Crain's Detroit Business, April 29, 2019 issue by Crain's Detroit Business

Eastern Market plans for ‘core values’ Page 6

Guardian Building starts to pay off Page 3

APRIL 29 - MAY 5, 2019 | crainsdetroit.com

NONPROFITS

United Way looking to diversify, refocus

SPECIAL REPORT

SHAKING MICHIGAN’S VC MONEY TREE The good news and bad news in venture capital in Michigan. Page 10 New venture capital firm to focus on health care IT. Page 11 Growth Capital Symposium scheduled for May 14-15. Page 12

By Sherri Welch swelch@crain.com

Bank of Ann Arbor executive talks lines of credit, angel investing and moving to Michigan. Page 12 University of Michigan spinoff puts $8 million funding round to use. Page 13

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SPORTS BUSINESS

USA Hockey churns out elite players, builds fans By Bill Shea bshea@crain.com

Jack Hughes, the coveted 17-yearold hockey phenom expected to be the top pick in June’s National Hockey League draft, spent the past couple of years honing his skills in Plymouth Township. Specifically, at USA Hockey Arena. The building, once known as Compuware Arena when it was home to the minor league Plymouth Whalers, has become the state-of-the-art crainsdetroit.com

headquarters for the nation’s elite hockey development program that feeds the college, professional and U.S. Olympic ranks. Hughes is the latest product of 501(c) (3) nonprofit USA Hockey Inc.’s National Development Training Program, and the first ultra-elite player to come out of the program since it moved in 2015 into the Plymouth Township arena after two decades renting ice time at the Ice Cube in Ann Arbor. SEE ARENA, PAGE 18

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The hallway to the locker rooms at USA Hockey Arena in Plymouth Township. The arena is headquarters to an elite hockey development program.

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Declining contributions and questions from stakeholders about where it invests the money raised have prompted United Way for Southeastern Michigan to do some soul-searching. The Detroit-based nonprofit is in the midst of a strategic planning process looking at revenue diversification, following three years of Driver Hudson losses. It’s also looking at how and where it should invest the tens of millions of dollars it raises each year through workplace giving campaigns and other community fundraising. Continued growth in the number of people in the region working yet struggling to cover basic needs — highlighted in a report released in March by the Michigan Association of United Ways — “is forcing a very different conversation with our partners in terms of how we get our resources, where they’ve been invested, and how we can work better together and really integrate resources,” President and CEO Darienne Driver Hudson said. The Detroit-based agency, which serves Wayne, Oakland and Macomb counties, is looking at everything it does as part of its strategic planning, said Mark Petroff, chairman of the United Way board. “Do we narrow our focus? ... Do we increase our focus on fundraising ... so we can raise more capital and have a broader reach in the marketplace?” said Petroff, president and CEO of Detroit-based OneMagnify. “If we want to be a convener, where do we have authority to convene? And where we have it, where are we making impact that is measurable? How do we distribute the capital raised to where we can make the most impact in our communities?” SEE UNITED WAY, PAGE 19

019 S I N E S S // A P R I L 2 9 , 2 CRAIN’S DETROIT BU

FOCUS

2018 venture-capital investments by state 2018 United States venture capital deals

State/Territory

California New York Massachusetts Washington Texas

1,798.38 1,735.20

258

283

1,635.91

250

267

1,496.75

131

142

1,375.32

101

106

112

120

1,147.33

141

148

1,026.23

117

121

786.47

135

145

742.70

New Jersey Connecticut District of Columbia

ews ast year was a good-news, worrisome-n year for the state’s venture-capital community, Michigan according to the just-released 2019 report. Venture Capital Association’s annual of $385 The good news? A dramatic record by VC firms either million was invested in 61 companies offices here, a 36.5 headquartered in Michigan or with record of $282 percent improvement over the previous better than the million invested in 2015, and 56.5 percent in 2008. s second-best total of $246 million

Inside this special report

The good news and bad news in venture capital in Michigan . This Page  New venture capital firm to focus on health care IT. Page 11



Bank of Ann Arbor executive talks lines of credit, angel investing and moving to Michigan. Page 12



Growth Capital Symposium scheduled for May 14-15. Page 12  University of Michigan spinoff puts $8 million funding round to



2,686.69

Pennsylvania

Virginia

thenderson@crain.com

427

Colorado

Minnesota

By Tom Henderson |

2,957.47

398

2,620.56

Ohio

Arizona Oregon Michigan Indiana Missouri Wisconsin Tennessee Kansas Delaware Nevada New Hampshire

and the 68 in 2015. third-highest ever, behind the 74 in 2015 based National Numbers compiled by the Washingtonincludes investments Venture Capital Association, which rms with no physical in Michigan companies by VC fi level of activity. Acpresence here, buttress that record got a total companies cording to the NVCA, 104 Michigan with the 78 compaof $502.5 million last year, compared and the 73 companies nies that got $334.4 million in 2017 that got $252.6 million in 2016. every year, with 2,869 California was No. 1 last year, as it is with New York No. companies getting a total of $77.3 billion, Massachusetts No. 3 2 (981 companies, $14.3 billion) and ranked 21st. 4 companies, $11.9 billion). Michigan

366 185

Georgia

VIA ISTOCK

14,311.79 11,885.72

337

234

Utah

PHOTO ILLUSTRATION BY CAPTURELIGHT

77,297.63

660

253

Maryland

GOOD NEWS, BAD NEWS ON VENTURE CAPITAL IN MICHIGAN

Capital Invested ($Millions)

1050

212

Florida

FINANCE

3063

981 624

173

Illinois

BROUGHT TO YOU BY:

# of Deals Closed

2869

239

North Carolina

FINANCE, Page 10

by state and territory

Company Count

South Carolina Kentucky New Mexico Iowa Rhode Island Oklahoma Arkansas Idaho Montana Vermont Alabama Maine Nebraska North Dakota South Dakota

1,165.25

732.01 683.12

676.15

538.95

100

527.90

104

111

502.48

311.27

254.27

223.39

164.18

367.74

144.72

131.61

127.61

86.47

85.34

84.99

91.50

52.69

46.49

45.36

44.5

56.78

36.5

30.7

28.0

26.8

22.2

21.4

18.

C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 2 9 , 2 0 1 9

MICHIGAN BRIEFS

INSIDE

From staff and wire reports. Find the full stories at crainsdetroit.com

MEDC tweaks business incentives program The Michigan Economic Development Corp. has tweaked its business incentives program to allow more grant and loan money for job training and projects in rural areas. The agency added two new grant and loan programs under its flagship Michigan Business Development Program. The Michigan Strategic Fund, which oversees the MEDC, approved the programs Tuesday. The first new program is the Jobs Ready Michigan Program, which was approved for one-time funding of $10 million, said Rodney Parkkonen, business development project manager with the MEDC. It will provide grants for businesses expanding in or relocating to Michigan that need funds for training workers. The second is the Micro Michigan Business Development Program, which will provide grants and loans for businesses in rural areas or places with high unemployment. Funding for this program comes from the general Michigan Business Development Program, and there is no cap on how much of the general funds can be used for it. Parkkonen said the changes were

CALENDAR

made to align with Gov. Gretchen Whitmer’s priorities and to match the economic incentives of competing states. “To remain competitive, we want to have a program that provides some dollars to training needs for these businesses,” he said. “We also want to target areas of the state that may not have larger projects but (the projects) are still impactful for that area.”

Michigan Attorney General Dana Nessel said her office will target businesses that cheat their employees of wages, pledging a forceful crackdown on what she called an under-the-radar problem that also lets companies dodge taxes, the Associated Press reported. “Our office intends to be as aggressive as possible in pursuing this issue,” the Democrat said at a news conference, where she was joined by Democratic lawmakers who announced related bills to be proposed in the Republican-led Legislature. Nessel said she is establishing a Payroll Fraud Enforcement Unit to investigate wage theft, including the misclassification of workers as independent contractors and the nonpayment of overtime. It is the fourth new unit to be created in the attorney general’s office since Nessel took over in January.

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Michigan AG plans business crackdown

A Republican-led legislative panel approved a transportation budget last week with a $132 million boost in road spending, far short of the roughly $2 billion net increase Gov. Gretchen Whitmer is seeking.

She said payroll fraud varies by industry but is most prevalent in the construction, landscaping, janitorial services, child care, beauty and personal care services, retail, food service, car wash and home health care industries. “The majority of Michigan companies play by the rules. But those who don’t are cheating the system, raking in unfair profits and hurting Michigan in the process,” Nessel said. By misclassifying employees or paying them under the table, businesses contribute less to the unemployment system and avoid paying toward workers’ compensation and

companies’ share of Social Security and Medicare taxes. It enables them to easily bid 20 percent to 30 percent less for contracts than legitimate companies, she said. Workers lose legal protections and benefits.

Senate budget boosts roads, but Whitmer vows veto

PEOPLE

RUMBLINGS

WEEK ON THE WEB

hike, the Associated Press reported. Whitmer vowed a veto if the Senate transportation plan reaches her desk as is. Under the Senate plan, 2015 road-funding laws would be fully phased in during the next fiscal year — a year early — by more quickly shifting earmarked general funds to road repairs. GOP senators plan to wait until the summer to consider if new tax or fee revenue is needed to fix deteriorating roads and bridges, separate from the budget process, setting up a potential standoff with the Democratic governor. Republican leaders have previously rejected the 45-cent increase as too much. “It’s money we don’t know that we’ll have,” Sen. Wayne Schmidt of Traverse City, chairman of the Senate’s transportation appropriations subcommittee, said when asked why the Senate is not tying the budget with broader road-funding talks. He was among five Republicans to back the bill. Two Democrats opposed it.

Growing stronger businesses together. The success of local businesses strengthen Michigan communities. Our commercial lending solutions can help you grow or expand your business.

Learn more about commercial lending at laketrust.org.

Federally insured by NCUA.

C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 2 9 , 2 0 1 9

HEALTH CARE

GOVERNMENT

OUT OF THE RED

Pharmacists: Benefit managers taking too big a cut of payments By Jay Greene jgreene@crain.com

Wayne County spent $33.5 million in 2008 on the Guardian Building in a deal that included the First Street Parking Garage and the Detroit Savings and Loan Building at 511 Woodward Ave. COSTAR REALTY INFORMATION INC.

More leased space, events pay off for Wayne County’s Guardian Building Kirk Pinho | kpinho@crain.com A plan to squeeze more cash out of the Guardian Building downtown appears to be paying off. Wayne County, which has owned the 40-story skyscraper for about a decade, says that it had $487,400 in net revenue from the property in fiscal 2017-18, which ran from Oct. 1, 2017 to Sept. 30. That’s on roughly $4.3 million in revenue and $3.8 million in expenses. And that’s compared to $3.39 million in revenue in FY 2014-15 with net revenue of $203,500, the county said. In fiscal 2015-16, it lost $62,800 and just barely broke even with $18,500 in net revenue in fiscal 2017-18. The turnaround instituted in the wake of the county’s financial crisis earlier this decade is attributed to increasing the total leased space and

“Weddings, special events, auto show functions, birthday parties, bar mitzvahs, a lot of office event stuff, the whole gamut.” Khalil Rahal, assistant county executive, describing the types of events people rent space for in the Guardian Building

holding more events, said Khalil Rahal, assistant county executive in charge of economic development. “The building was reportedly 74 percent occu-

pied. While that is technically accurate, the county could occupy a floor but it was only 40 to 60 percent occupied. As a result, it was definitely less than (74 percent), and without going through and counting cubicles, my best guess is that it was a little over half occupied.” Today, Rahal said, it is 95 percent full, with only about 30,000 square feet of the 643,000-squarefoot building at 500 Griswold St. vacant. Architecture firm SmithGroup recently inked a 10-year lease extension and soup-and-salad joint Green Room is opening on a five-year lease in the coming months in 1,000 square feet. The Detroit Land Bank Authority also takes just over 40,000 square feet across three floors in a deal that was inked in 2015. SEE GUARDIAN, PAGE 19

TECHNOLOGY

Autonomous startups find Michigan streets appealing for testing By Pete Bigelow

Automotive News

In the shadow of one of the world’s largest automakers, a small startup has been quietly testing technology that could soon help prevent traffic crashes. Derq, a startup headquartered in Dubai, installed software and hardware last year at Randolph Street and Jefferson Avenue in downtown Detroit. The company has developed a system with cameras and radar that can detect potential red-light runners and other hazards, then com-

municate them to road users within two seconds. Spitting distance from Derq’s test site is the global headquarters of General Motors Co. For a startup trying to gain visibility with established automakers, the location couldn’t be better. That’s something of a coincidence. But surrounding car companies with innovators is one reason PlanetM, a mobility-minded division of the Michigan Economic Development Corp., has doled out grants to Derq and other startups. SEE STARTUPS, PAGE 21

HUMANISING AUTONOMY

Humanising Autonomy uses artificial intelligence to predict the actions of pedestrians. The company is testing its technology in collaboration with the Ann Arbor Area Transportation Authority.

Independent pharmacies are charging that the state Medicaid program was overcharged by tens of millions of dollars and their own rates cut to the point that they are struggling to say open under a sincebanned practice known as “spread pricing.” A study commissioned by the Michigan Pharmacists Association concluded that the state Medicaid program was overcharged by at least $64 million by pharmacy benefit managers at the same time the PBMs cut average generic drug reimbursement to 451 independent pharmacies by 28 percent, from 2016 to 2018. The pharmacies’ average margins on Medicaid managed care dropped by 64 percent, the report said. The report, which collected data from nearly 20 percent of the state’s community pharmacies and analyzed 2 million generic prescriptions and compared Need payment for to know those prescrip Michigan tions with napharmacists claim tional averages, was conducted pharmacy benefit by 3 Axis Advimanagers serving sors, an OhioMedicaid HMOs based consulting have overcharged firm co-founded state and underpaid them by by two pharmacists who have millions done similar  ‘Spread pricing’ studies in Ohio, practice by PBMs New York and Ilunder investigation linois. in Congress and In recent several other years, rising prestates including scription drug Ohio, Illinois and prices have inNew York creasingly be PBMs and come a hot potato with health plans say their management d r u g m a k e r s , PBMs, providers, has helped hold insurers and down prescription pharmacies prices to state pointing fingers of blame at each other. Congress and the state of Michigan have looked into the cause of high drug prices. Two weeks ago, the U.S. Senate Finance Committee members sent a letter to the Office of the Inspector General at the U.S. Department of Health and Human Services calling for an investigation into PBM practices as it relates to Medicaid. In their letter, they reference a variety of state reports like Michigan’s related to spread pricing and PBM profiteering. “The pricing systems designed by drug companies and pharmacy benefit managers — the middlemen of Big Pharma — are a big part of why drug prices are so high,” said Sen. Debbie Stabenow, D-Michigan, in an email to Crain’s. “This report (MPA) is yet another sign that we need to take more action now, including letting Medicare negotiate lower prices for seniors.” SEE PHARMACY, PAGE 20

C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 2 9 , 2 0 1 9

W By

Auto

CRAIN’S DETROIT BUSINESS

The United Shore Professional Baseball League begins its fourth season Friday at Jimmy John’s Field in Utica.

