Crain's Detroit Business, Nov. 5, 2018 issue by Crain's Detroit Business

Rivalry Trophy plays to win Page 3

Arvia to build AAA’s digital banking Page 6

NOVEMBER 5 - 11, 2018 | crainsdetroit.com

NONPROFITS

TECHNOLOGY AND MARKETING

REACHING VOTERS WHERE THEY ARE

Ballmers’ visit, grants about learning ‘how to help’

Political marketing uses new tech to get personal with voters

By Dustin Walsh dwalsh@crain.com

Seated at the head of a scratched stainless steel table last Friday, upstairs from the coffee shop/laundromat The Commons on Mack Avenue on Detroit’s East Side, former Microsoft CEO Steve Ballmer used words like “gentrification” and “community engagement” and Steve Ballmer: In “advocacy.” The DetroitDetroit to hear born multibilideas for funding. lionaire and current owner of the Los Angeles Clippers was in Detroit to see what he is funding, to hear the ideas his money would spark. Last week, his Bellevue, Wash.-based Ballmer Group announced more than $16 million in grants in Southeast Michigan in its inaugural round of funding aimed at helping impoverished children and families in the region rise out of poverty. The grants come after nine to 10 months of meeting with stakeholders to leverage and forge collaborations, fact-finding conversations and data review to inform its grants. Surrounding Ballmer, and his wife, Connie, were several members of Detroit community-development organizations, those receiving those grants. The conversation focused on educating the Ballmers on the community’s needs and challenges. “We don’t know how to help,” Ballmer said after the meeting wrapped. “This is our chance to educate ourselves ... help reinforce the process of how communities own improvements in their communities.” The grants and Ballmer’s visit cement his place in philanthropic efforts in Detroit, a decision he said he made after attending Crain’s third-annual Detroit Homecoming event in 2016. The event, held in September, lures former Detroiters back to the city to trigger investment.

By Chad Livengood clivengood@crain.com

New technology could put political marketing messages where canvassers can’t go on Tuesday — right in your pocket while you’re waiting in line at the polls. A young mother standing in line to vote who pulls out her iPhone to browse through Facebook might see a custom campaign ad aimed squarely at people matching her demographic at just that location. Or she could receive a text message reminding her of the name of a candidate in a down-ballot race for the Legislature or Congress when her car pulls into the parking lot of a designated polling location. Micro-targeting messages to motivate voters in this year’s elections has made leaps-andbounds advancements from the days of voter outreach being limited to television sets, mail

Need to know

JJNew marketing technology is a great leap in targeting messages JJBoth parties experimenting with use of “geofencing” JJTech allows targeting of specific messages only to people at a polling place

and even robocalls. Campaigns, just like business marketers, are breaking new ground in using the technology called “geofencing” to deliver digital ads to people in areas as specific as a church or a school. Political campaigns also are buying information on voters from telecommunication and marketing companies that sell their customers’ cell phone-generated location data that can be mined to determine where they shop, work, play and pray. Campaigns use the information to create profiles of voters who might share their political philosophies and public policy issues they care about like health care, education and roads. Geofences can be drawn as small as the property boundaries of a school, library or church used for a polling precinct, said Nicole Hudson, owner of Inbound Lead Solutions, a Royal Oak-based digital marketing firm. SEE VOTERS, PAGE 20

ILLUSTRATION FOR CRAIN’S BY ANDREA UCINI

SEE BALLMER, PAGE 17

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Focus: Technology << Parabricks finds its niche in growing field of genomics. Page 10 Switched Sources creates “detours” around electrical grid trouble. Page 12 Jolt Energy Page 13 Cardiosound Page 14

