Detroit’s native son, billionaire Dan Gilbert, makes the case for his town
Dan loves Gilbert his hometown of Detroit. He loves it so much that the billionaire founder of future mortgage lender Quicken Loans put at least $ 2.5 billion into renovating buildings in the heart of the city.
He has also invested in many of the companies that are now renting these buildings, as well as restaurants and retailers, which have made the scene far more lively than before when Gilbert began his campaign to restore Detroit as one of the most important cities in the country.
We had the opportunity to speak with Gilbert, a father of five whose other notable interests include the highly regarded ecommerce marketplace StockX, which he co-founded in 2015, and the Cleveland Cavaliers NBA team he acquired, downtown Arena from Cleveland – for $ 375 million in 2005.
He shared why Detroit should be a priority for founders from the USA. We also talked a little about sports and why he took a traditional IPO route for Rocket Companies, the parent company of Quicken that he went public last August. Excerpts from this conversation follow.
TC: As a native of Cleveland and a longtime Cavs fan, I’m curious about your connection with Cleveland.
DG: When the Cavs went on sale in 2005 or 2004, the banker who was selling them called because our group had tried the Milwaukee Brewers baseball team and they thought we might want to buy the team. And the seller at the time [businessman Gordon Gund] wanted a very simple, not complex process with a buyer. So they called us and we decided to do it.
TC: Well, you kind of put us back in the game, so thank you. In the meantime, you’ve obviously been very focused on Detroit, where you grew up and went to college. How does Detroit compare to other Midwestern cities?
DG: First of all, one of the metrics companies use when deciding on a city is how many people they can reach within a five-hour drive because they believe that talent within that five-hour scope is ready to drive into, or at least this one Explore the city. And within five hours of Detroit there are 60 million people, including Chicago, Toronto, all of Michigan, all of Ohio, Indianapolis, Pittsburgh – I could go on and on.
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The same goes for universities. There are about 30 major universities within a five-hour drive, including the University of Michigan, Michigan State, Wayne State, Carnegie Mellon, and Ohio State, and those are just the larger schools. There are also a number of great schools in Canada that specialize in software development. Overall, this is a huge benefit when it comes to tapping potential talent.
Detroit has had so many decades of bad PR that it’s hard to get over this picture without seeing it for yourself, but if you spend two hours here, you get it. You feel the energy. You feel the passion. You see the young people.
TC: Do you think Detroit is better for businesses of a certain size? Things are changing fast, but in some cities there is a learning curve in terms of the specific needs of startups. I spoke to Drive Capital in Columbus recently and they said they had to do a lot to educate the landlords. Of course, you are one of the largest rental companies in Detroit.
DG: That’s a really great insight from Drive. At this point, Detroit is home to both of them [big and small companies]. We first brought around 1,400 people from the suburbs to downtown Detroit in the summer of 2010 and now have more than 20,000 employees at this tech company, which Quicken Loans clearly shows. And [that kind of hub] allows you to create an ecosystem of people and ideas that VCs care about so that this has become a part of it.
We control a few million square meters of real estate ourselves, but then we still have four or five million square meters that we build or that have already been bought so that we can accommodate startups and react flexibly to their growth. We also have three locations in downtown Detroit that companies like Pinterest and Snap have used. You already have big tech companies with locations like Amazon, which has an engineering office with 500+ people downtown, and Google, which has a 50,000 square foot office, and Microsoft, which is 50,000 square feet, and I’m in a building. So it’s not just the startup scene.
TC: Are there enough venture dollars in Detroit to support what you want to build? The Drive team also talked about missed opportunities because they don’t have the bandwidth to fund everything they see. You need a backup. Do you?
DG: Certain VCs discovered us. SV Angel’s Ron Conway, for example, fell in love with Detroit a few years ago and introduced us all on his network. He’s invested in a lot of our deals here. And there are others. Google Ventures and Battery Ventures came early. DST Global, General Atlantic, GGV Capital, Altimeter, Whale Rock Capital and Tiger Global have invested money in startups here.
It’s a new thing for us. Quicken Loans didn’t go public for 35 years, and we never really raised a lot of VC money because we never had to because of our cash flow. So with StockX this is something new for us. We never really had a startup that blew up so suddenly. But every stone in the wall helps.
TC: Speaking of StockX, its slogan is the “stock market of things”. Could any of these things be a non-fungible token at some point? Lots of people suddenly buy and sell digital items.
DG: Like NBA Top Shot? We love this model. We have some similar models that we are currently working on. We research and develop some things that are very close to this. I have four teenagers out of five at home and I can tell you this is definitely the hot thing right now.
TC: What’s the next step for StockX? Is it an IPO?
DG: I think the next step for StockX is likely to be an IPO. It’s just a matter of when. Probably sometime in 2022. I’m not saying anything official here; I’m just saying that there is a good chance.
TC: Do you have strong feelings about traditional IPOs versus other company IPOs? They brought Quicken to the public through a traditional IPO. Another Detroit-based mortgage company, United Wholesale Mortgage, has recently taken the SPAC route instead.
DG: I think so [a StockX offering] would probably only be traditional because, to be honest, I don’t know much about the complications and all the details of trying to do it differently. We’ve had success with Quicken Loans so we’re getting away with it.