USPBL enters Year 4 in black and still looks to expand By Bill Shea bshea@crain.com

As sunshine and warmth finally replace Michigan’s cold, wet springtime, Andy Appleby and his boys of summer are back. The Rochester sports entrepreneur, as the chief investor in a small group, launched the Utica-based United Shore Professional Baseball League in 2016 and he said the endeavor that combines developmental baseball with affordable family fun should again be as financially profitable as its first three seasons. Year 4 begins May 10. “We’ve been profitable every single year. We have to be. We have to pay back an $18 million ballpark,” he said. He’s referring to Jimmy John’s Field, the 1,900-seat stadium and community facility alongside M-59 that he financed as a home for his four-team league of ballplayers in their early 20s — nearly 30 of whom have gone on to sign contracts Appleby with 15 Major League Baseball organizations. Appleby privately financed the stadium’s construction with minimal public subsidy, and his games averaged 3,400 fans last season thanks to lawn seating. With so many other entertainment options in the nicest months across Southeast Michigan, from Detroit Tigers games to the zoo to concerts and parks, how has Appleby made his mini-baseball empire work? He chalks it up to what he’s said many times: high-level customer service for fans and corporate advertisers, and a fun atmosphere at a low price point during Michigan’s best weather. “We have to continually add value, especially in a situation like ours where we’re not going to have the World Series or Miguel Cabrera playing in our ballpark. We have to do all the little things right,” he said. “We’ve not only done that, but the biggest thing with me is we just continue to improve. We have a lot of cool things, but now we’re

Need to know

JJUSPBL bolsters baseball staff with

Mariano Duncan

JJLong-delayed expansion announcement could happen this summer JJOwner expects league to be profitable again this season

creating a little bit of nuanced improvement. The promotions are better and better and better.” The league has the usual range of extras such as fireworks, bands, giveaways, theme nights and discounts. This season’s new promotions include the “Mutts Gone Nuts” dog act and a “Faith Night” featuring former Tigers player Andy Dirks and ex-Lions kicker Eddie Murray. New at concession stands will be ribeye, shredded brisket, pulled pork, and an all-chicken menu at a new stand, the New Belgium Top Fry stand, cinnamon sugar pretzel bites with cream cheese frosting, new beers including Stella Artois and Labatt, and slushies. “We have really refined the ballpark and the ballpark experience,” Appleby said. The USPBL plays a 75-game May-September schedule round-robin style, mainly on weeknights and weekends. Public games are limited to two hours and 30 minutes each. The teams are up to 25 players each, for players ages 18-25 who have not yet made it into Major League Baseball’s minor leagues. Its games are available via the ESPN3 streaming service. The USPBL isn’t just an entertainment business. Appleby’s plan is to develop baseball players who draw interest from Major League Baseball, and he has said that getting a player to the majors will be the final validation for the league. For 2019, Appleby said the USPBL has invested an additional, undisclosed sum in the program to develop ballplayers. Last season, he said $1 million was spent on the organization’s baseball academy and for this season has spent a bit more. The baseball-side additions in for 2019 included hiring Mariano Duncan, who won World Series rings with the Cincinnati Reds in 1990 and the New York Yankees in

1996. Duncan, who spent 12 years as a major leaguer and coached in the majors and minors, including with the Detroit Tigers’ Single-A West Michigan Whitecaps last year, will be assistant manager of the USPBL’s Birmingham Bloomfield Beavers this season. Other new hires include Mark Weidemaier, who spent more than 35 years managing and scouting in the majors, as manager of the Westside Woolly Mammoths, and veteran major leaguer and hitting coach Von Joshua as assistant manager of the Eastside Diamond Hoppers. Appleby said the Duncan hiring occurred because Justin Orenduff, the league’s director of baseball operations, knew him and Joshua was Duncan’s minor-league hitting coach years ago. “There became some good synergy and after we explained the development approach the USPBL offered our players, Mariano decided to come on board,” Appleby said. The league pays its coaches $10,000 to $25,000 during the season. Players are paid $600 to $700 a month, and are housed locally. They get catered pre- and post-game meals. The biggest perk for them, Appleby said, is the experience and training they get as ballplayers. “We feel we have assembled some of the best development minds in baseball combined with former MLB players, scouts, coaches, and managers that can relay the necessary steps for our players to get to the next level,” Appleby said. “The players have access to an indoor training facility seven days a week where they can continue to develop at their own discretion. In-game video analysis, stats and feedback are provided to players after each game.” The baseball developmental program appears to be working: There are eight or nine USPBL veterans on MLB farm teams this season, Appleby said, with Fraser native Taylor Grzelakowski atop the bunch as an infielder for the Pensacola Blue Wahoos, which is the Minnesota Twins’ Double-A affiliate in Florida. The Twins have signed five USPBL players to minor-league deals over the past two seasons, the most of any major league organization. SEE USPBL, PAGE 5

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C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 2 9 , 2 0 1 9

Waymo to build self-driving cars in Detroit By Pete Bigelow Automotive News

Waymo has reached an agreement with American Axle & Manufacturing to lease a factory in Detroit, where it will integrate its self-driving systems onto vehicles provided by Fiat Chrysler Automobiles and Jaguar, the Google affiliate announced last week. Waymo will invest $13.6 million to adapt an existing plant within the supplier’s Holbrook Avenue campus and could eventually grow to 200,000 square feet and hundreds of workers. The size of the footprint Waymo will open with later this year is not clear. The move will create Waymo’s first full-fledged assembly plant for the purpose of retrofitting vehicles with self-driving systems and marks an expansion into the cradle of the traditional auto industry. In January, when Waymo laid out its ambitions to find a manufacturing facility in Southeast Michigan, it said as many as 400 engineers from Canada’s Magna International Inc., a Waymo partner, could eventually be hired to perform the system integration. Waymo did not say Tuesday how many employees would be hired initially. “We’ve found the perfect facility in Detroit,” Waymo CEO John Krafcik said Monday. “We will partner with American Axle & Manufacturing to repurpose the existing facility, bringing a work force back to an area where jobs in the automotive industry were recently lost.”

WAYMO

Google affiliate Waymo has agreed to lease a factory in Detroit. It plans to integrate its self-driving systems with Fiat Chrysler Automobiles and Jaguar vehicles.

Mayor Mike Duggan welcomed the news: “Waymo could have located the world’s first 100 percent dedicated Level 4 autonomous vehicle factory anywhere. We deeply appreciate the confidence John Krafcik and the Waymo team are showing in the Motor City.” Waymo worked with Dan Gilbert’s Bedrock LLC to find a space in Detroit. “... Waymo’s newest expansion only helps to affirm Detroit’s position as the startup hub of the Midwest — making our city synonymous with high-tech innovation,” Gilbert said in

a statement. Crain’s reported in January that the project is supported by an $2 million grant from the Michigan Strategic Fund that covers the first 100 jobs — about $20,000 each — upon signing a lease for no less than three years. Waymo could then qualify for $20,000 for each new job at the site up to 400 new jobs or an additional $6 million in grants. MichAuto, the automotive economic development division of the Detroit Regional Chamber, is also supporting the project by elevating Waymo’s status in the nonprofit to a

USPBL FROM PAGE 4

“The United Shore league might not be the most well-known league, but it’s got great players in it. I’ve had the chance to coach a couple guys the Twins have signed from the USPBL, and those guys work so hard. With (Grzelakowski), we knew we were getting someone who was going to put in the work every single day and we’re really seeing great results,” said Blue Wahoos Manager Ramon Borrego via email. The four USPBL teams play additional games and scrimmages privately for coaching and training purposes. Those already are underway. Thanks to the scouting and coaching, there’s enough talent on the field to entertain fans, and two USPBL plays were featured on ESPN’s Top 10 Plays of the Day last season. “We’ve really developed a wonderful reputation, not just in baseball and college, but a lot of major league teams are seeing that we’re so much different than any independent league,” he said. Appleby is still trying to expand the league, too. When he launched the USPBL in 2016, Appleby’s plan was to expand to 20 teams in 10 Midwest stadiums over the next decade, with 10 to 12 teams by 2020. The hitch has been trying to find cities willing to pay for a stadium. He doesn’t want to finance more USPBL ballparks himself, and said he’s in “very active” takes with four or five cities for an expansion teams. “They’re willing to essentially build the ballpark for us. We will pay it back over next 30 years with stadium rent,” he said. “We could have 20 ballparks built tomorrow if we want to put our own investment dollars behind that. There are so many wonderful benefits for a community to build a ballpark such as ours and do so many good

KURT NAGL/CRAIN’S DETROIT BUSINESS

Fans of the United Shore Professional Baseball League at Jimmy John’s Field.

things in the community, from the economic to the charitable.” An expansion announcement could happen by the end of this summer, Appleby said, and that could be for one or more new markets. “We’ve been able to make Utica such a great case study that has gotten the attention of city planners. There seems to be a sort of renewed, heightened interest,” he said. Expansion adds costs such as travel and salaries, but leasing a stadium rather than building one itself means the USPBL won’t have debt payments. Appleby’s goal is to remain profitable by managing expenses with deliberate, controlled expansion. As a single-entity structured business — Appleby and his investors own the league and the league owns and operates the teams — he’s able to keep costs down. “It also allows us to scale the league and all our various functions,” he said. “We don’t need more front office executives or baseball operations staff.” In addition to players and coaches, the USPBL has about 40 staffers and 400 seasonal game-day employees.

The league’s finances to cover those costs are rooted in two primary revenue sources: corporate advertising and game-day sales. Appleby said he’s used his decades of sales experience as a Detroit Pistons executive and then running his own company to land deals that produce an estimated $4 million-plus in annual corporate sponsorship revenue for the USPBL. Among the companies with advertising deals at the ballpark, or who lease suites, are Budweiser, General Motors Co. Lucido Fine Jewelry, AAA, Scotts Miracle-Gro Co., Pepsi, DTE Energy, Dunkin’ Brands Group Inc., Priority Health, Belfor USA, Huntington Bank and FCA Mopar. Appleby credits a devotion to customer service for minimizing sponsorship churn. He’s locked many of his clients into multi-year deals, too. “We do everything we can to have those companies achieve their goals and objectives from working with us,” he said. “It’s made our business model is very strong. We service the heck out of accounts.”

higher tier, an upgrade worth $25,000, according to an MEDC memo. American Axle & Manufacturing last made front axles in the factory, ending production in 2012. It was most recently used as a sequencing center for a local parts supplier, according to a company spokeswoman. American Axle recently moved back into a portion of the building set up for administrative functions. Terms of the lease were not disclosed. The facility will be the second in Michigan solely dedicated to producMost of the stadium’s 26 suites get leased for the full season at prices ranging from $35,000 to $55,000 each. Single-game suite rentals range from $800 to $1,000. He also sells out of a batch of four-seat tables along the field level that lease for $20,000 a season. Single-game tickets range from $6$35, while season tickets start at $480. Last season, Appleby added a beer garden and turned shipping containers into a retail store. There are no major capital projects for the stadium in 2019. After the advertising signage and sponsorship revenue is money created by ticket sales, then concessions and merchandise. Appleby said he’s not raised prices, but as costs rise, and expansion finally occurs, he’s going to look at boosting some prices. “It’s hard. So far we’ve been able to add sponsorships to be able to (stay profitable). At some point, we’ve have to have a small adjust in pricing. Maybe someday we’ll charge for parking,” he said. The league and city of Utica jointly built an 800-car lot next to the stadium in 2016. Keeping costs lower than major league rivals is part of his strategy. “Our price point is so cost effective for any company or civic group. They get a great premium experience at a much less than premium price,” he said. The strategy works: The league sold out 61 of 75 games in 2018 and set a single-game attendance record of 4,499. Appleby is almost Ahab-like in his obsession with fan happiness. “We send out a survey to all attendees at the end of the year and the results have been nothing short of fantastic for the overall Jimmy John’s Field experience, cleanliness, safety and game day staff helpfulness. We can also measure by the fact that we have lost very few of our partners over the past four years — as we work year-

ing Level 4 autonomous vehicles — those that never require human involvement in the driving process but may have weather-related and location constraints that limit their deployment to select areas. Navya, a maker of self-driving shuttles, opened an assembly plant west of Detroit in Saline last year. The building will be Waymo’s second in Southeast Michigan. In October 2017, it opened a 53,000-squarefoot office at 46555 Magellan Drive in Novi to house vehicles used for testing in cold-weather conditions. About 20 people are employed there. Waymo, the commercial-minded descendant of Google’s self-driving car project, says it expects to be “up and running” by mid-2019. It will start by installing its self-driving systems onto Chrysler Pacifica minivans. At a later date, it will add the self-driving systems to Jaguar i-Pace electric vehicles. Both vehicles will be used in Waymo One, the commercial ride-hailing service the company launched in December in Phoenix. At least for now, vehicles in operation still have human safety drivers behind the wheel and the service is limited to pre-approved riders. Waymo has not yet announced plans for expanding that service or the size of its fleet, but with plans for its assembly plant in place, the groundwork has been set. — Crain’s Detroit Business contributed to this report. round to service them,” he said. University of Michigan sports economist Rodney Fort isn’t surprised the USPBL is working. “There is no reason that independent minor league ball can’t succeed; it’s reaching mostly TV fans of big league teams, and always a great family bargain for baseball entertainment,” he said via email. “It sounds like Andy is following the tried-and-true approach. It’s especially smart to build his own environment for the entire league. Minor league baseball is an American mainstay. MLB is not really a substitute, but rather they are complementary for baseball fans without access (geographically or financially) to the MLB product other than on TV.” Who is Appleby’s competition? Perhaps not who you think. “In the past, I might have said other sporting facilities, but what we’ve found is that’s not true at all. It’s technology, at all levels, and everyone is so scheduled. Our competition is really someone sort of laying on the couch and not wanting to do anything,” he said. “It’s what people are going to do with their free time.” Appleby, who ran into opposition from the Tigers more than a decade ago when he tried to launch a minor league team in Troy, said he feels no sense of competition from Detroit’s pro baseball team. Although the Tigers have seen sharp attendance declines from their heyday a few years ago, they didn’t try to stymie Appleby’s Utica effort, and he has nothing but positive things to say about the big league team. “We love it when the Tigers win, because it gets people feeling more in a baseball mood and baseball mode. We feel like we’re aligned with the Tigers in that respect. It’s better when there is more excitement for baseball,” he said. Bill Shea: (313) 446-1626 Twitter: @Bill_Shea19

C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 2 9 , 2 0 1 9

Nonprofit Eastern Market Corp. has a goal of preserving some affordable commercial space as Detroit’s Eastern Market food district changes under a wave of new landlords.

KURT NAGL/CRAIN’S DETROIT BUSINESS

Eastern Market makes plans to preserve affordability, ‘core values’ in food district By Annalise Frank

Tracking market changes

Eastern Market Corp. is creating protocols that it could use to score whether or not a private developer in the Detroit food district is abiding by the district’s principles. The list of a dozen points that’s under development would address the “core values of the market,” such as carving out 25 percent “affordable” space for small businesses, and could determine whether or not Eastern Market supports a developer’s project, said Dan Carmody, president of the nonprofit. Eastern Market Corp. manages the district’s public markets and works to support food access in the city. It also aims to preserve the character and inclusivity of the historic neighborhood northeast of downtown in a time when many fear it’s besieged by change. A building-buying bonanza that started nearly two years ago with Sanford Nelson and others shows no signs of slowing down. Planned investments by Nelson and others are likely to mean rent hikes in an area previously known for housing artists and businesses at low rates. The district’s growing pains came to a head last week when longtime fixture Russell Street Deli announced it would close in September due to a dispute with its new landlord, Nelson, over repairs and a proposed rent increase from $1,700 to $3,500 a month. Carmody expressed concern early last week about the closure of a popular, 30-year-old restaurant in the district and said Eastern Market

A host of Eastern Market businesses have recently moved, closed or planned to do one of the two:

afrank@crain.com

JJFarmers Restaurant at 2542 Market St. closed in early March following the sale of its building to Sanford Nelson. Nelson told Crain’s he asked the owners to stay open, and they said in a window sign that they had retired. JJMeat shop Adam’s Meat LLC and gardening store Cultivation Station Inc. closed in nearby buildings last year before Nelson purchased them. JJEastern Market Antiques at 2530 Market St. is expected to vacate its Nelson-owned space to make way for renovation work by the end of September. JJWell Done Goods by Cyberoptix will be moving from a Gratiot Avenue space Nelson owns into a soon-to-be-renovated building at 1473 Winder St. JJRussell Street Deli at 2465 Russell St.

plans to close at the end of September due to a dispute with landlord Nelson over

Corp. would pitch in financially to help with the $50,000 in floor repair work needed at the deli. While Nelson’s team stated it would welcome the nonprofit’s assistance, Russell Street owner Ben Hall told Crain’s on Tuesday that Eastern Market’s offer is “wildly unlikely” to change the situation. Carmody told Crain’s Thursday that the nonprofit is still exploring a “full range of options” for helping Russell Street, but he declined to elaborate.

floor repairs and rent rates. JJMootown Ice Cream & Dessert Shoppe, in the same prominent Russell Street building as the deli, closed March 29. Its owner called it a “personal decision.” JJDetroit Kung Fu Academy was in the same building as Russell Street and Mootown, along the Fisher Service Drive, but it vacated that spot this fall for a third-floor space three blocks north (also owned by Nelson). JJMotorless City Bicycle Co. next to Kung Fu Academy closed in late September, blaming tariffs, seasonal struggles and new ownership. Jordan Friedman, co-founder of Fortus Partners LLC, bought the building at 1343 E. Fisher Freeway Service Drive in July. JJDetroit Mercantile Co. closed at the end of 2018 at 3434 Russell St. JJBeau Bien Fine Foods ceded the front of its store to gift box company Mitten Crate, but still operates out of 2478 Riopelle St. near Detroit City Distillery.

‘Fundamental shift’ Amid these changes, Eastern Market Corp. is developing a list of rules that would outline what the nonprofit wants to achieve and preserve in the district. There’s been a “fundamental shift” in property values that “creates a lot of anxiety and stress around what that’s going to do around rental rates initially,” Carmody said. “It’s a long-term process. We gotta work our way through it.”

Carmody declined to elaborate on the specific items it would include in its protocol, but spoke about them in the context of rent affordability and how a project “respects the core values of the market.” Eastern Market Corp. doesn’t have the “ability to tell people how to run their business,” he said, but it could use this protocol to score a building project in the market and decide whether or not the nonprofit will give support to the project in the course of city of Detroit approvals. As part of the same efforts, Eastern Market Corp. has a goal to preserve 25 percent of small-scale commercial space at rents below market rate, Carmody said. He didn’t put a time stamp on it, but said it would apply to properties leasing out commercial spaces smaller than 5,000 square feet in the “historic core” of the market — the area bounded by Gratiot Avenue, I-75, Mack Avenue and St. Aubin Street. Eastern Market Corp. has no way of enforcing this with property owners, but it could include it as part of the protocol and request that developers abide by it. “We would look for every opportunity, from suggesting that landlords old and new set aside part of their space for below-market tenants, as well as looking for creative ways to finance space we own or control or partnering with others who own or control space,” he said.