C R A I N ’ S D E T R O I T B U S I N E S S // N O V E M B E R 5 , 2 0 1 8

MICHIGAN BRIEFS

INSIDE

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

Economic index falls amid stalled auto sales, home construction Comerica Bank’s Michigan Economic Activity Index fell for the third month in a row in August. It’s the first three-month drop since early 2015, the bank under Dallas-based Comerica Inc. said in a Wednesday news release, attributing “lost momentum” to stagnant auto sales and stalled residential construction. The economic indicator dropped from 118.4 in July to 118.1 in August. The August figure is slightly lower than the 2017 average of 118.2. The August index hasn’t changed much since late 2016, around when U.S. car sales started flattening out, according to Comerica. Automotive has faced higher material and labor costs, but the U.S.-Mexico-Canada Trade Agreement answers some questions. Housing prices were rising, but that slowed through the summer. Housing is “a key missing piece for the Michigan economy,” the news release said. Comerica’s measurement of economic activity contains nine variables: nonfarm payrolls, continuing claims for unemployment insurance, housing starts, house price index, in-

CLASSIFIEDS

KEITH CRAIN

OPINION

dustrial electricity sales, auto assemblies, total trade, hotel occupancy rates and sales tax revenues. All data are seasonally adjusted. August only saw three positive variables out of the nine: nonfarm employment, auto production and state sales tax revenues.

PEOPLE RUMBLINGS

WEEK ON THE WEB

ed $3.86 million in 2016 and $3.89 million in 2015. Revenues have declined along with the sport’s popularity in recent years.

Horse racing could return to Michigan

Thoroughbred horse racing will return to Michigan with 26 live events in the Flint area, if a plan to reopen a race track in Swartz Creek goes through. Following the closure of Hazel Park Raceway in April, thoroughbred racing appeared to be extinct in Michigan. Now, plans to reopen Sports Creek Raceway could reverse course for the sport. There are 26 days of live thoroughbred racing scheduled for Sports Creek next year on Fridays and Saturdays from June 15 through Sept. 7, with simulcasting throughout the year, according to a news release from the Michigan Gaming Control Board. At Northville Downs, which is the only track open since Hazel Park closed, there will be 44 days of live simulcast standardbred, or harness, racing — 16 fewer than the previous season. The track does not offer thoroughbred racing. Delaware-based AmRace & Sports LLC plans to purchase the track in Swartz Creek that has been closed

New sites for cybersecurity training

DAVID PHILLIPS

August only saw three positive variables out of the nine: nonfarm employment, auto production and state sales tax revenues.

since 2015 and resume thoroughbred racing, according to a report from ABC 12. Several conditions must be met, on top of standard licensing and inspection guidelines, before that happens. The gaming control board approved an application from AmRace, but the company must complete a lease or contract on or before Dec. 1 to use the race track. Additionally, on or before Dec. 28, it must strike an agreement with the Howell-based Michigan Horsemen’s Benevolent and Protective Association, which represents thoroughbred horsemen in the state, and a totalizator company, which would keep record of bets made on races.

Simulcasting can be begin as soon as Jan. 1 if those orders are followed. A race calendar is available on the state’s website. “We are cautiously optimistic about the reopening of Sports Creek and the re-establishment of thoroughbred racing in Michigan,” Richard Kalm, executive director of the gaming control board, said in the release. “It’s good for the industry when fans can enjoy both harness and thoroughbred racing live in Michigan.” Horse racing generated a total of $3.5 million in revenue for the state in 2017 through simulcast wagering taxes as well as licensing and racing fees, according to an annual report from the gaming control board. It generat-

Two more universities in Michigan will be getting new sites for cybersecurity training, Gov. Rick Snyder said Monday. The announcement came at the 2018 North American Cyber Summit in Detroit. Snyder said cyber range hubs at Northern Michigan University and at the University of Michigan-Flint will open within the next six months in partnership with Merit Network and the Michigan Defense Center. The hubs provide space for cybersecurity training, business services and hands-on educational opportunities. The Michigan Cyber Range is operated by Ann Arbor-based nonprofit Merit Network. It prepares cybersecurity professionals to detect, prevent and mitigate cyberattacks in a real-world setting. The new sites in Marquette and Flint will be the sixth and seventh additions to the Michigan Cyber Range.

