in SF, NYC, etc.

Here's the kicker though.

You have to overpay like crazy to get really good people, because kind of good people don't make a huge difference. If you don't get really good people into your ecosystem, you might as well have not "bought" that talent in the first place, because those almost-stars don't make the ecosystem better.

The idea behind buying talent is this: overpay to get star talent -> connect them to other people in the ecosystem -> others in the ecosystem benefit from their talent and get better.

Building it

The idea here is helping average people learn and grow at a hyper accelerated rate. Think of a boot camp exercise class at a gym. You come into it in poor shape and you do lots of reps of lots of different exercises. You, and the group you're in, get better faster because you learn from each other and push each other harder. Not everyone get better at the same rate, and not everyone gets more fit. But with a sufficiently large sample size and a lot of reps, some people will become beastly fit.

As you can guess, this approach takes a lot of discipline to commit to. There's a lot of failure and learning that happens. If you're applying this analogy to a startup community, you can't expect every company to make it and "get fit." You have to tolerate a lot of failure in hopes that some people will learn really quickly and become strong pillars for the rest of the community.

Here's the kicker though.

If you take this approach, you can't expect results right way. You have to invest in people learning (which means they won't make money right away, and they may never). And, you also have to stay committed to investing in this learning - even if it takes awhile - otherwise the results will never come.

The idea behind building talent is this: invest in failure and other things that help people learn quickly -> People get better a lot faster -> some people make it and some people don't -> the ones that do make it will make the rest of the ecosystem better

CONCLUDING THOUGHTS

Here are a few observations and hypotheses for the Detroit entrepreneurial community:

• Connected Networks Make It Possible - Either approach doesn't work unless there are connections across the entrepreneurship community and even beyond. These networks don't form effectively if they're not open. Which is why incubators kind of throw me for a loop - they're semi-private communities, and semi-private communities easily become elitist and siloed (if they're not actively managed not to be). Siloed communities, as we know, are really hard places to learn. I'm a much bigger fan of open meetups a la meetup.com or Detroit Startup Drinks (full disclosure: a lot of the Detroit Startup Drinks folks are friends of mine). Semi-private and open communities are both important for different reasons. I just don't see as many open communities as I do semi-private ones and that's kind of unsettling.

• You can't have your cake and eat it too - When trying to build talent, I see people falling fool to a fallacy. The people (particularly in the social sector) want to back winners, and fund people who will be successful. That would be sensible, if we already had a robust community of talent in Detroit. We don't. People investing in the entrepreneurial community here have to encourage failure and reflection, because failure is when the most learning happens. You can't build talent without failure. We don't have people who invest in failure (and the learning that comes with it). That's something we desperately need.

• Buying talent - We haven't really tried this, have we? Stik was brought in from SF, and the guy who started D:hive was brought in from Chattanooga. I can't think of any other examples (please correct me). Why haven't we tried to buy more stars? Starting VCs and social investment funds are useless for us in Detroit if the capital isn't being used to buy talent or to build talent. We're don't have enough depth of talent to just expect results from our investments. I think we're wasting our time (and money) if we aren't investing in the best learning / talent development opportunities. Moreover, I get this feeling that Detroiters think that everything here has to be home grown and that the city can "go it alone" without help from the outside. I think that getting some interesting folks here from other places would be smart, and also pretty cool.

Especially because I've taken some strong stances, I welcome your pushback!

*Note - In this post I'm talking about the tech / high growth entrepreneurial community. Fort the most part, I'm not talking about social entrepreneurship / innovation or small service firms like restaurants, coffee shops, yoga studios, dry cleaners, etc.

I'd also like to shoutout to my friend Stu who explained a lot of these points in a way that congealed them in my head. The good ideas in this post are mostly because of him.