Preserving lower rents Nelson and several real estate

brokers estimated market rate retail storefront rents in the center of Eastern Market in the mid-$20s per square foot. Renovated commercial space rates across the market currently range from $15-$20, according to Carmody. Eastern Market Corp. expects work to start next week on 15,000 square feet of food accelerator space where it plans to house eight businesses for $7-$11 per square foot. It's leasing space along Adelaide Street from developer ASH NYC. The nonprofit aims to start out offering leases of less than 50 percent of market rate, but those could vary over time to 50 percent-25 percent of market rate, Carmody said. With the pricey renovations required for some of the older Eastern Market buildings, it can be difficult for developers to finance affordable space, some contend. “The idea that somebody could buy a building and keep rent low is very difficult,” said Ben Rosenzweig, a vice president of retail brokerage for Colliers International who is involved in projects in Eastern Market including the redevelopment of the former Detroit Water and Sewerage Department building and the Busy Bee Hardware property along Gratiot Avenue. “When you’re buying properties to redevelop them, rents in some cases are gonna go up, but I think that there’s a balance and things should be attempted to be preserved as somewhat reasonable.” Annalise Frank: (313) 446-0416 Twitter: @annalise_frank

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including a lack of providers, insurance restrictions, stigma and uncoordinated care. Kids are showing up in emergency rooms throughout the state, throughout the country, and not really getting the care they need. We need to throw the stigma in the corner. These are real issues and it’s our responsibility to make sure we’re helping these kids. Burns: Tell us about pediatric cancer research and how it relates to your hospital? Thomas Ewald: Having a child with cancer is one of the most painful and difficult situations we see families go through at Children’s Hospital. One in 285 children in the U.S. will be diagnosed with cancer by the age of 20. Despite those very high numbers, less than 4 percent of the Federal Government’s total funding for cancer research is dedicated to childhood cancers. We want to see these kids survive, and live happy and healthy lives. We can’t do it without this important research.

Dr. Rajen Mody, Professor of Pediatric Oncology and Communicable Disease, University of Michigan and Dr. Jeffrey Taub, Division Chief of Oncology, Children’s Hospital of Michigan

Dr. Robert Shaner, Superintendent, Rochester Community

Larry Burns: A year and a half ago, the two of you put a grant proposal together for a threeyear commitment to research. Tell us about the partnership and what outcomes you hope for. Dr. Rajen Mody: The research proposal we are working on is for precision oncology, where you precisely treat each child’s tumor based on their own genome signature. We are the first group in the country to report that you can, in real time, sequence a child’s tumor and identify the genetic aberration driving that particular tumor, and ultimately, try to find a treatment. In about 35 percent of cases we can identify a drug and make a difference in a patient’s quality of life. Burns: How does the diverse patient base at Children’s Hospital of Michigan give you an advantage in your research? Dr. Jeffrey Taub: We have not only Caucasians but a higher proportion of our patients are AfricanAmerican, Hispanic, ArabicAmerican and other Asian ethnicities. It’s important to identify that sometimes the risk for developing cancer may differ between individuals of different ethnic or racial origins. How they metabolize or respond to our chemotherapy drugs may also differ. The biology of their cancers may differ. Burns: What is a realistic goal over the next couple of years? Mody: One thing that we would like to understand is why the outcomes of minority children are about 15 percent lower compared

Larry Burns: Are you seeing more mental health, behavioral health issues with students? Dr. Robert Shaner: We certainly are, and some of them are severe. We’ve experienced suicides at the middle school and high school level. We have lost students to addiction, and have seen an increase in depression, anxiety, addiction and suicidal ideation. Burns: Is your district trying to educate teachers on how to handle behavioral issues in the classroom? Shaner: We have a team of behaviorists that work with our teachers to help them with behavior management. We’re also working with our PTA on things like mindfulness and teaching kids how to handle stress and anxiety before it becomes a problem. We’re working on removing the stigma to make sure that kids know they can ask for help when they need it. Burns: Are you seeing kids more willing to talk about what’s going on in their lives? Shaner: I do see more openness about it. I still think there’s a stigma, particularly with addiction, and that’s something we’re working on. When I think about the future, I don’t despair. When I visit schools, I have a tremendous amount of hope. I see a lot of love and cooperation. Burns: If a parent thinks their child is having issues, do you have any advice to give them? Shaner: The most important thing when a child is showing signs of struggling is that we don’t panic, that we assure them that things are going to be okay, then we

to their Caucasian and Asian counterparts, despite having similar access and similar therapy. Their toxicity is much greater. We want to understand the genomic signature in minority children to see how they are different. We may not develop a new drug in three years, but if we can at least answer why they develop certain types of cancers more frequently or why they don’t respond to treatment like other children, or why they respond poorly to treatments, that would be a good contribution. Taub: I always want to offer hope to families. We have access to state-of-the-art technology and state-of-theart medical research that we can offer to our patients and that is really critical.

School District

get them some intervention. I can tell you that if someone calls our counselors, social workers, principals or teachers, they’re going to act quickly to make sure that there’s intervention for that child. The challenge is people asking for help or identifying the need for it. If we see the need for an intervention, we should go ahead and intervene and not act like it’s an event. Let’s act like it’s just what it is: something we do on a daily basis to ensure the well-being of our kids. If we really believe that it’s a disease and not a condition of poor judgment, we need to put our money where our mouth is and act like it by not casting a stigma and reaching out a helping hand. It needs to be more routine, just like an intervention we would offer if a child had a literacy issue. The community needs to address it like that. Upcoming health summit Evidence-based research on mental wellness will be the focus of a daylong 2019 Child and Adolescent Behavioral Health Summit hosted by the Children’s Hospital of Michigan Foundation. Hear from local and national leaders in children’s health about suicide prevention, trauma, anxiety and depression, and the stigma of substance abuse during the May 14 event. See the agenda and register now at www.chmfoundationorg/2019bhs

C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 2 9 , 2 0 1 9

OPINION COMMENTARY

The agenda in Lansing just got gerrymandered

t could be a long, hot summer in Lansing. Just as Republican-controlled Michigan Senate subcommittees started passing budgets last week that gut Democratic Gov. Gretchen Whitmer’s priorities for roads and schools, three federal judges dropped a constitutional bunker bomb on the Legislature. The three-judge panel ruled Thursday that the Republican-controlled Legislature engaged in “a political gerrymander of historical proportions” in 2011 when they drew congressional and legislative district boundaries in their favor. The GOP has remained in firm control of the Legislature and Michigan’s congressional delegation ever since. In finding the boundaries of 34 districts violated the equal protection and First Amendment rights of voters by diluting the votes of Democrats and ensuring Republican victories, the federal jurists ordered the Legislature to redraw its maps for congressional seats, the House and Senate by Aug. 1 for the 2020 elections. The ruling orders an unprecedented special election of two-year terms for at least 10 of the 38 state senators in the middle of their four-year terms (and likely any district their gerrymandered district touches). This could lead to an extraordinary realignment of power in Lansing as Democrats try to use a presidential election with a vulnerable White House incumbent on the ballot to win back the House majority for the first time since 2008 and retake the Senate chamber after 36 consecutive years of GOP rule. The redistricting court ruling “adds to a mounting sense on the Republican side of sort of being under siege here,” said former Senate Majority Leader Ken Sikkema, a Republican siding with Whitmer on the need for a major gas tax increase to fix crumbling roads. “At best, it’s a distraction. But worst-case scenario is it kind of hardens the arteries in terms of Republicans vs. Democrats.” Two redistricting lawsuits involving legislative boundaries in Maryland and North Carolina that the U.S.

CHAD LIVENGOOD clivengood@crain.com

Supreme Court is expected to rule on by late June will likely determine whether the Michigan case stands and the maps have to be redrawn, Sikkema said. “I think the court decision was aimed not at the Legislature; it was aimed at the U.S. Supreme Court,” said Sikkema, a senior policy fellow at Public Sector Consultants in Lansing. If the U.S. Supreme Court rules in the favor of plaintiffs in the other states, this could be the first July in recent memory in which the Legislature actually works more than one day at the Capitol. Whitmer is already threatening to veto any transportation budget that falls short of the $1.9 billion in new revenue for roads her 45-cent fuel tax increase would generate. That could create a major budgetary standoff this summer between the first-year governor and a Legislature that’s dug in against increasing the gasoline and diesel taxes that they last increased in 2017 — and now struggle to explain to voters why their 2015 road funding plan hasn’t fixed the roads yet. While this redistricting ruling may seem like just a political power struggle — which it most certainly is — it has real implications for business leaders who had hoped to get anything else done in the Legislature this year or next. If the Legislature is bogged down in a map-drawing exercise this summer and the budget negotiations and road-funding debate stretch into September, that leaves little time this fall to pass a major overhaul of the no-fault auto insurance law or tackle any number of other contentious issues facing the state.

The education reform agenda known as “Launch Michigan” that Business Leaders for Michigan, the Michigan Education Association and other groups are pursuing might have a hard time getting off the launch pad. Dan Gilbert might as well start organizing his 2020 ballot campaign now to reform or repeal the no-fault law. Auto insurance reform has been elusive in the Legislature in off-election years, as evidenced by the state House shooting down Detroit Mayor Mike Duggan’s proposal in November 2017 to let drivers opt out of unlimited medical benefits. Now, the redistricting court ruling weaves in a totally new dynamic as some senators who may have been ready to take the punches for a tough

vote on no-fault could suddenly be back on the ballot next year — starting with a primary in August. There’s already a lot of political calculations by first-term senators as they glance across the Capitol rotunda to see which second or third-term House member may be gunning for their seat in 2022. Now they have to worry about 2020. And to make things even more complicated, some second-term senators re-elected in 2018 probably won’t be able to run for this two-year term because voter-imposed term limits say “no person shall be elected to the office of state senate more than two times.” They’ve already hit the constitutional limit. Before the gerrymandering ruling, several Republican lawmakers were already resigned to the reality that if

they don’t act on no-fault reform by midsummer, either Gilbert or a federal judge handling Duggan’s lawsuit challenging the law are going to forge ahead without them. “Those are the three pathways I see at this point,” said Sen. Tom Barrett, an Eaton County Republican and member of the Senate’s insurance committee. Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

MORE ON WJR Listen to Crain’s Group Publisher Mary Kramer and Managing Editor Michael Lee talk about the week’s stories every Monday morning at 6:15 a.m. Mondays on WJR 760 AM’s Paul W. Smith Show.

Potholes — literally — stand in way of luring mobility companies V

ice President Mike Pence was in Michigan last week to talk about the president’s new trade deal to replace NAFTA. He spent a lot of time outlining why the new deal is better for American manufacturing and job growth. The other topic that he briefly mentioned was infrastructure. Our country has a major issue, and it’s something we’re going to hear a lot about in the next election cycle. This topic obviously resonates with a Michigan audience. Michigan has some of the worst roads in the country; we’ve been hearing a lot about

KC CRAIN Publisher

how we need to fix them, but no agreement on how to do that. Gov. Gretchen Whitmer put forth a 45cent gas tax increase to create more

funding, but so far, it hasn’t gotten a lot of traction in the Legislature. Crain Communications has an automotive publication for the German car market, and we frequently hold events for the European automotive industry. So I spend a bit of time traveling in Germany. One thing you immediately notice is how good their roads are — long, smooth roads that give you the impression they were made from one single piece of concrete. A big difference between my experience here and what I see there: When part of a German road begins

to deteriorate, the entire section is cut out and replaced. They put in multiple layers of concrete. You never see piles of asphalt loosely tossed in a pothole. We all know what it’s like to hear the asphalt pinging around in our wheel wells. We need more accountability for the longevity of our roads. You can’t just award contracts to the lowest bidder. We hear a lot of talk about Michigan fighting to be the epicenter for the future of mobility. Companies are investing millions of dollars in research and development centers that

hope to attract technology investment. The state is working tirelessly to attract new mobility companies to our area. But how do we expect to attract anyone when our roads are in such terrible shape? The roads don’t need “fixing;” they need to be completely replaced. Can we use this as an opportunity to really lead the way in technology infrastructure? I hope as the conversation continues someone is brave enough to step back and look at the whole picture and come up with a real solution and a way to pay for it.

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Attracting tech companies would help diversify economy

hile the Silicon Valley is the undisputed epicenter of tech innovation today, other metro areas have attracted tech companies to help diversify their economies. Austin, Seattle and Boston continue to build on their tech industry heritage while New York, Washington and Los Angeles have emerged as major tech hubs today, too. Unfortunately, tech companies rarely come to mind when you mention the Detroit metro area. And yet the potential here is tremendous. In fact, given the explosive growth many tech companies are experiencing now, they should play a central role in driving the Detroit economic revitalization forward. Automotive is still very much the heart of Detroit, but our economic future relies on business diversification. Recent local successes such as luxury retailer Shinola and pasta sensation Banza are spurring continued business interest in metro Detroit. I believe strongly that tech can take us to the next level. In fact, we’ve built a tech unicorn in the metro area with OneStream Software in Rochester. With our recently announced investment from KKR, the company is currently valued at more than $1 billion. We provide software that simplifies corporate finance and accounting to help companies with financial planning, analysis and reporting. We’ve steadily created local jobs and even opened a second facility in Rochester to accommodate our expanding team. I’d like to think that OneStream is a model for other tech companies to emulate as they build and thrive here in Michigan. But it’s not just about why tech is good for Detroit. In the end, it’s all about why the Detroit metro area is good for tech companies. There are many advantages here for tech startups and established companies alike. Talent is one of the biggest benefits the Detroit Metro area offers for tech companies. Michigan is home to some of the nation’s best universities, offering impressive programs in engineering, computer science and business. As

OTHER VOICES Tom Shea

a result, the Detroit area has a highly educated population with an incredible talent pool. Plus, competition for tech talent remains relatively low here. Colleagues in the Silicon Valley, Austin and Seattle

often complain about the struggle to find and keep top employees. Attracting and retaining quality talent was the top concern in a recent survey of more than 800 CEOs conducted by The Conference Board. Based on our own experience building the OneStream team, I give Michigan a big advantage here. Cost of living and cost of business are another significant benefit for companies in the Detroit metro area. If you look at the cost of living Index for U.S. cities, San Francisco, New York and Seattle rank significantly higher than Detroit. The affordability of the Detroit metro area helps retain talent in a region that is exciting and offers many cultural and recreational activi-

ties. We have a major airport, professional sporting teams, world-class art and music for every taste. Of course, the relatively lower costs translate into business benefits as well. Savings in real estate, operations and professional services can be passed on to customers, making Detroit area businesses highly competitive. “Entrepreneurial spirit” might be harder to quantify, but you can feel it in the Detroit metro area. This is where Henry Ford pioneered automobile manufacturing and Berry Gordy launched Motown. Today it is attracting a new generation of entrepreneurs, seeking to be part of the Detroit economic miracle. Further, we are seeing

exciting new partnerships between industry, government and nonprofit organizations with a goal of revitalizing Detroit, which benefits the entire area. The economic diversification has already begun and the opportunity for tech companies is still wide open. The Detroit metro area offers some of the brightest, most entrepreneurial talent in the country, combined with significant cost benefits and the ability to be part of our region’s big resurgence. It’s an exciting time to be in business in Detroit and an especially good opportunity for tech companies. Tom Shea is founder and CEO of Rochester-based OneStream Software.

TALK ON THE WEB

Re: Ilitches call HBO report on District Detroit ‘inaccurate' I find it sadly funny that everyone always blames the private investors and never the city councils over the years that allowed all these “negatives” to happen. Yet, because of all the private investment, Detroit city is certainly looking a lot better than it did when I emigrated 25 years ago. MarkYTH The truth is the Ilitches are not developers and don’t plan to be, they are pizza business and sports team owners. The real scam was the other nearly $300M that was fined for hiring violations on the LCA project. ... these additional taxpayer funds went toward the costs the Ilitches were to pay. Additionally. I’m not sure why all the property rights outside the arena itself were granted to the Ilitches? If the Ilitches were smart they would realize there is money to be made in downtown residential and commercial real estate development, but again they would have to be a third party to any development. Get real

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New PHOTO ILLUSTRATION BY CAPTURELIGHT VIA ISTOCK

By Tom Henderson | thenderson@crain.com

ast year was a good-news, worrisome-news year for the state’s venture-capital community, according to the just-released 2019 Michigan Venture Capital Association’s annual report. The good news? A dramatic record of $385 million was invested in 61 companies by VC firms either headquartered in Michigan or with offices here, a 36.5 percent improvement over the previous record of $282 million invested in 2015, and 56.5 percent better than the previous second-best total of $246 million in 2008. The number of companies that got VC funding is the

Inside this special report The good news and bad news in venture capital in Michigan . This Page 

 New venture capital firm to focus on health care IT. Page 11

Bank of Ann Arbor executive talks lines of credit, angel investing and moving to Michigan. Page 12 

Growth Capital Symposium scheduled for May 14-15. Page 12 

University of Michigan spinoff puts $8 million funding round to use. Page 13 

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third-highest ever, behind the 74 in 2015 and the 68 in 2015. Numbers compiled by the Washington-based National Venture Capital Association, which includes investments in Michigan companies by VC firms with no physical presence here, buttress that record level of activity. According to the NVCA, 104 Michigan companies got a total of $502.5 million last year, compared with the 78 companies that got $334.4 million in 2017 and the 73 companies that got $252.6 million in 2016. California was No. 1 last year, as it is every year, with 2,869 companies getting a total of $77.3 billion, with New York No. 2 (981 companies, $14.3 billion) and Massachusetts No. 3 (624 companies, $11.9 billion). Michigan ranked 21st.