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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 // N O V E M B E R 5 , 2 0 1 8

REDEVELOPMENT

Mammoth McLouth poised to come down By Chad Livengood clivengood@crain.com

The only steel that’s going to be coming out of the hulking former McLouth Steel plant along the Detroit River in Trenton over the next two years is scrap. Wayne County on Thursday officially transferred title of 183-acre complex covering 1.25 million square feet across 45 buildings that was a state-of-the-art steel-making plant a half-century ago. The Moroun family’s Crown Enterprises Inc. is the new owner of the riverfront property and has promised an aggressive 24-month demolition of the blighted plant, which hasn’t churned out a rod of steel since 1995, when McLouth Steel went bankrupt for a second time. The U.S. Environmental Protection Agency has designated the McLouth plant a Superfund site, making Matthew Moroun: Crown and its Getting site ready subsidiary, MSC Land Co. LLC, elifor development. gible for federal funding to pay for part of the cleanup. The cleanup will be extensive, starting with the removal of “millions of gallons” of stormwater that have sat in 23 open pits and lagoons for years, some mixed with petroleum and other hazardous materials left behind in wake of the plant’s closing, said Dennis Schreibeis, a director at Crown Enterprises.

TECHNOLOGY

Startup looks to clean up with diapers By Kurt Nagl knagl@crain.com

Inside

In a tank in Ann Arbor, bacteria and yeasts are hard at work creating something that eventually could change what happens to diapers after they’ve done their duty. The company that owns the biopolymer is a University of Michigan spinoff that’s working on materials that can absorb 300-400 times their own weight in liquid and also break down quickly in compost, which the

From research to tech spinoff: In this week’s special report, we profile technological breakthroughs made at Michigan State University, Wayne State University and the University of Michigan and the businesses that have spun off to market those breakthroughs. Pages 10-16.

diapers of today mostly don’t. The potential applications are

wide-ranging — from cosmetics and beauty products to soil erosion prevention. Eco-friendly diapers, though, are the end game for Ecovia Renewable Inc. “I think the big pot of gold at the end of the rainbow is super-absorbents for hygiene just because the market is enormous,” said Andrew Hertig, 32, co-founder and chief business officer of Ecovia. Its business pitch for compostable diapers is grabbing investors’ attention.

The company has raised $3.6 million in investment and grants since forming in 2014, including a $500,000 investment earlier this month from the University of Michigan, where it all started. In a recently expanded 5,500-square-foot lab at the Michigan Innovation Headquarters coworking space, a full-time team of six is ramping up efforts to commercialize years of research pioneered by a student and professor. SEE DIAPERS, PAGE 18

SPORTS BUSINESS

Need to know

 Crown Enterprises has 24 months to tear down sprawling complex  Project entails removal of millions of gallons of contaminated storm water on the riverfront site  Moroun company committed to investing $20 million over six years in cleanup and redevelopment

One of the challenges will be navigating the infrastructure of the complex, as there are limited blueprints to show the locations of underground tunnels, pipes and substructures that supported the plant and its electric arc and blast furnaces, Schreibeis said. “There’s a spaghetti network underground of pipes that we need to analyze and manage,” Schreibeis said during a tour of the complex. One of the sedimentation basins alone is holding an estimated 4 million gallons of contaminated water that has to be removed to ensure it doesn’t end up in the Detroit River, Schreibeis said. SEE MCLOUTH, PAGE 22

Patrick Kelly (left) and Brian McDonald of Rivalry Trophy. LARRY PEPLIN FOR CRAIN’S

An underdog makes favorites MSU fans find niche with replica trophies

By Bill Shea bshea@crain.com

Lifelong Michigan State football fans Brian McDonald and Pat Kelly were so thrilled when the Spartans beat archrival Michigan in 2008 after a six-year drought that they wanted to commemorate the victory by buying their own Paul Bunyan Trophy. One problem: No replica of the trophy, which has been claimed by the