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The bad news locally? A shortfall of cash on hand to invest in current or new portfolio companies. Of the $3.7 billion under management by state VC firms, 74 percent has already been invested, 10 percent is being set aside for those portfolio companies, with just 16 percent available to invest in new companies. While $337 million is available for follow-on financings for existing portfolio companies, survey respondents say they will need about $967 million for those companies over the next two years.

That shortfall could be short-lived. Eleven state firms are currently raising what they hope will be a total of at least $722 million, according to confidential information submitted by state VC firms to Emily Heintz, whose Ann Arbor-based firm, EntryPoint, compiled the data and wrote the report. And another firm that launched in January and wasn’t included in the MVCA report, Ann Arbor-based Narrow Gauge Venture Syndicate LLC, is raising a fund for early stage companies of what it hopes will reach $10 million. (See related story, Page 11.)

“The report is exciting,” said Ara Topouzian, who joined the MVCA as its executive director in March. Previously he had been president and CEO of the Troy Chamber of Commerce. “The venture community is working with entrepreneurs to build companies and put people to work. ... The innovation going on in the state is fantastic, and it’s being connected to investors.” Of the potential shortfall of current cash available to state venture firms, Topouzian said: “That’s not bad news, but it is something to

keep an eye on. There’s work to be done. There is a need for more outside venture capitalists to come into the state. We want to encourage new venture capital to come into the mix.” Here are some statistical highlights from the research report:  There are 140 venture-backed companies in Michigan, an increase of 37 percent over the last five years.  Michigan is no longer a fly-over state for East- and West-Coast VC firms. Every $1 invested in a Michigan startup by a Michigan-based VC

is matched by $7.85 from companies outside the state.  533 venture firms from outside Michigan have invested in state companies.  46 percent of the companies getting funding in 2018 were IT companies and 32 percent were in life sciences.  859 angel investors invested $52 million in 84 state companies in 2018. That number of angels is 218 percent higher than five years ago, and those companies employ 642. SEE VC, PAGE 14

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C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 2 9 , 2 0 1 9

SPECIAL REPORT: FINANCE

2018 venture-capital investments by state 2018 United States venture capital deals by state and territory Capital Invested ($Millions)

Company Count

# of Deals Closed

California

2869

3063

77,297.63

New York

981

1050

14,311.79

Massachusetts

624

660

11,885.72

Washington

337

366

2,957.47

Texas

398

427

2,686.69

North Carolina

173

185

2,620.56

Illinois

239

253

1,798.38

Florida

212

234

1,735.20

Colorado

258

283

1,635.91

Pennsylvania

250

267

1,496.75

State/Territory

Maryland

131

142

1,375.32

Utah

101

106

1,165.25

Georgia

112

120

1,147.33

Ohio

141

148

1,026.23

Minnesota

117

121

786.47

Virginia

135

145

742.70

New Jersey

732.01

Connecticut

683.12

District of Columbia

676.15

Arizona

538.95

Oregon

100

527.90

104

111

502.48

Indiana

367.74

Missouri

311.27

Wisconsin

254.27

Tennessee

223.39

Kansas

164.18

Delaware

144.72

Nevada

131.61

New Hampshire

127.61

Michigan

South Carolina

91.50

Kentucky

86.47

New Mexico

85.34

Iowa

84.99

Rhode Island

56.78

Oklahoma

52.69

Arkansas

46.49

Idaho

45.36

Montana

44.58

Vermont

36.57

Alabama

30.73

Maine

28.06

Nebraska

26.85

North Dakota

22.23

South Dakota

21.48

New venture capital firm to focus on health care IT By Tom Henderson thenderson@crain.com

Jonathan Goldstein, the former director of entrepreneurial services at Ann Arbor Spark, the economic development nonprofit, has launched a new venture capital firm, Narrow Gauge Venture Syndicate LLC, which will focus on early stage health care IT companies. Goldstein says the firm, based in downtown Ann Arbor, will generally target companies needing to raise between $1 million and $3 million, with initial investments of $100,000 to $500,000. He said he hopes to have a first close this summer on what he hopes will be a fund of $7 million to $10 million. “Part of the reason I took the job at Spark was to see what the needs and the opportunities were,” said Goldstein, who was at Spark for nearly two years before leaving in February to focus full-time on Narrow Gauge. “There’s a real gap for companies between the angel-investor stage and the venture-capital stage. If you are raising $1 million to $3 million, it’s just too small for traditional venture capital to look at. I’m bridging that gap between seed funding and Series A funding. “This is a true micro-VC. We’ll be doing smaller deals in companies that eventually can have an exit of $50 million instead of bigger companies doing exits of $200 million.”

He said he has already invested in his first portfolio company, Redwood City, Calif.-based Naked Labs Inc., which makes 3-D body scanners for home use that give Goldstein readouts on body fat and other health and fitness metrics. “We’ll be agnostic about where companies are based, but we’ll have a focus on Michigan,” he said. “I’m in due diligence on four more companies, a couple of them local companies.” Goldstein was an intern in 2006 at Ann Arbor-based Plymouth Management Co., a venture-capital firm founded by Ian Bund, the dean of the state’s venture capitalists. In 2013, Bund was honored with a lifetime achievement award by Crain’s. “I’ve always considered Jonathan quite a talent,” said Bund, who is Plymouth’s chairman. “He’s paid his dues, and he has a natural talent for marketing. He’s also got very strong people skills. When people meet Jonathan, he’s able to bring quite a bit to the table.” Of what is regarded in venture circles as a gap in funding for those early stage companies that have

got some seed funding but aren’t able to get the attention of larger VC firms, Bund said: “His approach to early stage venture capital is going to be a great addition locally. The need in that space continues to grow. Sources available for that have increased nicely recently, with what Skip Simms has been doing with the Michigan Angels and with the Grand Angels expanding, but there is still a large gap between demand and supply. “But it’s not just a matter of writing checks. It’s doing homework and due diligence to sort out which companies to back, and that’s not easy.” “In the middle part of the country, it is often more difficult to raise the first $1 million of start-up capital than it is to raise $10 million after a company has had some level of success,” said Chris Rizik, CEO of the Ann Arbor-based Renaissance Venture Capital Fund. “This is still true in Michigan, even as venture investing overall here has dramatically increased. We’ve had a number of good funds formed in the past few years to address this issue, but we continue to have a shortage of early stage capital. So a new fund like Narrow Gauge is welcome, and will likely find plenty of opportunity here.” Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

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Louisiana

18.47

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Hawaii

13.89

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Wyoming

12.12

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Mississippi

9.60

Contact Jim Robinson, Southeast Michigan Regional President, at 248.244.2866 for more information.

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West Virginia

7.75

Alaska

3.73

Puerto Rico

2.96

$52 s in 218 ago, 2.

Virgin Islands

Other US Territory

E 14

Source: National Venture Capital Association

Member FDIC

C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 2 9 , 2 0 1 9

SPECIAL REPORT: FINANCE

Growth Capital Symposium scheduled for May 14-15 By Tom Henderson thenderson@crain.com

The 38th annual Midwest Growth Capital Symposium, one of the premier and oldest events in the country matching investors with early stage companies in need of financing, will take place on May 14-15 at the Marriott Eagle Crest resort in Ypsilanti. Thirty-two companies will make presentations about their business models and funding needs, 23 of them from Michigan. The keynote speaker for the opening-day luncheon will be Dixon Doll, co-founder and partner emeritus of DCM Ventures, a venture-capital firm in Silicon Valley, following opening remarks by University of Michigan professor David Brophy, who founded this event before many people had ever heard of venture capital. On Tuesday, there are two panels. The first is on the topic of what you can do when bad things happen to good companies. The second panel is on the rise of corporate venture capitalists and the opportunities they offer to startups. In recent years, corporations have formed their own venture-capital units to invest in technologies that can help their businesses. Some in Michigan include Dow Venture Capital, General Motors Ventures and Spectrum Health Ventures. The panel will include representatives of corporate

Q&A

thend

VCs discussing the strategies they employ for investing and partnering with early stage companies. Wednesday’s panel will be on how robotics in health care is shaping the VC market and future opportunities. At the Tech Transfer Track on Wednesday, representatives from seven Midwest universities will talk about technologies at their schools that are poised for commercialization. Scott Kupor, managing partner at the Silicon Valley VC firm Andreesen Horowitz LLC, will give the keynote speech at Wednesday’s lunch. Following the lunch will be the Biomedical Innovation Cup pitch event, where teams of university researchers and would-be entrepreneurs tell venture capitalists about their business models and get feedback. An associated event will take place over three days after the symposium, called the Venture Capital University Seminar. A series of panels and workshops will be held at the Marriott on Wednesday and at the Ross School of Business at UM on Thursday and Friday. It is sponsored by the National Venture Capital Association, the University of California, Berkeley and the Ross School. Early registration until May 11 is $425 at Michigan-GCS.com. Registration after May 11 and day-of registration is $450. One-day registration for Wednesday is $225. Mike Cole is president of the Bank of Ann Arbor’s Technology Industry Group.

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Bank of Ann Arbor exec talks lines of credit, investing and Michigan Mike Cole has been president of the Bank of Ann Arbor’s Technology Industry Group since 2002, providing loans and lines of credit to area tech companies as well as financing called a capital-call line of credit to the state’s venture capital companies, including Ann Arbor-based Arboretum Ventures LLC and the Renaissance Venture Capital Fund and the Grand Rapids-based Grand Ventures. A 1982 graduate of Michigan State University, he got his MBA from the University of Southern California, from 1993-99 was senior manager in Los Angeles of the Royal Bank of Canada’s Technology Industry Group and then was founder and CEO of Santa Monica-based iKnack before returning to Michigan in 2001. He talked about his group with Tom Henderson, who has been covering venture capital for Crain’s since 2005. What did your California company do and what brought you back to Michigan?

iKnack was involved early on in human-resources management over the Internet. Ultimately, it didn’t go anywhere. My wife and I wanted to move back to Michigan. We had three kids, and we wanted to raise them in Michigan, so we rented an

“One of the reasons I started the Ann Arbor Angels was I was trying to figure out how to get more money off the sidelines.” Mike Cole

RV and drove back in the spring of 2001 with a 4-year-old and 2-yearold twins. It was quite a ride. Founding a technology group at a Midwest bank in 2002 was ahead of the curve.

In the Midwest, we are still ahead of the curve. I don’t think there are any banks here doing what we are doing. Here’s a dumb question for you. You provide a capital-call line of credit for venture capital firms in Michigan. If I have a VC firm that has raised a $100 million fund, why do I need a line of credit?

It provides you with some flexibility in case something comes up. If you raise a fund, you don’t get that money all at once. You make capital calls to your investors when you need money. But an opportunity

might happen quickly, and you don’t have the cash on hand. It might take you two weeks to raise your money from your limited partners. So a capital call from us gets them money quickly. You do a draw on your line of credit and pay it down in 30, 60 or 90 days. Is there a typical size for a line of credit for your VC customers?

It can be anywhere from a couple of hundred thousand to $20 million for a very big fund. You were an early promoter in the state of angel investing, too, starting a group that later morphed into the Michigan Angels under Skip Simms at Ann Arbor Spark.

I started the Ann Arbor Angels in 2004. That was about the time the Grand Angels in Grand Rapids was starting and Dave Weaver had a group in Detroit getting off the ground. I was president until 2014. We were doing about $3 million a year in deals, and then Skip and Tom Kinnear got the Michigan Angels up and running. One of the reasons I started the Ann Arbor Angels was I was trying to figure out how to get more money off the sidelines. Skip’s done a great job of that, raising his Michigan Angel funds, which gets more people involved.

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C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 2 9 , 2 0 1 9

SPECIAL REPORT: FINANCE

UM spinoff puts $8M funding round to use By Tom Henderson thenderson@crain.com

Canton Township-based Fusion Coolant Systems Inc., a spinoff from the University of Michigan that uses supercooled carbon dioxide to lubricate cutting tools used in manufacturing, has wasted no time putting a funding round of $8 million it raised last October to good use. Fusion Coolant uses the liquid CO2 to replace the traditional mix of water and oil used to cool industrial cutting tools, hitting the surface of the tool at between minus-20 and minus-60 degrees Celsius. The CO2 speeds up machining time, increases tool longevity, sharply reduces the cost of cleaning up waste created by the oil and water and the associated health and environmental risks and can be used in a wider range of manufacturing, including implantable medical devices where oil is a contaminant. In March, the company hired Brian Ahlborn as its full-time president and CEO. Ahlborn has more than 30 years in the automotive sector and was recruited from Linamar Corp., a company based in Guelph, Ontario, that had $7.6 billion in revenue last year. Positions he held there included president of its European Group and of the U.S./Canada Group. Previously he served as CEO of Los Angeles-based Transonic Combustion Inc., and as president of Livonia-based McLaren Performance Technologies. Fusion Coolant doubled its square footage in Canton in December from 4,200 square feet to 8,400 square feet and will soon open a new customer center there to demonstrate its technology. The center will triple the company’s machining capacity. The company will open an office in Europe in the second quarter. The company has grown from four to 12 employees and expects to be at 20 by year’s end. The company has recruited Christine Gibbons as chief administrative officer. Previously she had been president and CEO at Ann Arbor-based HistoSonics Inc., a medical-device company that earlier in April closed on a funding round of $54 million, the second largest in state history for a medical-device company. She continues to serve as a consultant for HistoSonics. As is often the case, this funding round was as notable for the validation that came from the reputation of those investing as it was for the money itself. This round included two new lead investors, Material Impact, a recently launched $110 million fund in Boston co-founded by Adam Sharkawy, who has a track record of building medical-device companies and serves on Duke University’s Biomedical Engineering Advisory Board and Texas A&M’s Bioengineering Advisory Board; and Bloomfield Hills-based Michigan Capital Advisors, a private equity firm focused on tier-two and -three suppliers to the automotive industry whose managing partner is Chip McClure, the former chairman and CEO of Meritor Inc. Previous investors who joined the recent round included the Ann Arbor-based Amherst Fund LLC; a University of Michigan fund called

Brian Ahlborn (left), CEO of Fusion Coolant, and Steven Skerlos, University of Michigan professor and company founder. FUSION COOLANT

Christine Gibbons, chief administrative officer for Fusion Coolant.

MINTS, for Michigan Investment in New Technology Startups; and Detroit-based Invest Michigan. “I know Stephen Polk, one of Chip’s limited partners,” said Ahlborn, referring to the former owner of Southfield-based R.L. Polk & Co. who sold the company for $1.4 billion in 2013. “They said they were closing on funding for a company and asked to come in and look at it. This is the third time I’ve done a startup. Personally, I like the small-company environment. “The first thing I liked about the company is I come out of the auto world, where you’re trying to eke out efficiencies of maybe 1.7 percent and if you do, you celebrate. With Fusion Coolant, you’re looking at 2X, 3X improvements over existing technologies. If someone says you can improve the life of your tools by three times, it’s eye-opening. “And then you throw in the fact

that the company already has bluechip customers in auto, aerospace and medical,” said Ahlborn, who said nondisclosure agreements prohibit him from naming who those customers are. Charlie Moret, the president and CEO of Detroit-based Invest Michigan, said it was an easy decision to invest again in the recent funding round. He invested $425,000 this round and has invested a total of $750,000 over three rounds of funding, which is the most money he has invested in any portfolio company. “Their technology is seeing very high demand in the medical, aerospace and automotive sectors, and sales are now growing at an exceptionally rapid pace,” Moret said. Fusion Coolant was founded in 2010 by Steven Skerlos, UM’s Arthur F. Thurnau Professor of mechanical engineering and civil and environmental engineering. In his role as chairman of the company, he had been acting as a part-time de facto CEO. He remains with the company as chief technology officer. In 2004, Skerlos co-founded Accuri Cytometers Inc., which became one of the state’s entrepreneurial success stories. Accuri, which makes bench-top devices to help researchers automate cell analysis, was sold for $205 million in 2011 to New Jersey-based Becton, Dickinson and Co. In 2011, Fusion Coolant won $150,000 as the runner-up at the second annual Accelerate Michigan Innovation event. Subsequently, it got funding of $550,000 in 2012, led by Ann Arbor Spark; $600,000 from the Frankel Fund at UM in 2013; and $1.3 million in 2016, led by MINTS. Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

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Skidmore tapped to do master plan for Uniroyal site By Kirk Pinho kpinho@crain.com

Skidmore, Owings & Merrill LLP has been selected to do a master plan for the former Uniroyal Tire Co. site on the east Detroit riverfront near Belle Isle. The Detroit Economic Development Corp., or EDC, board approved the payment to the Chicago-based firm selection on Tuesday, according to a spokeswoman. The process is budgeted to cost no more than $200,080, with the EDC paying for half and developer Bettis/Betters Development LLC responsible for the other half, according to a briefing memo for the EDC board. The memo says the process is expected to be done in three phases over 10 weeks, with the first analysis, mapping and programming stage taking two weeks, visioning and master planning options taking four weeks, and developing the preferred master plan concept taking another four weeks. It’s not known precisely when the process will start. Skidmore, Owings & Merrill also worked on the Detroit Riverfront Conservancy’s framework plan for the east Detroit riverfront that was unveiled in the winter 2017. “We are very excited that Skidmore is coming back to Detroit to work on this project,” Mark Wallace, president and CEO of the conservancy, told Crain’s on Thursday afternoon. “SOM spent a significant amount of time working on the east riverfront framework project in 2017 and they

KURT NAGL/CRAIN’S DETROIT BUSINESS

The city of Detroit bought the 43-acre Uniroyal Tire Co. site along the east Detroit riverfront in 1981 for $5 million and spent another $3.6 million razing structures and clearing the land.

have a strong understanding of what people love about the riverfront and the potential the riverfront has to become an even better place for our community.” An email was sent to Skidmore seek-

ing comment. A planned roughly half-mile span of Detroit RiverWalk across the Uniroyal site is expected to start construction this year, Wallace said. “It’s something we have been work-

FROM PAGE 10

CONNECTION TO

COM M U N IT Y We travel your roads and live on your streets so we know well what is important to your community. Local knowledge and personal understanding – it’s all connected.