Need to know 

Retailer fills market void

Trophies are licensed by Big Ten, schools 

 Company seeks to boost sales, profile with Amazon sales

winning team since 1953, was for sale. The vast retail landscape of thousands of licensed products didn’t in-

clude official copies of the famous rivalry trophies. McDonald and Kelly, friends since meeting as part of a fantasy football league in 2004, decided there was a niche to be filled, so they launched Rivalry Trophy LLC to produce licensed hard plastic resin replicas of the Big Ten’s famous college football trophies. It’s become a successful sideline business for McDonald, a social studies teacher at Parcells Middle School in Grosse Pointe Woods, and Kelly, a

dentist in Lincoln Park. They still work their day jobs while their nights and summers are often filled with trophy business work. They’re 50-50 partners and use seasonal part-time help, with an office in Northville and a product warehouse in Redford Township. “Because we love college football, it’s a labor of love,” McDonald said. Now, they’re studying product expansion while also scaling up sales by dipping their toe into distribution through Amazon.com. SEE TROPHIES, PAGE 21

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A history of philanthropy

Holiday shopping in downtown Detroit

Dustin Walsh takes a look at the industry in advance of Tuesday’s vote on the ballot proposal. Page 8

Family aims to continue legacy of Arbor Drugs founder Applebaum. Page 4

Winter markets to feature new vendors, food offerings. Page 23

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@CRAINSDETROIT

Family aims to continue legacy of Arbor Drugs founder Applebaum By Sherri Welch swelch@crain.com

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Before his death nearly a year ago, Arbor Drugs founder Eugene Applebaum sat with his family, creating a strategy to ensure his philanthropy would continue. He didn’t direct a huge infusion from his estate to the Eugene Applebaum Family Foundation. He trusted his wife and daughters to continue to support the arts and cultural, educational and health care organizations important to him and young leaders and entrepreneurs in the region. “What meant the most to my dad during his lifetime of philanthropy was the type of giving he accomplished most consistently and often most quietly,” said Pamela Applebaum, president of Arbor Investments Group LLC. “He loved investing in people to help them succeed ... to inspire them to aspire.” Beyond continued support for the Jewish causes and metro Detroit institutions the Arbor Drugs founder supported, the Applebaum family is funding programs to support entrepreneurs and young leaders in the region and to cultivate the next generation of nonprofit leaders. It’s funding internships for University of Michigan and Wayne State University students at Detroit arts and culture organizations and nonprofits to help build a talent pipeline. It’s also forging new youth and professional development programs with institutions like The Henry Ford and Dark Room Detroit. And it’s bringing its philanthropic relationships to bear to help forge collaborations between organizations like the Detroit Symphony Orchestra and Wayne State University. The family is still establishing how much it will give on an annual basis, said Andrew Echt, director of Applebaum Family Philanthropy and COO of Arbor Investments. But all totaled, annual commitments will add up to more than previous levels of giving for those invited to submit grant proposals. Giving through the Eugene Applebaum Family Foundation totaled $2.7 million in fiscal 2016. Family members are also making additional, personal gifts under the Applebaum Family Foundation banner, Echt said. “Historically, my family’s philanthropy was basically my dad making some very grand gifts towards brickand-mortar and medical research, in addition to his core giving to various organizations around the region,” Pamela Applebaum said. Institutions including the Detroit Institute of Arts, DSO, Michigan Opera Theatre, UM and WSU have long benefited from the Applebaum family’s support. “We’re not abandoning any, but the ones we’ve had successful partnerships with, we’re doubling down,” she said. “And we’re bringing our new lens of innovation and entrepreneurial thinking in trying to meet their needs.” The centerpiece of the family’s giving is a $1 million commitment to the Applebaum Fellows program, providing opportunities for young people in their communities that inspire leadership, entrepreneurship and independence. The grants will support

Need to know

JJApplebaum family continuing Eugene

Applebaum’s longtime support of cultural, educational and health care anchors and Jewish life engagement JJAlso supporting new programs continuing his “quiet” support of entrepreneurs, young leaders JJFunding internships for UM, Wayne State students at Detroit arts and culture organizations, nonprofits to help create talent pipeline

“What meant the most to my dad during his lifetime of philanthropy was the type of giving he accomplished most consistently and often most quietly.” Pamela Applebaum, president of Arbor Investments Group LLC

expansion of a pilot launched in 2016 that’s funding Wayne State University internships at the Detroit Symphony Orchestra. They’ll also seek new opportunities, the family said, giving priority to those that: J Improve and advance education J Promote health and medical research J Enhance arts and culture J Strengthen the Detroit Jewish community and Israel To fulfill a commitment to participate in the University of Michigan’s “Victors for Michigan” campaign, the Applebaums last year established a separate, nonprofit internship program that paired 15 literature, arts and sciences students from the University of Michigan with Detroit arts groups, including the Detroit Historical Society, Detroit Institute of Arts, Detroit Symphony Orchestra and Museum of Contemporary Art Detroit, and with other nonprofits like Downtown Boxing Gym. The goal is to expand the program to 30 students, Echt said. “We want these students to be exposed to working in the nonprofit sector, particularly among the cultural arts institutions,” he said. These institutions are great places where students can potentially develop their careers or at minimum gain familiarity with them, Echt said. At the same time, having a pipeline of professionals to work in these institutions “is critical for the community,” he said, to protect the institutions and investments made in them. Half of the family’s $1 million gift is permanently endowed, and UM committed to provide up to $250,000 in matching funds for it, Echt said. “So there will be an indefinite arch to

this program.” Building on past support of Tamarack Camps, a place Eugene Applebaum attended on scholarship, the family has also committed to building a scholarship endowment of $500,000 over a period of years to enable more young people to participate in a Jewish camping experience. The “Applebaum Student Experience Fund for Wayne State University,” set to launch with up to $50,000 in grants starting in 2019, will support programs such as internships, leadership development, conference experiences and entrepreneurial programs. Eugene Applebaum supported a range of programs at WSU that are coming to a close. The new program is continuing the relationship between the family and university. Through it, WSU will submit grant requests each year for funding, Echt said. “As we sunset one program, we want to sunrise on another one,” Pamela Applebaum said. “My dad was very proud of his experience at WSU, very proud to have a college named after him. We feel we have a lot we can still do with them in the student experience front.” Other programs/organizations receiving support from the Applebaum family include: J Eugene Applebaum Family Entrepreneurial Excellence Awards at the Stephen Ross School of Business-Zell Lurie Institute of Entrepreneurial Studies at UM, honoring undergraduate and graduate students in business administration tracks, who excel academically and demonstrate an entrepreneurial spirit, funded with up to $20,000 annually. J Hillel of Metro Detroit and Hillel Campus Alliance of Michigan Applebaum Family Student Interns, launched in 2017 to provide young Jewish leaders on campus a stipend to engage students in Jewish student life on college campuses in the region and around the state. J The Henry Ford Applebaum Fellows Program, a two-year program launched in 2017 with a $20,000 grant to provide high school seniors in the museum’s youth mentorship program with college tours, training on taking college entrance exams, interview training and opportunities to meet new college students. J The Applebaum Teen Exhibition Program at MOCAD, an exhibition and workshop series aimed at fostering career and college prep, leadership and team work. J Darkroom Detroit Applebaum Fellowship 2018, a nine-month mentorship and development program for emerging and established photographers in Detroit. Beyond the efforts it’s already funding, the family is looking to collaborate with other funders, leading and participating in important discussions around philanthropy and community, Pamela Applebaum said. And she, herself, is intent on engaging the next generation, bringing her two daughters who are in their 20s into the conversations. “I’m really trying to instill in them the importance of continuing the family legacy in philanthropy,” Applebaum said. Sherri Welch: (313) 446-1694 Twitter: @SherriWelch

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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 // N O V E M B E R 5 , 2 0 1 8

New Auto Club Group exec builds banking service line By Jay Greene jgreene@crain.com

Anne Arvia plans to spend the next year making banking just as synonymous with AAA as towing is. Arvia plans to develop a strategic plan and expand the banking service division of Dearborn-based Auto Club Group banking services into an integral part of AAA’s auto, road, insurance and travel service business lines. As newly named executive vice president of banking and financial services, Arvia, 55, is bringing experience she developed in her previous three banking jobs to AAA under CEO Joe Richardson Jr.