J 27 VC firms operate in the state, 21 headquartered here and six out-ofstate firms with offices here. They employ 85 investment professionals. J Total venture capital under management in Michigan in 2018 was $3.7 billion, down almost 30 percent from the high of $5.3 billion in 2015. But that decline is deceptive. When the state was funding venture capital through the Venture Michigan Fund I and Venture Michigan Fund II, out-ofstate companies had to have state offices to get funding. When the state decided not to fund VMF III, a handful of out-of-state firms closed their local offices, dropping out-of-state money under mangement from $3.05 billion to $1.53 billion. While their funds no longer count in the state total of money under mangement, those firms got used to looking at state deals and continue to invest here. J The total money under management by Michigan-based firms in 2018 was $2.2 billion, an increase of 1 percent over 2017.

An interesting range of funding

FISHBECK , THOMPSON, CARR & HUBER engineers | scientists | architects | constructors

State companies getting funding recently run the gamut of sectors. The largest funding round in state history occurred in January when Kalamazoo-based Ablative Solutions Inc. raised $77 million in Series D funding for its technology to lower high blood pressure by reducing false messages from nerves to the brain that the body is undergoing low blood pressure when in fact it is not. Some other fundraisings of interest: J 100 Thieves, a gaming and e-sports

ing on diligently,” he said. The city had tapped Pittsburgh-based C.J. Betters Enterprise, affiliated with Bettis/Betters, to oversee a planned redevelopment that, at the time, had a projected price tag of

$500 million with 2,000 residential units and retail space. Among the investors in that group was Jerome Bettis, the Detroit native and Pittsburgh Steelers running back until he retired in 2005, the year after Bettis/Betters was awarded the redevelopment contract. In recent years, Dan Gilbert’s team has also been in discussions about the site, Crain’s reported in September 2017. The Bettis/Betters development agreement is with the Detroit Brownfield Redevelopment Authority, which along with the EDC is staffed by the Detroit Economic Growth Corp. Only a little more than one-third of the site has been cleared of contaminants resulting from more than a century of industrial use. Most recently, 1941-78, it was home to a Uniroyal tire manufacturing plant and a Michigan Consolidated Gas Co. coal-gasification plant. The city bought the land from Uniroyal in 1981 for $5 million and spent $3.6 million more razing structures and clearing the site. Remediation of just the western 15-acre parcel cost Detroit-based DTE Energy Co., which now owns MichCon; E.I. du Pont de Nemours & Co.; and Michelin USA Inc. around $35 million. The Michigan Department of Environmental Quality assigned the cleanup cost to DTE, Michelin, du Pont and London-based Enodis plc in 2006. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

Room to improve

community is when it comes to diversity. The local VC world is still a predominantly white and male, and whiter and more male than in the U.S. VC community as a whole. According to the MVCA report: J 61 companies got $385 million from venture capital firms; $53 million was invested in 16 Michigan companies led by a CEO who is a member of an underrepresented group, including $20 million in women-led companies and $33 million in racial minority-led companies. J Just $225,000 was invested in companies led by someone in the LGBTQ community. J Of the 140 venture-backed startup companies in Michigan, 13 percent are led by a CEO who is of a racial minority, while 39 percent of the U.S. population are minorities; 10 percent are led by a woman; 1 percent are led by a CEO who identifies as LGBTQ. J Of the 85 venture capital professionals in Michigan, 9 percent are racial minorities, compared with 30 percent of venture capital professionals nationally. J 12 percent of the state’s VC professionals are female, compared with 18 percent nationally. J None of the state’s VC professionals identify as LGBTQ; 5 percent of the U.S. population identifies as LGBTQ. “I looked at old research reports when I was considering taking this job,” Topouzian said. “In the last five years, there has been a major increase in minority involvement in Michigan, but we still have low numbers. There’s growth that needs to happen. There’s an intentional outreach the MVCA can do.”

One place where there is room for improvement for the state’s venture

Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

startup with operations in Detroit and Los Angeles, raised a Series A round of $25 million, including participation from Detroit-based Ludlow Ventures LLC. J Ann Arbor-based Groundspeed Analytics, an IT startup that helps insurance brokers and carriers make sense of their data, raised a Series B round of $25 million. J Guardhat, a Detroit-based company that makes sensor-based wearables that provide a safer work environment, raised a Series A round of $20 million. An early investor was Detroit Venture Partners, a VC firm affiliated with Dan Gilbert. J Detroit-based StockX, another of Gilbert’s portfolio companies, raised a Series B round of $44 million. It bills itself as the world’s first stock-market of things, enabling the buying and selling of high-demand consumer products, including sneakers, watches, handbags and streetwear. It was reported by Recode that StockX is in talks for another funding round that would value it at more than $1 billion. J Ann Arbor-based NeuMoDx Molecular Inc. raised a Series C round of funding of $20 million for its molecular diagnostics technology. The company is run by a pair of serial entrepreneurs. Jeff Williams is chairman and CEO; Sundaresh Brahmasandra is president and COO. Brahmasandra co-founded Ann Arbor-based HandyLab Inc., where Williams was CEO when it was sold in 2009 for $275 million. Williams then took over as CEO of Ann Arbor-based Accuri Cytometers Inc., which was sold for $205 million in 2011.

C R A I N â&#x20AC;&#x2122; S D E T R O I T B U S I N E S S // A P R I L 2 9 , 2 0 1 9

CRAIN'S LIST: LARGEST STAFFING-SERVICE COMPANIES

Ranked by 2018 revenue Company Address Rank Phone; website

Top local executive(s)

Revenue ($000,000) 2018

Revenue ($000,000) 2017

Average daily employment 2018

Annual payroll 2018

No. of W-2 forms issued 2018

No. of offices in metro Detroit 2018

Kelly Services Inc. 999 W. Big Beaver Road, Troy 48084 (248) 362-4444; www.kellyservices.com

George Corona president and CEO

$5,513.9

$5,374.4

Tata Technologies Inc. 41050 West Eleven Mile Road, Novi 48375 (248) 426-1482; www.tatatechnologies.com

Warren Harris CEO and managing director

425.5 B

417.7 C

Acro Service Corp. 39209 W. Six Mile Road, Suite 250, Livonia 48152 (734) 591-1100; www.acrocorp.com

Ron Shahani president and CEO

371.0

354.1

4,454

143.5

12,608

Strategic Staffing Solutions Inc. 645 Griswold St., Suite 2900, Detroit 48226 (313) 596-6900; www.strategicstaff.com

Cynthia Pasky president and CEO

342.0

340.0

AccessPoint LLC 28800 Orchard Lake Road, Farmington Hills 48334 866-513-3861; apteam.com

Greg Packer CEO and chairman

247.0

245.8

5,343

196.5

12,883

Stefanini Inc. 27100 W. 11 Mile Road, Southfield 48034 (248) 357-2866; www.stefanini.com

Spencer Gracias CEO

235.0

227.0

1,310

0.0

2,010

Technosoft Corp. One Towne Square, 6th Floor, Southfield 48076 (248) 603-2600; www.technosoftcorp.com

Radhakrishnan Gurusamy president and CEO

165.0

130.0

1,021

76.5

1,159

Epitec Inc. 24800 Denso Drive, Suite 150, Southfield 48033 (248) 353-6800; www.epitec.com

Jerome Sheppard, CEO; Josie Sheppard, president

98.0

77.2

950

72.5

1,464

Rapid Global Business Solutions Inc. (RGBSI) 1200 Stephenson Highway, Troy 48083 (248) 589-1135; www.rgbsi.com

Nanua Singh chairman and CEO

88.4

84.8

947

2,685

The Dako Group

Scott Baker president and CEO

74.0

70.0

875

53.0

1,400

Reliable Software Resources Inc.

Ravi Vallem, CEO; Sridhar Kodati, CFO; Venkat Gone, president

69.7

64.3

612

709

Modis Inc.

Carl Lucke vice president

68.0

65.0

780

52.0

1,310

Kyyba Inc. 28230 Orchard Lake Road, Suite 130, Farmington Hills 48334 (248) 813-9665; www.kyyba.com

Thiru Ganesan president and CEO

53.0

52.7

G-TECH Services Inc.

Kouhaila Hammer chairman

48.9

53.4

475

699

Staffworks Group

L. William Brann III, president and CEO; Jason Brann, president and COO

41.0

35.0

2,000

9,000

W3R Consulting

Eric Hardy chairman, president and CEO

40.0

42.0

335

12.7

385

Contract Professionals Inc. 4141 W. Walton Blvd., Waterford 48329 (248) 673-3800; www.cpijobs.com

James Cowper president

33.5

33.0

524

925

Automotive Quality & Logistics Inc.

Sangeeta Ahluwalia CEO

32.6

30.0

456

11.8

1,230

Malace & Associates Inc.

Larry Malace II president

31.4

30.4

993

24.3

2,482

Arrow Strategies LLC

Jeff Styers president and CEO

31.3

34.4

266

19.6

583

Blue Chip Talent D 43252 Woodward Ave., Suite 240, Bloomfield Hills 48302 (248) 858-7701; www.bctalent.com

Nicole Pawczuk CEO

23.5

18.1

211

14.8

354

DriverSource Inc.

David Olshansky, co-owner and COO; Jinan Dalloo, coowner and CEO

19.2

17.0

200

14.0

825

Human Capital Staffing LLC

Mary Oxendine Adams president

4.3

4.7

110

4.3

355

Trillium Teamologies Inc.

Greg Stanalajczo vice president and CMO

2.5

1.8

Industrial Row Drive, Troy 48084 10 2966 (248) 655-0100; www.dakogroup.com Haggerty Road #285, Northville 48167 11 22260 (248) 504-6869; www.rsrit.com Town Center Drive, Suite 2600, Southfield 48075 12 3000 (248) 357-4200; www.modis.com

Michigan Ave., Dearborn 48126 14 17101 (313) 441-3600; www.gogtech.com Northwestern Highway, Suite 200, Southfield 48075 15 24445 (248) 416-1090; staffworksgroup.com Town Center, Suite 1150, Southfield 48075 16 1000 (248) 358-1002; www.w3r.com

Jib St., Plymouth 48170 18 14744 (734) 459-1670; www.aql-inc.com

Crooks Road, Suite 112, Troy 48098 19 5700 (248) 720-2500; www.malacehr.com Franklin Road, Suite 1200, Southfield 48034 20 27777 (248) 502-2500; www.arrowstrategies.com

Michigan Ave., Dearborn 48126 22 15340 (800) 887-9095; www.driversource.net Adams Road, Suite 208, Bloomfield Hills 48304 23 6001 (248) 593-1950; www.hcsteam.com S. Main St., Suite 300, Royal Oak 48067 24 219 (866) TEAM-TTI; www.trilliumteam.com

This list of temporary-employer/staffing-service companies and companies that provide such services is an approximate compilation of the largest companies in Wayne, Oakland, Macomb, Washtenaw and Livingston counties. It is not a complete listing but the most comprehensive available. Crain's estimates are based on industry analyses and benchmarks, news reports and a wide range of other sources. Unless otherwise noted, information was provided by the companies. Companies with headquarters elsewhere are listed with the address and top executive of their main Detroit-area office. The Bartech Group Inc. which was No. 3, Danlaw Inc. which was No. 13, VisionPRO which was No. 21 and CrossFire Group which was No. 25 on last year's list all declined to participate this year. NA = not available.

B Fiscal 2018 revenue listed on company website. C Fiscal 2017 revenue listed in annual report 2016-2017. D Parent company is Computer Consultants of America Inc. LIST RESEARCHED BY SONYA D. HILL

C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 2 9 , 2 0 1 9

SPOTLIGHT

DEALS & DETAILS CONTRACTS JJHealth Alliance Plan, Detroit, a health plan, has partnered with Livongo, a biotechnology company, Mountain View, Calif., to provide HAP Medicare Advantage members with support to better manage their diabetes. Websites: livongo.com, hap.org JJThe United States Advanced Battery Consortium LLC, a subsidiary of the United States Council for Automotive Research LLC, Southfield, and a collaborative organization of FCA US LLC, Ford Motor Co. and General Motors, has awarded a $4.8 million technology development contract to Zenlabs Energy Inc., Fremont, Calif., fa technology developer, for development of battery tech-

nology for electric vehicles. Websites: uscar.org/usabc, zenlabsinc.com JJDeMaria, Detroit, a commercial construction firm, was awarded the construction management contract for pre-construction, construction management and post-construction services for the design team support, bid solicitation, construction and commissioning of the Department of Public Works Administrative Offices and Water & Sewer Building for the city of Livonia. Website: demariabuild.com

cility in Jiaxing, China. The $30 million 185,000-square-foot facility employs 110 and includes production hide finishing, regional customer research and development and a laboratory. Website: gstautoleather. com JJSari Baskin Life Coaching, a life coaching firm, has opened an office at 6022 W. Maple Road, Suite 403, West Bloomfield Township. Phone: (248) 733-3355 Website: saribaskincoaching.com

EXPANSIONS

JJCatalystXL Inc., Detroit, a software company, has developed a mobile productivity platform that communicates sales information to sales professionals. Website: catalystxl.com

JJGST

Autoleather Co. Ltd., Rochester Hills, a leather goods manufacturer, has opened a leather finishing fa-

NEW SERVICES

CALENDAR MONDAY, APRIL 29 2019 Technology in Industry Reveal. 8-11:30 a.m. Automation Alley. Automation Alley’s 2019 Technology in Industry Report will be unveiled. Event includes discussion of key findings of the data, including use cases, emerging trends, challenges, opportunities and action items designed to help business, educators and policy makers. Detroit Institute of Arts. $75 members; $95 nonmembers. Email: events@automationalley.com. Website: automationalley.com/techreveal

WEDNESDAY, MAY 1 Leadership Oakland Breakfast of Champions — David Drews. 7:30-9 a.m. David Drews, CEO of Justus Equity LLC and University of Michigan Executive-in-Residence, will discuss “Creating Impact: Modern Day Les-

sons in Leadership and Life.” Mercedes-Benz Financial Services. $36. Contact: Susan Hollady, email: shollady@leadershipoakland.com. Website: leadershipoakland.com/breakfast-of-champions/ Going Global. 8-10 a.m. Troy Chamber of Commerce. Panel includes: Rick Haas, Mahindra NA; Bruce Thelen, Dickinson-Wright, and Scott Sneckenberger, Plante Moran. Moderated by Chad Livengood, senior reporter, Crain’s Detroit Business. The panel will discuss: Expanding a business globally, foreign market research and strategies; cultural differences in business and impact of trade sanctions on global expansion. Altair Engineering, Troy. $29 Troy Chamber members; $36 nonmembers. Email: theteam@troychamber.com. Website: troychamber.com/events/ going-global

Western Wayne Diversity and Inclusion Experience. 7:30-11:30 a.m. Livonia Chamber of Commerce. Session will focus on implicit bias, one’s attitudes or stereotypes that affect understanding, actions and decisions in an unconscious manner. Event will include comments from Keith Allman, CEO of Masco Corp., who will discuss why his company finds great value in diversity and inclusion initiatives. Followed by roundtable discussions and a brainstorm on how to implement inclusion strategies into an increasingly diverse workplace. VisTaTech Center, Schoolcraft College. $49. Phone: (734) 427-2122, email: tahmouch@ livonia.org; website: livonia.org To submit calendar items visit crainsdetroit.com and click “Events” near the top of the home page. Then, click “Submit Your Events.”

Mi Bank hires president

Jenny Meier, a former executive at Bank of Ann Arbor, is the new president of the de novo Mi Bank, scheduled to open May 28 in Bloomfield Township. Meier, 39, who took on the job earlier this month, is charged with “creating a culture of exceptional Meier customer service and personalized business solutions” at the first newly chartered bank in the state since the Great Recession, according to a news release. Meier will report to Rob Farr, her former boss and the chairman and CEO of the new bank who led a $30 million capital fundraising campaign to create it. Farr founded the Bank of Birmingham, which was acquired by Ann Arbor-based Arbor Bancorp in 2017. “Jenny brings two decades of banking experience to this role,” Farr said in the release. “She has worked in and mastered virtually every facet of the business.”

New president at Cooley Law

Western Michigan University’s Cooley Law School has hired James McGrath as its new president and dean. McGrath starts at the university July 1, according to a news release. He comes from Texas A&M University School of Law, where he has McGrath been for nearly 14 years, most recently as professor of law and director of academic support.

McGrath replaces Jeffrey Martlew, who had been interim president since September 2018, when Don LeDuc retired from the helm after 16 years. Martlew will also return to retirement when McGrath takes the reins. McGrath was chosen after a national search committee involving the law school’s faculty, staff, students and alumni, according to the university. “We will all work together to make our law school a model for the future of legal education,” he said in the release.

Huron River Watershed leader takes new role

After two decades at the helm of Huron River Watershed Council, Laura Rubin is stepping down to join the Healing Our Waters-Great Lakes Coalition as its new director. Rubin, 53, will assume her new role June 3. A search for a new executive diRubin rector of the Ann Arbor-based nonprofit will begin soon, the organization said in a Tuesday news release. “Protecting clean water has always been my passion,” Rubin said in the release. “In my new role, I will expand my focus to the Great Lakes — building bipartisan support for federal programs and policies that can benefit the Great Lakes. But the Huron remains my home river, and I will always support HRWC’s efforts to protect the river.” Rubin replaces Todd Ambs, who left his role at Healing Our Waters in March to serve as the assistant deputy secretary at the Wisconsin Department of Natural Resources, according to a January news release.

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Patricia O’Kane, CPA joins Michigan CFO Associates as a Consulting CFO. Trish brings 25 years of public & private industry experience providing financial and operational leadership to businesses in multiple industries. Trish strives for maximizing cash flow, effective operational & financial practices, risk reduction, & increased profitability. Trish is a volunteer for Gleaners, Our Lady of the Lakes Catholic School, Cub Scouts and is a STEM counselor for Boy Scouts of America. Welcome Trish!

Spencer Jaskiewicz, a project architect in Stantec’s Detroit studio, was recently promoted to associate. Since joining Stantec in 2017, he has worked on many significant projects for the company, including a regional headquarters renovation for a major insurance provider in Tampa and the Disney Springs Cirque Du Sole theater renovation. He regularly volunteers with AIA Detroit, AIA Michigan, and the University of Detroit Mercy Architecture Alumni Council.

Siren PR announces Lindsey Walenga as Chief Executive Officer. Since co-founding the strategic public relations firm in 2012, Lindsey has been the visionary force behind the firm’s 28 percent year-over-year growth average. She is known for her ability to achieve results and influence positive outcomes. Lindsey has fostered a culture of trust and high performance at Siren, leading her team and the firm’s business strategy with sharp instincts, compassion and bravery.

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C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 2 9 , 2 0 1 9 CRAIN’S DETROIT BUSINESS

17 Page 1

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CLASSIFIEDS To place your listing, contact Suzanne Janik at 313-446-0485 or email sjanik@crain.com www.crainsdetroit.com/classifieds

JOB FRONT

LARRY PEPLIN FOR CRAIN’S

Crain’s Senior Reporter Chad Livengood, left, moderates a panel Wednesday morning on Detroit neighborhood revitalization at Crain’s Real Estate Next event on the retail landscape. He’s joined by (from second left) Chase Cantrell, executive director of nonprofit Building Community Value; Jevona Watson, owner of cafe Detroit Sip; Katy Trudeau, executive director of services and infrastructure in Detroit Mayor Mike Duggan’s office; Abir Ali, director of design and culture at developer The Platform LLC; and Alessandro DiNello, president and CEO of Flagstar Bank.

POSITIONS AVAILABLE

Senior Test Engineer; Position: 01; location: Novi, MI.

Job Duties: Analyze cust req & create test case based on specs. Ensure traceability of req test case. Dev automation FW to perform test on Harman’sInfotainment P’forms & Write test scripts to test internal & cust specs both unit & sys level for infot features. team of engin vali/qualifying SW for mult infot prod for var car manufacturers. Perf sys valida on infotainment modules both vehicle & bench setups for Vehicle interface, M’media, BT-WiFi & connect feat. Phone Proj such as Carplay & Android Auto feat. Build test setup for funct test & a’mation test on Infot modules. Create simulation using CAN based tools to repl vehicle envir. Perf infot safety feat test like critical chimes, collision detect & emerg calling using simulation/tools. Create simulation module & test ADAS feat like Collision warning, Lane sens, Auto-park assist, cross traf alerts etc. Repro defect, verify fixed issues. I’tify test scena based on func & busn req, create & m’tain test case. Create test repo of error with supp trace, log files & excel descr. Ensure test results are docu & commu approp & defects have been entered in the defect mgmt tool. status updates, unblock issues & ensure timely deliver. Create reports for validation/automation test result, publish to cust & projects. Req: Bachelor’s deg (or foreign Equal) in CompSci, Engi, IT, Elec/Electro or rel & 5 Yrs of exp in IT of which 3-5 yrs of exp into Auto Infot Test is acceped. Alternate: Master’s deg (or foreign Equal) in CompSci, Engi, IT, Elec/Electro or rel & 3 Yrs of exp in IT of which 2 yrs of exp into Auto Infot Test is acceped. Exp in func & non-funct SW test, STLC & test meth, k’ledge of CAN protocol, CAN analyzer tools & CAPL script. test on Android P’form/Android Apps. Exp analy prod req from cust. automation with CAN, infotainment test automation, scrip lang, program with Python & C#. Unittest of APIs, test case dev, test exec, test mgmt, test status repo. defect mgmt tools/log tools. MS Office, Android test, Wi-Fi, BT, CAN, Neo VI, CANoe. Apply: send resumes to Harman Connected Services Inc, Attn: Mahesh G M; Job Code STE-HCS-M-12 to 2002 156th Avenue NE #200, Bellevue, WA 98007.

Crain’s panel: Detroit residents’ retail needs are path to profit, resurgence of neighborhoods By Annalise Frank afrank@crain.com

The CEO of Flagstar Bancorp Inc., among seven companies kicking in $5 million for Detroit neighborhood redevelopment, said Wednesday that he doesn’t know if the public-private effort will work. Alessandro DiNello, a native eastside Detroiter, acknowledged the bank’s commitment to helping re-energize the Old Redford neighborhood in northwest Detroit, but didn’t shy from stating it would be a long, difficult road. He spoke as part of a panel at Crain’s Real Estate Next event Wednesday at the Fillmore Detroit attended by more than 250. “Can it really happen? I don’t know,” he said at the event. “But we have to try.” Some of the skepticism, DiNello said, comes from listening to neighborhood residents who have seen past endeavors fail. Hearing existing residents’ needs and incorporating them to make development plans successful — in terms of both profit and the greater good — was a common thread through Wednesday’s discussions among industry professionals and city officials. “Patience and commitment” to helping communities needs to be “baked up front” in Detroit real estate development deals, said Abir Ali, director of design and culture for Detroit-based developer The Platform LLC. “I think if that is part of it, then we’re going to see that impact not just impacting returns and development portfolios, but also with the people you’re impacting,” Ali said. Among central topics Wednesday was Detroit Mayor Mike Duggan’s Strategic Neighborhood Fund, a publicly and privately funded campaign to revitalize commercial corridors throughout the city — including in northwest Detroit, where Troy-based Flagstar’s investment will go. The city and bank on Monday announced the investment. Katy Trudeau, executive director of services and infrastructure in Duggan’s office, said there’s business opportunity in building the retail corridors highly demanded by Detroit residents.

Detroiters spend $2.6 billion yearly in the suburbs on goods and services, a study released in 2018 found. Trudeau and others Wednesday brought up the Detroit Economic Growth Corp. study, used to convince investors their dollars are wellspent in Detroit commercial corridors that lack necessary shopping. Influential downtown Detroit landlord Bedrock LLC also has a “long way to go” when it comes to bringing in tenants in service, grocery and other sectors, Jennifer Skiba, vice president of leasing for Bedrock, said at the event. “So we still have just scratched the surface with all that,” she said.

REAL ESTATE AUCTIONS

Changing, but not dying? The input of average residents is also essential outside Detroit, as real estate companies question how to adapt to changing retail preferences in other downtowns and sprawling suburbs throughout the region. At center stage was omnipresent e-commerce. But Joey Agree, CEO of Bloomfield Hills-based Agree Realty Co., is among those battling the perception that brick-and-mortar retail is losing out to Amazon.com Inc. “You have to really ask yourself, ‘Where is, really, the future of retail heading?’ and where it’s heading is an omni-channel future,” Agree said, referencing a term that means using multiple avenues — websites, apps and storefronts — to reach customers, not just online. “And brick-andmortar is by no means dead.” Walkable downtowns in metro Detroit have been forced to reinvent themselves to respond to changes in what consumers want, said Kristi Trevarrow, the Rochester Downtown Development Authority’s executive director. “We can’t deliver like Amazon, but what can everyone deliver?” Trevarrow said. “It’s about that experience ... (cities) have to go inward. They have to figure out exactly from the people that live there who they think they are and where they want to go from there.” Annalise Frank: (313) 446-0416 Twitter: @annalise_frank

POSITIONS AVAILABLE

Senior Software Engineer: 02 Positions: Work Location Novi, MI Job duties: Work cross-func Cust & our dev teams in analyz req & desig Android App s/Serv for Auto Infot proj with on-time & high-qua deliv to mult cust. global SW dev team, develop new feat, debug & write test case for unit test. Lead meetings’s for design review & clarifi in the specifications doc & commu on Framework & Apps SW issue b/w Cust, incl reporting & investige the issue, identify prior, update tracking & root cause doc. Dev & track KPIs each SW rele to insure &meet accep crit. Interact with Test teams & peer teams to share k’ledge in order to p’form dev & debug acti. Supp & mentor less exp peers by shar k’ledge in Android & rel tools to carry-out acti. Keep abreast new tech & methods for purpose of reco change that benefit current & future cust prog. Apply inten & diversified k’ledge of engin princi & practice in broad areas of assignments & rel fields. Qualifications: Bachelor’s deg (or foreign Equivalent) in CompSci/InfoSys /Elec/Electro Eng or equal or rel with 5 Yrs of exp in IT. [OR] Master’s deg (or foreign Equival) in CompSci/InfoSys /Elec/Electro Eng or equal or rel with 3 yrs of exp in IT. also accept/consider (Education equal) Bach’s or Mast’s in CompSci/InfoSys /Elec/Electro Eng or equal provided by Education evaluation agency. Req: Exp in dev & debug large complex SW in real-time, embedded, multiinterface environment. SW design & dev in Android app framework & apps. K’ledge of Android UI des princi, patterns & best practice. Exp Java, Android SDK, XML, Linux, Eclipse, Git & other tools rel to Android based dev. Problem-solv skill with exp on using sys anal & prof tool for debug & perf optimization. Apply: send resumes to Harman Connected Services Inc, Attn: Mahesh GM; Job Code SSE-HCS-M-15 to 2002 156th Avenue NE #200, Bellevue, WA 98007.

Application Development Manager (Multiple Positions) (Accenture LLP; Detroit, MI): Manage project execution to ensure adherence to budget, schedule, and scope. Must have willingness and ability to travel domestically approximately 80% of the time to meet client needs. For complete job description, list of requirements, and to apply, go to: www.accenture.com/us-en/careers (Job# 00703592).

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C R A I N ’ S D E T R O I T B U S I N E S S // A P R I L 2 9 , 2 0 1 9

ARENA FROM PAGE 1

PHOTOGRAPHS BY JOHN SOBCZAK / LORIEN STUDIO

USA Hockey Arena in Plymouth features a wall of “Great Moments.”

Young hockey fans ring cow bells at a recent game at USA Hockey Arena in Plymouth Township.

cilities and lecture spaces upstairs, and a modern gym and puck-shooting area on the lower floor. “It has exceeded our expectations, the value that it brings to our organization. It’s a crown jewel,” Kelleher said. Now, they just need to get more paying fans into the building. Krupsky said the NDTP games can average anywhere from 1,000 to 2,500 a game — some people want to see the future Olympians and NHL stars in action now. The Whalers averaged 2,388 fans per game in their final season of 2015 (Karmanos sold them separately from the arena in 2015 and they relocated to become the Flint Firebirds). The Whalers peaked at 3,226 per game in 2004-05. They averaged 2,781 fans per game over their 18 seasons at the arena — never enough for Karmanos, who publicly complained at times about needing more paying fans for a hockey team that was a playoff fixture. “We’re still trying to build a fanbase,” Krupsky said. NDTP game tickets are mostly $10 to $12. Season tickets range from $270 to $325. Additionally, there are corporate ticket bundles that range from $540 to $1,260, along with four suites. The arena under the new ownership maintains the busy CJ’s Brewing Company restaurant that’s inside the building, too. The retail shop was improved and now sells USA Hockey merchandise and hockey equipment and offers services such as skate sharpening. During the Whalers era, the venue hosted concerts, soccer and even boxing. Karmanos privately funded its $22 million construction.

Detail area Detroit

6 Mile Rd

USA Hockey Arena

14900 North Beck Rd.

Five Mile Rd

14 N Beck Rd

In the four years since buying the building from Detroit businessman Peter Karmanos Jr., Colorado Springsbased USA Hockey’s charitable arm has invested $5.5 million in renovations and a 20,000-square-foot addition that caters to the NDTP’s two teams that call the arena home. The 3,504-seat arena was bought as part of a $19.5 million bond issue by The USA Hockey Foundation in a deal that included the building name change. As a business, it’s been a challenge to shift from a traditional minor-league professional hockey facility that hosted occasional concerts to becoming a training venue for future Olympians, college stars and NHL players. So far, the arena is breaking even financially, said Pat Kelleher, executive director of The USA Hockey Foundation. “It’s done very well. It’s been great for USA Hockey. It’s become a great location for all of our programs,” he said. “It’s been feasible for us to manage and operate. There was a good base of business there that we’ve expanded upon.” The primary tenants in the 170,000-square-foot building are the NDTP’s under-17 and under-18 teams composed of 22 players hand-picked from around the country to train in two-year apprenticeships at the arena. The teams play 40 to 50 games. The arena also is busy with youth hockey and instructional classes, tournaments, figure skating and with college games. Additionally, its Olympic rink is the home ice for powerhouse Detroit Catholic Central High School’s hockey program. Perhaps the highlight so far under USA Hockey’s ownership was the U.S. Women’s National Team beating Canada, 3-2, in the gold-medal game during the 2017 International Ice Hockey Federation Women’s World Championship. It drew a building-record crowd of more than 4,000. “The hockey was rocking that night,” said Pete Krupsky, broadcaster and media relations liaison for the NDTP at USA Hockey Arena. Krupsky would know because he’s been there for the entire evolution of the arena. He spent 25 years doing broadcast and media relations work for the Plymouth Whalers before joining USA Hockey when it bought the building. “They’ve really transformed the place,” he said. “I was proud to be a Whaler, but this has been a nice page-turner for me.” Some of the upgrades include an entirely new red, white and blue color scheme inside the building to match the organization’s Olympic colors. The interior walls are lined with large photos of famed program alumni and other sources of pride. There are motivational sayings painted along hallways to inspire the players. USA Hockey also did general refreshing and upgrades such as new dasher boards and glass around the building’s two ice sheets, added video boards along with improved sound and lighting, and new flooring. Out of public view, entirely new locker room and support facilities were constructed for both NDTP teams. There are new eating and lounge areas, and new laundry and maintenance equipment. The biggest investment was a two-story 20,000-square-foot addition onto the building that houses the USA Hockey offices, classrooms, video fa-

N Territorial Rd

“We’re pretty much out of the concert business,” Krupsky said. The arena for many years has held drive-in movie nights in the parking lot during the summers, and that will return this year. That parking lot, for years crumbling and rutted with potholes, is the final planned capital project at the arena. The ongoing repaving should be done by June, Kelleher said. The movies are one of the many revenue streams used by USA Hockey to finance its mission in Plymouth. The arena, as is industry practice, sells corporate advertising signage and sponsorships deals. Current advertisers in the main rink include Schoolcraft College, Hines Park Lincoln, St. Joseph’s, Dunkin, Kroger, TCF Bank,