“When Joe (Richardson) reached out to me, he said nobody knows AAA has a bank. Joe has a vision of connected membership. We are building our strategy around that.” Anne Arvia

Richardson, who took over as Auto Club Group’s CEO in 2016, following the retirement of Chuck Podowski, told Crain’s in a previous interview that his strategic direction for AAA includes developing a mobile technology platform and new products for millennials, many of whom do not

own cars and instead use public transportation, carpools or ride-booking services like Uber, Lyft or taxis to get around. “There is a lot of competition with digital banking with Chase, Wells Fargo and Citibank dominating,” Arvia said. “When Joe reached out to me, he

Need to know

JJAnne Arvia hired in August as executive

vice president of banking and financial services at Dearborn-based Auto Club Group

JJTop priority is to build digital banking service line from its current $500 million in assets JJAAA is trying to build membership in the millennial age group by integrating banking, road, insurance and travel services

said nobody knows AAA has a bank. Joe has a vision of connected membership. We are building our strategy

around that.” Arvia will oversee Auto Club Trust FSB, the Dearborn-based bank with 100 employees, assets of more than $500 million, up from $78 million in 2014, $365 million in total deposits and 400,000 credit card customers. The bank was originally founded as a community bank in 1999 in Nebraska and acquired by Auto Club Group in 2001. It is part of ACG, the second-largest AAA club in North America, with 10 million members in 11 states, including Michigan, Florida, Georgia, Iowa, Nebraska and Wisconsin. Auto Club Trust also provides such services as financial planning, trust, investment management, life insurance, home mortgages and auto loans. “The idea is to get good at banking services and integrate” with insurance, travel and road services, said Arvia, who while she worked in Chicago was selected as one of Crain’s Chicago Business’ 100 most influential women and as a 40 Under 40 honoree. John Donnelly, managing director of Donnelly Penman & Partners, a Grosse Pointe-based investment banking firm, said AAA has a great brand name and its credibility will carry the organization a long way in expanding digital banking services. “It is a brutally competitive industry with billions of dollars being spent by other banks to capture the millennials,” Donnelly said. “It gives them a payment mechanism” for their insurance, road and travel services. “We will help you save for a trip with your bank account,” said Arvia, adding AAA will be adding ATMs once it completes a customer survey process.

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After growing up in Iowa, Arvia decided to pursue an accounting degree from Michigan State University. She had already passed her CPA examination and wanted to pursue more practical accounting courses at MSU, where she graduated in 1985. She held several executive positions before arriving at AAA in August. From 2006 to 2016, she held several positions at Nationwide Insurance, including CEO of Nationwide Bank, where she built a startup online bank and drove growth to more than $3 billion in the third year of operation. Arvia said women executives face definite challenges in the banking industry. But she had a mentor for a decade when she was CFO at Chicago-based ShoreBank. “I always felt I belonged there” in the C-suite, said Arvia, who became CEO of ShoreBank in 2000, a year after her mentor, Margaret Cheap, was diagnosed with brain cancer and had to step down as CEO. “Women of my (generation) had to fight for their positions. Margaret did. When she was diagnosed ... on April 16, 1999, she called me into her office and funneled everything to me.” Soon after, Arvia was promoted from COO to CEO of ShoreBank. “It is a moment in your career where you find out what you are made of,” she said. “It was a gift to know Margaret. She was an extremely talented leader, and I think of her every day.” Jay Greene: (313) 446-0325 Twitter: @jaybgreene