Nike, Pepsi and University of Michigan’s sports medicine. Revenue from the arena’s events finances operations and pays off bonds issued by the Colorado Educational and Cultural Facilities Authority, which issues low-interest tax-exempt bonds for cultural and educational institutions. In addition to the $5.5 million for the expansion and renovations inside the building, $19.5 million was used for the purchase price and to retire some previous USA Hockey Foundation debt, Kelleher said. The bonds, which mature in 2030, are repaid from the arena’s revenue and from other money generated by USA Hockey. USA Hockey Inc. is the governing body for organized amateur ice hockey in the United States, and its National Team Development Program launched in 1996 is used to develop elite youth players. Nearly 600 kids have gone through the program, which is 22 players in under-17 and under-18 teams. The program scouts and picks the roster every year. Nearly 80 percent of NDTP participants have gone on to play college hockey, including 47 at the University of Michigan, according to the organization’s data. And more than 300 since 1999 have been drafted by NHL teams. There were 85 NDTP alums on 29 NHL rosters this season. The Florida-born Hughes will be the next NHLer. He’s set various NDTP records, wowed the hockey world and is widely expected to be the No. 1 pick by the New Jersey Devils in the NHL draft that begins June 21 at Rogers Arena in Vancouver. In an emailed statement from Finland, where he was playing in the 2019 International Ice Hockey Federation Under-18 Men’s World Championship, Hughes praised his team’s home arena. “USA Hockey Arena is an unreal facility with lots of awesome resources. Two rinks, an NHL-like gym, shooting room and so many other things make USA hockey arena a great place to train and play,” he said. The NDTP was founded in 1996 and played until 2014–15 as a lessee at the 1,000-seat Ann Arbor Ice Cube. The program wanted its own space, and USA Hockey opted to buy Compuware Arena when Karmanos decided to get out of the minor league hockey business. Karmanos, who remains a minority owner of the NHL’s Carolina Hurricanes, still visits to watch his youngest children learn hockey at the

arena he named for the Detroit-based software company he co-founded in 1973. “I’m at USA Hockey Arena almost every weekend. They have done a magnificent job on the building and the U.S. elite development program,” he said. The NDTP U-17 team is part of junior hockey’s United States Hockey League, and is part of international tournaments. The U-18 team plays a USHL schedule but also college teams and international opponents. The program has produced notable NHL names such as Dylan Larkin and Jimmy Howard of the Detroit Red Wings, along with Patrick Kane, who was top pick in the NHL’s 2007 draft by the Chicago Blackhawks and has won three Stanley Cups. Other NDTP alums include Ryan Suter of the Nashville Predators and Minnesota Wild, Livonia native Ryan Kesler of the Vancouver Canucks and Anaheim Ducks, Phil Kessel of the Pittsburgh Penguins, and Jack Johnson, who grew up in Bloomfield Hills and was a No. 3 overall draft pick in 2005 by Karmanos’ Hurricanes and now plays for the Penguins. Some of those players, such as Larkin, visit USA Hockey Arena to talk to the players or to use the facilities for off-season practice. Another visitor is Red Wings Coach Jeff Blashill, who played college hockey and roomed with NDTP U-17 coach Seth Appert at Ferris State. While the refreshed and expanded hockey arena is nice, it’s not luxurious, Appert said. That comes at the collegiate and professional level. Instead, USA Hockey Arena is clean, modernized and functional — not unlike a boot camp. That suits Appert, who is in his second year coaching the NDTP U-17 team. He called USA Hockey Arena an “accelerant” for the program’s strategy of identifying and grooming the nation’s best youth hockey players to go on to play collegiate, Olympic and NHL hockey. He likes that the building lacks fripperies because part of the point of the program is to create gentleman players without destructive egos. The arena also raises the program’s profile in the hockey world. “It’s the front porch for USA Hockey,” he said. “It’s helped USA Hockey become incredibly more visible. This is the place to play.” Bill Shea: (313) 446-1626 Twitter: @Bill_Shea19

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GUARDIAN FROM PAGE 3

Great Lakes Coffee Roasting Co. and Crazy Gringo, a carryout restaurant with Mexican food, have also opened, the county said. Event revenue has gone from $18,100 in FY 2014-15 to $142,400 in FY 2017-18, the county said. The county charges $4,000 to hold an event in the promenade and $2,000 to hold one on the 32nd floor, Rahal said. “Weddings, special events, auto show functions, birthday parties, bar mitzvahs, a lot of office event stuff, the whole gamut,” Rahal said describing the types of events people rent space for. “When we took office, Wayne County had accumulated too much real estate and liability and we needed to assess all our assets, including the Guardian Building, which was losing money,” Wayne County Executive Warren Evans said in a statement to Crain's. “We’ve changed the way the building is managed. We are managing it efficiently enough to cover our operating expenses while investing in capital improvements to maintain one of Detroit’s finest buildings.” The Guardian Building opened in 1929. “We are very proud of the fact that our occupancy rate is well above 90 percent as we celebrate the 90th anniversary of this great building,” Evans’ statement continued. “It’s such a great part of the Detroit skyline. We are excited about its future.” However, the building still has some challenges to contend with, in-

UNITED WAY FROM PAGE 1

Those are the questions the board is asking Driver Hudson and her team to explore, he said, along with revenue diversification through things like planned gifts from longtime supporters or new ways to engage millennials. The goal is more refinement than reinvention, Petroff said. “How do we position ourselves in the market to demonstrate our relevance, and who do we position ourselves toward to demonstrate our relevance?” United Way launched over 100 years ago as an organization that aggregated workplace campaign donations in urban areas that didn’t have the same sense of community and safety nets as rural areas. In the 1950s, the United Auto Workers negotiated a plan to allow carmakers’ employees to donate through payroll deduction, cementing the relationship between the groups that took on the United Way name in the 1970s and corporations. But workplace contributions began to decline as donors increasingly sought to give directly to causes. The Detroit-based agency in 2004 began shifting to what it called a “community impact model” in an effort to expand its impact and relevance beyond third-party fundraising. After talking with more than 7,000 community stakeholders about the most pressing needs in the region, it shifted its broad-based support of local charities to those working in three areas: basic needs, which it now refers to as “health”; financial stability; and education. It continues to operate a workplace campaign to raise money for programs in those three areas.

The Guardian Building’s banking hall has a three-story vaulted ceiling.

cluding a perception in the market that it’s strictly a government office building, as well as floor plates that shrink the higher in the building you go, said Sam Munaco, president of Southfield-based brokerage firm Advocate Commercial Real Estate Advisors of Michigan LLC “I have worked on a couple renewals there,” he said. “I don’t have people pounding down the doors on me because it’s still got a governmental flavor to it. It’s not a traditional land-

lord developer, but I love the building with the Pewabic tile. Tenants love walking in that lobby. But it’s a little bit of a challenge to lease up, and I’m glad to hear they are in the black now.” The county relocated its offices there in 2009 after a dispute over lease rates with Old Wayne County Building LP, the previous owner of the Old Wayne County Building. The county bought the Guardian in 2008 for $14.5 million from the De-

It also began operating a number of programs like the 2-1-1 health and human services hotline and early childhood centers. And it carved out a “convener” role that put it at the head of the table in aligning nonprofits, public and private groups to spur efforts working on issues in its three pillar areas. Fifteen years later, the annual campaign is still at the core of everything it does, Petroff said. “I think everybody recognizes that ... even on a national and global level.” Detroit’s United Way is largely dependent on the annual campaign and foundations for revenue, he said. “But there’s a whole revenue model emerging around the direct to donor approach” that can supplement those.

its annual campaign, with a target of $46 million, wraps up. “We’re still projecting to be on target with our campaign for this year,” she said, pointing to the 2019 Ford GT Heritage Edition VIN 001 auctioned off by the automaker in January to raise $2 million for United Way, along with other corporate support. One strategy already rising up at United Way is an increased focus on volunteerism, something helped by the inclusion of a new volunteerism goal in this year’s annual campaign, said Driver Hudson. Joe Hinrichs, executive vice president and president of global operations at Ford and campaign cabinet chair for the Detroit-based United Way’s 2018-19 annual campaign, put the new volunteer goal in place, already beating a stretch goal of 28,000 volunteer hours. Engaging volunteers isn’t a new approach for United Way, Petroff acknowledged. “But what we’re doing (now) is using volunteerism as an opportunity to engage at a higher level with millennials who view volunteerism as the entrée to engaging with a nonprofit,” he said. United Way is working with organizations including nonprofit consultancy and investment firm Mission Throttle LLC and Deloitte LLP, which is providing pro bono consulting, to help with the conversations Driver Hudson said she is having with hundreds of nonprofits, donors and corporations, foundations and other stakeholders. The nonprofit isn’t just looking at its current pillars. It’s looking at the overall system, “making sure that ... we’re the safety net for the safety nets, if you will,” Driver Hudson said.

Revenue declines In its annual report for 2018 provided to Crain’s, United Way reported a $2.8 million loss, its third in as many years. Revenue totaled $61.4 million, with $44.5 million of that coming through its annual campaign. Expenses totaled $64.2 million. Last fall, it laid off 13 people, eliminated nine more positions and reduced costs on everything from consultant contracts to budgets for meetings and travel by 20 percent, to offset a $3.5 million shortfall in unrestricted funding during fiscal 2018. The cuts closed the shortfall for fiscal 2018 and a projected shortfall for this year, Driver Hudson said. For fiscal 2019, which ends June 30, United Way has a $56.7 million budget. In March, it moved from downtown Detroit to cheaper office space in the Fisher Building, in New Center. Driver Hudson declined to give projections on how fiscal 2019 is trending, noting that 75 percent of United Way’s revenue actually comes this quarter as

Sherri Welch: 313 (446-1694) Twitter: @SherriWelch

JACOB LEWKOW FOR CRAIN’S

troit-based Sterling Group. The 226,000-square-foot Old Wayne County Building, at 600 Randolph St., and a 120-space county-owned parking lot at 400 E. Fort St. were purchased in 2014 for $13.4 million by 600 Randolph SN LLC, a private New York City investment group. The county paid more than $14 million for the 1,450-space First Street Parking Deck at 621 First St. in 2010. The garage has generated $1.1

million, $1.35 million and $1.56 million in revenue the last three fiscal years, said James Martinez, communications director for Evans. A sale of another county-owned building at 511 Woodward Ave. next to the Guardian Building to Birmingham-based real estate investor Zaid Elia for $4.95 million is expected to close this summer. There has long been speculation that ultimately the county and Dan Gilbert would strike a deal to sell the billionaire founder and chairman of Quicken Loans Inc. and Rock Ventures LLC the Guardian Building in the future. Earlier this year, Evans left the door open to selling the building to Gilbert during a Crain’s Detroit Business event when he remarked, “I’ve got a feeling that we’ll have more deals with Rock before my term is over.” Last week, Rahal said the county has “not received any offers for the Guardian.” “We are not in a rush to get out of the building by any means,” he said. “We have a lot of things going on. We are trying to build a criminal justice complex and run county government. If we were to receive and offer to leave the building, it would have to put us in a better situation. Right now, we owe $59 million (in bonds on the Guardian and other properties) and when the sale (of 511 Woodward) closes, it will be $57 million.” Plus, where would the county end up? “We would have to find a place to go, and that’s not easy,” Rahal said. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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PHARMACY FROM PAGE 3

Officials for Michigan’s Medicaid program also have taken steps to more effectively control and monitor pharmacy benefit manager practices. Last October, Michigan Medicaid banned the practice of spread pricing and now it is forbidden in contracts the state has with health insurers. Under the spread pricing strategy, PBMs purchase drugs from pharmaceutical companies, charge health plans, self-insured employers and Medicaid higher prices and reimburse pharmacies at lower prices, pocketing the difference as profit. In other words, spread pricing is the difference between what a PBM pays a pharmacy for a medication and what it charges Michigan Medicaid. While spread pricing may not be illegal, Larry Wagenknecht, president of the Michigan Pharmacist Association, says the practice is unfair. The association’s report argues that the PBMs are reaping inordinate profits at the expense of Michigan Medicaid and the independent pharmacists. “Pharmacies know reimbursement has decreased on generic drugs the past two years. We are getting 49 cents above drug acquisition costs,” Wagenknecht said. “Medicaid reimbursement is going south. We didn’t know exactly what the PBMs were doing before, but we knew it is not fair.” John Gross, a pharmacist and owner of three independent pharmacies in Clare County, told the Michigan House health policy committee last week that the actions of the PBMs threaten his business. “The financial strain that PBMs have placed on community pharmacies like mine becomes greater every day,” Gross said. “The status quo simply isn’t acceptable. These practices are predatory and only put the pa-

Wagenknecht

Pallone

tient-pharmacist relationship at risk.” The PBM industry and the Michigan Association of Health Plans have pushed back on the allegations that PBMs are reaping unjust profits. PBMs serve as middlemen between pharmacies and insurance companies, determining which drugs will be covered by insurers and negotiating reimbursement rates paid to pharmacies for filling prescriptions. PBMs argue they save payers money by bringing negotiating power to bear on drug pricing, and they pass part of the savings along to payers. The Pharmaceutical Care Management Association said in a statement to Crain’s: “Pharmacy benefit managers are hired to reduce prescription drug costs and improve the quality of benefits for consumers, employers, and public programs, including Medicaid. The plan hiring a PBM always has the final say on contract terms.” PCMA, which includes OptumRx and ExpressScripts, two of the larger PBMs operating in Michigan, called the MPA report “irrelevant, given that beginning October 2018 Michigan decided to no longer use spread pricing contracts in the Medicaid program.” Blue Cross uses ExpressScripts, and United Healthcare owns OptumRx. Dominick Pallone, executive director of the Michigan Association of Health Plans, said the association is willing to work with the MPA or any other stakeholder to “ensure the transparent model required in the

state’s current contract, but we believe strongly that the whole health of the individual is best served through an integrated benefit which includes the management of prescription benefits.” Pallone said he is concerned some independent pharmacies have had their prices cut too low for generic drugs from Medicaid. Michigan Medicaid managed care organizations manage about $250 million a year in generic drug spending. “Something happened. I don’t deny that some plans using PBMs used spread pricing. The report probably shows that,” said Pallone, adding: “I don’t believe that it cost the state money. We completely disagree there are ($64 million in) savings to be had from the state.” Pallone said the solution for pharmacists is for the state to pay health plans a higher drug administrative rate, which would allow the plans to pass along higher payments to PBMs and then to pharmacies. However, the state’s 2019-2020 budget proposal would make things worse for pharmacies, he said. It calls for a $19.9 million, or 20 percent, cut in administrative fees to the health plans, reducing the amount from about $6.03 per claim to about $4.83. “A 20 percent cut to us means that will be pushed down to the reimbursement side to pharmacists,” he said. “Something needs to be done about this or everyone will be affected.” Wagenknecht said he is concerned about the proposed rate cuts, but is skeptical that if the PBMs received higher rates, anything would be passed along to pharmacies. “It is not their practice,” he said. A spokesman for the Michigan Department of Health and Human Services, which oversees the state Medicaid program, said officials have asked its actuaries to review and eval-

“We are working on legislation so that small mom-and-pop shops (pharmacies) don’t go out of business. Some get reimbursed negative dollars to fill a script. PBMs are getting richer with spread pricing. The (MPA) report only shows generic drugs. But PBM spread pricing (accounts for) up to 30 percent of every dollar.” Rep. Abdullah Hammoud, D-Dearborn

uate whether an adjustment should be made to the administrative rates paid to health plans and service rates paid to pharmacies. “MDHHS has reviewed the study commissioned by the Michigan Pharmacists Association. The department acknowledges the concerns around spread pricing that this study calls attention to and, in fact, made substantial changes to the Medicaid Health Plan contracts in fiscal year 2019 in order to address these concerns as soon as we became aware of this issue,” according to the MDHHS statement. “The time period that was reviewed as part of the study (first quarter 2016 through first quarter 2018) predates the resultant contract enhancements made in October 2018.” In addition, MDHHS mandates in contracts between health plans and PBMs that the reimbursement methodology to pharmacies must be based on the actual amount paid by the PBM to a pharmacy for professional dispensing and ingredient costs.

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To expand on the steps MDHHS has already have taken, state Rep. Abdullah Hammoud, D-Dearborn, this week said he will introduce a bill to help independent pharmacies survive and provide greater oversight of the pharmacy benefit managers. “We are working on legislation so that small mom-and-pop shops (pharmacies) don’t go out of business,” Hammoud said. “Some get reimbursed negative dollars to fill a script. PBMs are getting richer with spread pricing. The (MPA) report only shows generic drugs. But PBM spread pricing (accounts for) up to 30 percent of every dollar.” Hammoud said his bill would address at least three issues: set prices like under Medicaid fee-for-service to pharmacies based on average drug prices and a small administrative fee; mandate PBMs be regulated and licensed with greater financial disclosure in Michigan; and allow any pharmacy willing to accept contract prices to be included in PBM networks. “We need more transparency in the system. Under the current structure, independent pharmacies are being forced to close their doors,” Hammoud said. “This will ensure pharmacists get dignified reimbursement and based on the report, the Medicaid system is paying too much to the PBMs.” Pallone agrees with parts of Ham-

moud’s bill. For example, if a pharmacy accepts rates paid to it that it should be allowed to stay in the network. He said the only reason to reject a pharmacy from a network is if there is “fraud and abuse or (they are) not a good actor.” However, Pallone noted that PBMs are already licensed as third-party administrators and file with the state Department of Financial and Insurance Services. He said MAHP has no opinion yet on whether the state should license and regulate PBMs as PBMs. “There would be more financial information and more disclosure,” Pallone said. “This is a national debate. We’d like to see more transparency for the drug companies.” Wagenknecht said he hopes the Michigan Legislature takes action on Hammoud’s proposed bill this year and also addresses a whole range of issues related to PBMs and pharmacy prices. Last year, Senate Bill 287 was introduced that would have regulated and increased transparency of PBMs and addressed the overall double-digit increase in prescription drug prices. The Senate never scheduled a hearing, and the bill died. Pallone said he supports Michigan’s current prohibition on spread pricing and could accept additional transparency for the PBMs. But he said last year when Ohio banned the practice, there were no major savings to its Medicaid program or major increases in prices paid to pharmacies. Pallone said health plans can always change PBMs. “There are plenty of other PBMs to work with. PBMs have produced savings from taxpayers’ perspective,” he said. Antonio Ciaccia, Axis’ co-founder, told Crain’s his company’s study in Ohio found pharmacies incurred massive cuts in prices from PBMs midway through 2016. The cuts amounted to up to 80 percent on pharmacy Medicaid profit margins, he said. “Ohio Medicaid didn’t have an answer. Ohio health plans did not have answers. We looked at what was charged. The rates (paid to PBMs) were going up. That didn’t make sense” if rates paid to pharmacies were being cut, Ciaccia said. “PBMs were capturing 31 percent of the overall spend on generic drugs. The state didn’t know PBMs taking (that much) from middle, $224 million” and kept an average margin of 8.8 percent, he said. “There is a lot of money being skimmed off the top and the bottom in these drug programs.” Ciaccia said the Ohio attorney general, Dave Yost, who had been the state auditor last year, is investigating several PBM practices to determine if funding can be recouped. In March, Yost sued OptumRx in an attempt to recover $16 million in alleged overcharges to the state workers’ compensation fund. Last year, Ohio Medicaid wanted to carve out pharmacy benefits from the health plans and create a single PBM for the state, but that effort stalled and new legislative proposals are being introduced. Wagenknecht said PBMs should provide additional transparency to state Medicaid officials and the public. “We think the state ought to get money back from the $64 million” that was overcharged and pharmacies should be reimbursed at higher rates, he said. Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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crainsdetroit.com Editor-in-Chief Keith E. Crain Publisher KC Crain Group Publisher Mary Kramer, (313) 446-0399 or mkramer@crain.com Associate Publisher Lisa Rudy, (313) 446-6032 or lrudy@crain.com Managing Editor Michael Lee, (313) 446-1630 or malee@crain.com Product Director Kim Waatti, (313) 446-6764 or kwaatti@crain.com Digital Product Manager Carlos Portocarrero, (313) 446-6056 or cportocarrero@crain.com Creative Director David Kordalski, (216) 771-5169 or dkordalski@crain.com Assistant Managing Editor Dawn Riffenburg, (313) 446-5800 or driffenburg@crain.com News Editor Beth Reeber Valone, (313) 446-5875 or bvalone@crain.com Special Projects Editor Amy Elliott Bragg, (313) 446-1646 or abragg@crain.com Design and Copy Editor Beth Jachman, (313) 446-0356 or bjachman@crain.com Research and Data Editor Sonya Hill, (313) 446-0402 or shill@crain.com Newsroom (313) 446-0329, FAX (313) 446-1687, TIP LINE (313) 446-6766

DERQ

Derq’s equipment is intended to make predictions about vehicles that are going to run red lights before they do it, and broadcast immediate warnings to vehicles in the area.

STARTUPS FROM PAGE 3

PlanetM has maintained a Pilot Grants program that intends to distribute up to $1 million by year-end to startups that test their tech either at proving grounds, such as Mcity in Ann Arbor or the American Center for Mobility in Ypsilanti Township, or on public streets. The Michigan Economic Development Corp. is expected to announce more recipients early this week. Creating symbiotic relationships between established companies and savvy startups is part of the goal. “They want to prove out their technology, and the best way to do that is have real-world situations for them to solve,” said Seun Phillips, director of PlanetM. “And the corporations here are interested in the disruptive technology that’s coming from the mobility side.” As many as five more companies could receive grants this week, and two more testing locations could be added. In June, Phillips said, a delegation from Michigan will attend EcoMotion, a conference that showcases Israeli tech startups in Tel Aviv, and seek to attract more companies. Here’s a closer look at the testing these startups have begun in Michigan.

Derq Derq’s artificial intelligence is designed to do two things. It makes accurate inferences about vehicles that are going to run red lights before they do it, and it broadcasts immediate warnings to vehicles in the area. It also predicts the intentions of pedestrians and other vulnerable road users and alerts vehicles if a conflict is anticipated. The system must make such forecasts with enough time to give motorists a two-second warning. “The metric we’re seeing and shooting for is an ability to predict true positives 90-plus percent of the time, and we’re doing that with extremely low false positives,” said Will Foss, director of business development and partnerships for Derq, which received an $80,000 grant from PlanetM. Foss said the company plans to expand testing in Michigan and else-

REPORTERS Annalise Frank, breaking news. (313) 446-0416 or afrank@crain.com Jay Greene, senior reporter, health care. (313) 446-0325 or jgreene@crain.com Anisa Jibrell, breaking news. (313) 446-1612 or ajibrell@crain.com Chad Livengood, senior reporter, Detroit rising. (313) 446-1654 or clivengood@crain.com Kurt Nagl, breaking news. (313) 446-0337 or knagl@crain.com Kirk Pinho, real estate. (313) 446-0412 or kpinho@crain.com Bill Shea, enterprise editor, the business of sports. (313) 446-1626 or bshea@crain.com Dustin Walsh, senior reporter, economic issues. (313) 446-6042 or dwalsh@crain.com Sherri Welch, senior reporter, nonprofits and philanthropy. (313) 446-1694 or swelch@crain.com

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HAAS ALERT

A notification on an infotainment screen shows how HAAS Alert envisions warning drivers about nearby emergency vehicles.

where in the U.S. next year. Though the company remains agnostic on whether its V2X, or vehicle-to-everything, warnings are sent via Digital Short Range Communications or over cellular networks, Derq has demonstrated its software while using Qualcomm’s cellular chipsets, which can alert autos that have V2X built in or have an aftermarket receiver. An unforeseen benefit has developed since Derq started testing. As the use of e-scooters has sprouted around the city, the company’s data has given city transportation officials and safety advocates insight into where and how they move around. “Before, it was bikes and pedestrians,” Foss said. “Now there’s a whole new class of vulnerable road users that are kind of on the sidewalk, sometimes not, and kind of like a bike, but not a bike. So we’re looking at their usage and behavior, and learning to predict and understand how they’re impacting risk.”

HAAS Alert Six years ago, HAAS Alert founder Cory Hohs was nearly struck by an ambulance speeding through an intersection in Chicago. The experience stuck with him. In his mind, a flashing light isn’t sufficient warning.

So he created an aftermarket transponder about the size of a deck of cards that fleet managers of emergency vehicles can install themselves. The devices can understand real-time location, and further understand if the lights on the vehicles are flashing or whether buckets are deployed on utility vehicles. All that information can be disseminated via cellular networks. Alerts are available through the company’s app or integrated on the Waze navigation app. The Grand Rapids Fire Department has installed HAAS Alert on vehicles throughout the western Michigan city. As the pilot project has gained traction, Hohs says he has heard from an unexpected contingent — ride-hailing drivers who are deaf or have partial hearing loss are interested in receiving visual alerts. The information becomes no less important in an autonomous era. “In automated vehicles, this becomes even more critical,” Hohs said. “We’re coming from an off-board sensor using cellular technology to tell a vehicle what’s coming up and who’s about to blow the light at an intersection.”

Humanising Autonomy One key challenge for autono-

mous vehicles is that it’s not enough to detect and identify obstacles in their paths. They need to understand how those obstacles, namely vulnerable road users, are going to behave in the immediate future to seamlessly function. “For now, autonomous vehicles are being trained in low-density pedestrian environments like Phoenix or Mountain View [Calif.], and there’s a reason it’s being done there,” said Leslie Nooteboom, a co-founder of Humanising Autonomy, headquartered in London. “It’s easier to drive where there’s less people. If you want these vehicles to truly drive in cities or crowded urban environments, they’ll need to understand people.” To do that, the company uses AI to evaluate behavioral patterns and movements to anticipate with a high degree of accuracy whether people plan to cross a street or wait for passing traffic. Already working with Daimler and European aerospace company Airbus, Humanising Autonomy is testing a permutation of its technology in Ann Arbor that isn’t intended for self-driving vehicles, but instead for city buses. The company is collaborating with the Ann Arbor Area Transportation Authority to give bus drivers alerts on the likely actions of vulnerable road users.

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Pure Michigan to debut album of ambient sounds

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lymouth Township-based electric vehicle startup Rivian Automotive LLC has scored another significant investment, this time $500 million from Ford Motor Co., the companies announced last Wednesday. In another move to shore up its electrification efforts, Dearborn-based Ford also said it plans to build a battery EV using Rivian’s flexible skateboard platform. The move comes weeks after talks between Rivian and General Motors Co. reportedly broke down. GM reportedly had been interested in becoming an equity investor in Rivian, much like Amazon.com Inc., which invested $700 million in the startup in February. Ford executives declined to say what type of vehicle the company would develop on Rivian’s skateboard platform, where it would be built or when it would go on sale. They said it would not be one of the two BEVs Ford has already announced. Ford CEO Jim Hackett said the Rivian investment was in addition to the automaker’s $11 billion financial commitment to electrifying its lineup through 2022. “As we continue in our transformation of Ford with new forms of intelligent vehicles and propulsion, this partnership with Rivian brings a fresh approach to both,” Hackett said in a statement. “At the same time, we believe Rivian can benefit from Ford’s industrial expertise and resources.” Rivian, which has shown concept versions of an electric pickup and SUV, will remain an independent company, and the investment is subject to regulatory approval. Joe Hinrichs, Ford’s president of automotive, will join Rivian’s seven-member board. Rivian’s founder and CEO, RJ Scaringe, said the startup plans a “broad portfolio” of vehicles on its skateboard architecture, some of which might directly compete with Ford’s EVs. But he said vehicles it develops with Ford will be distinct, with Rivian focused on higher-priced performance models in the active lifestyle space. “What we do with Ford will be different than that,” Scaringe said. Scaringe said Rivian could partner with other companies, although its current focus would be on building the relationships with its existing partners. For Ford, the deal secures another ally to manage costs and development in a hypercompetitive space where it has so far lagged much of the competition. While rivals including GM and Tesla have introduced battery-powered vehicles, Ford’s first long-range battery EV — a Mustang-inspired crossover — won’t hit showrooms until 2020. It’s also planning a battery-powered F-150 pickup. Ford is also in discussions with Volkswagen about sharing an EV platform. Hackett on Wednesday said the Rivian investment “does not interfere” with any potential deal with VW. “This is a specific platform that helps us in an area we weren’t considering with others,” Hackett told reporters on a conference call.

BUSINESS NEWS J Beaumont Health plans to open a new outpatient center in Livonia next year. The center, at 39000 Seven Mile

FORD MOTOR CO.

Rivian Automotive founder and CEO RJ Scaringe (left) and Ford Motor Co. Executive Chairman Bill Ford announce a $500 million Ford investment in the Plymouth Township-based company.

Detroit digits A numbers-focused look at last week’s headlines:

$500M

Amount Ford is investing in Plymouth Township-based electric vehicle startup Rivian

441

Number of new jobs expected to be created in Plymouth Township after $47.9 million investment by Webasto Roof Systems

$13.6M

How much Google affiliate Waymo plans to invest in Detroit for self-driving car plant

Road — the former global headquarters of manufacturer A123 Systems Inc., which moved to Novi last year — will provide primary and emergency care, imaging, outpatient surgery, cancer services, physical therapy and other services. J The University of Detroit Mercy’s business college has received a $3 million donation that will be used to help minority students gain expertise in investing. The donation comes from Richard Charlton, founder of New England Pension Consultants, who graduated from Detroit Mercy in 1965. J Mayor Mike Duggan’s administration denied Marathon Petroleum Corp.’s request to continue storing petroleum coke in an uncovered pit after years of complaints from southwest Detroit residents about clouds of black dust blowing in the air and into the Detroit River. J Webasto Roof Systems Inc. plans to invest up to $47.9 million on a new manufacturing plant in Plymouth Township. The project is expected to create 441 new jobs and is supported by a $2.7 million grant from the state and a property tax abatement from the township. J Walker-Miller Energy Services LLC, a Detroit-based company that specializes in energy-waste reduction, opened its headquarters in the New Center neighborhood on Friday. The company recently purchased a building, dubbed "The Emerald Corner," at 8045 Second Ave. The move allows for the consolidation of its Midtown office space in the Boulevard West Building, as well as warehouse space and parking previ-

ously leased from nonprofit Focus: Hope, moving the company's metro Detroit team into one location. J Plum Market’s swift expansion continues with the specialty grocer planning a new concept diner at the Henry Ford Museum of American Innovation in Dearborn. The new location will take up 4,000 square feet inside the museum, at 20900 Oakwood Blvd. J Detroit-based American Jewelry and Loan, made famous on truTV’s over-the-top reality show “Hardcore Pawn,” has rolled out a mobile app and digital kiosk at its 20450 Greenfield Road store, allowing customers to renew loans and pay off items more efficiently. J An interventional cardiology fellowship program at the Detroit Medical Center that has been under scrutiny the past several months received approval earlier this month after a reinspection decision, according to the Chicago-based Accreditation Council of Graduate Medical Education.

REAL ESTATE NEWS J Fiat Chrysler Automobiles has pledged to hire Detroiters and invest $13.8 million in community improvements, education and workforce training as part of a planned $2.5 billion investment in its Jefferson North and Mack Avenue assembly plants. Detroiters will be allowed to apply for jobs at the two plants "in advance of the general public," according to a document presented at a citizens' advisory council meeting last week. J A mammoth, long-planned $133 million project in downtown Birmingham is inching forward after city approval this week, but it still faces several hurdles before getting off the ground. The Birmingham City Commission approved a nonbinding development agreement for the project planned west of Old Woodward Avenue and north of Willits Street. J An economic development hub in Detroit’s Livernois-McNichols area opened last Thursday. HomeBase debuted at 7426 W. McNichols Road on a stretch of largely vacant buildings between the University of Detroit Mercy and Marygrove College in the northwest part of the city. J Flagstar Bancorp Inc. is investing $5 million toward the revitalization of the Old Redford neighborhood in northwest Detroit. The Troy-based bank plans to put the funding toward the Affordable Housing Leverage Fund and the city’s Strategic Neighborhood Fund.

he state is ready to drop its debut album, “Pure Sounds of Michigan.” The album, which is a collection of ambient sounds from 10 state parks, is free and will be available May 22 across all streaming platforms, including SoundCloud, Apple Music, Amazon Music, Spotify and Google Play. The idea for the album came from the state’s tourism arm, Travel Michigan, which is launching the music as part of its Pure Michigan travel campaign. The tracks are composed by local artists, such as John Beltran, Windy & Carl, Greater Alexander, Dave Graw and Todd Modes. It takes listeners on a “virtual, sunrise-to-sunset tour of the state from

coast to coast.” Two tracks, “Forest Trails” by Windy & Carl and “Childhood Memories” by John Beltran, can be heard on Michigan.org. The sounds of nature — birds chirping, waves washing ashore, branches snapping — intermingle over a backdrop of dramatic, drawn-out notes. Tim Allen, the voice of Pure Michigan, does not appear on the featured tracks. The album is being released by Detroit-based recording studio Assemble Sound, with locals Blair French and Eddie Logix producing, mixing and mastering the music. An invite-only listening party is scheduled May 9 at the Department of Natural Resources Outdoor Adventure Center in Detroit.

MOTOWN MUSEUM

Detroit-based musicians and Musictech startups will have an opportunity to work alongside Motown Records as part of two new programs to be offered at Motown Museum and TechTown Detroit.

Motown Records to launch music accelerator programs M otown Records is gearing up to launch two music programs aimed at arming Detroit artists with the skills, connections and funds to take their careers to the next level. The record label founded 60 years ago in Detroit and now based in Los Angeles is teaming with TechTown Detroit, Motown Museum, Los Angeles-based Capitol Music Group and Wisconsin-based accelerator gener8tor on the programs, according to a Thursday news release. “Detroit has always been a creative hub for new talent and development,” Motown Records President Ethiopia Habtemariam said in a press release. “With the Motown Musician Accelerator initiative, we have an opportunity to come back to Detroit and highlight the incredible talent that has always existed in their community.” The Motown Musician Accelerator program will offer four artists or groups coaching, industry introductions and a $20,000 grant, the release said. The free 12-week program, operated by gener8tor, will include workshops with industry professionals at TechTown Detroit and the Motown Museum in Detroit and Capitol Studios in Hollywood, Calif., the release said.

Applications are being accepted through July 5 at MotownMusicianAccelerator.com. A search is underway for a director to lead the Motown Musician Accelerator, with applications being accepted at gener8tor.com/careers. The accelerator grant is funded by the Esther Gordy Edwards Family Foundation, Microsoft Corp., Hassan Bazzi, director of regional opportunities at the Arab Community Center for Economic and Social Services in Dearborn, and others. It can be used for studio sessions, travel or other needs that would help advance participants’ music careers. At the same time, five Detroit-based startups focused on music technology will be chosen for the free seven-week gBETA Musictech program in TechTown Detroit, the business incubator/accelerator in Detroit’s New Center area. Participants will have the opportunity to work with entrepreneurs, venture capitalists, technologists and more to foster strategies, win customers and pitch investors. Applications for the gBETA Musictech program in Detroit, which begins Aug. 29, are due Aug. 9 at gbetamusictech.com/apply.

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