C R A I N ’ S D E T R O I T B U S I N E S S // N O V E M B E R 5 , 2 0 1 8

Virginia economic Ramco-Gershenson changes development guru name, moves headquarters to NYC “In the four months since the to head new business change in leadership, we have streamlined our operating attraction group platform, reset our By Kirk Pinho kpinho@crain.com

By Annalise Frank afrank@crain.com

The still-nameless nonprofit formed by a group of CEOs that’s looking to attract business to Southeast Michigan named its leader, and he’s coming from Virginia. The regional CEO group led by, among others, DTE Energy Co. and its top executive, Gerry Anderson, has been planning to launch an economic development organization. The group made news for its regional transit push in the spring and its assertions that Southeast Michigan is lagging behind other regions that have more unified attraction efforts in place. To run the new organization, Barry Matherly comes from a job as president and CEO of the economic development organization for the Richmond, Va., region. The Barry Matherly: 53-year-old Get pipelines of deals, companies. starts in January and leaves his current job Dec. 31. “... We wanted to get someone with deep proven experience in a peer organization elsewhere in the country with a strong track record of success,” said Anderson, who is also chair of the new nonprofit’s board. “We wanted someone who understands deeply and believes in regionalism.” The economic development professional with 24 years of experience will lead an effort to create a single point of entry for those looking to invest in Southeast Michigan. The CEO group wants to be able to respond more efficiently and cohesively to requests for regional data. “One of the big things is to … ramp up the marketing of this region and get a bigger pipeline of potential deals and companies coming in,” said Matherly, who was born in Connecticut and grew up in Virginia. Anderson declined to disclose Matherly’s salary. A selection committee chose the CEO after a national search for someone who knows this model and can quickly implement it in Southeast Michigan. The region is catching up to those in other states that have been at it for a decade or more, Anderson said. Among those on the committee were Anderson; Ray Telang, Detroit Regional Chamber board chair; Detroit Regional Chamber President and CEO Sandy Baruah; and Matt Cullen, chair of the Detroit RiverFront Conservancy. In essence, the new nonprofit will spin off from the Detroit Regional Chamber, Baruah said. The five employees staffing the chamber’s business attraction unit, Destination Detroit, will move to work under Matherly. He expects to have a staff of 20-21 when at full strength. The group is expected to need $5 million-$6 million per year once it is

Need to know

J CEO group that pushed transit creating group to market region for investment J Barry Matherly comes from leading economic development organization for Richmond region J

Group forms board, seeks name

up and running, Anderson said. He declined to disclose specific donors or contributors. The threads of the nonprofit are still coming together. It is waiting for official approval for 501(c)(3) and 501(c)(6) nonprofit status. It formed its board this summer, Baruah said, and within the last month added new members: Detroit Mayor Mike Duggan, Wayne County Executive Warren Evans and Macomb County Executive Mark Hackel. Phil Bertolini, Oakland County’s deputy executive and CIO, is signed on in an advisory role. Oakland County Executive L. Brooks Patterson has been invited, Baruah said. Anderson said he’s confident Oakland County will be eager to contribute when it sees “good work being done.” Patterson in August made waves when he said he’d “rather join the Klan” than pay dues to the new business attraction group. For him, the organization appears to represent a threat to county autonomy and its ability to lure companies. But economists argue a unified regional strategy is more efficient. Patterson hasn’t said yes or no to joining the board, Bertolini told Crain’s. “Mr. Patterson is going to keep an eye on it ... and see where it goes,” he said. “We want to see how the organization gets formed, where it goes, its mission and how it operates before he becomes part of the board.” The county leadership was concerned about the group advocating for Detroit over other communities, Bertolini said. It is supportive of the group acting as “neutral broker for the region,” though, he said. As a united front and marketer of the region’s potential, the entity needs a catchy name. A “public partner council” made up of leaders of economic development organizations has started that process, Baruah said. Matherly will also weigh in. Matherly earned a bachelor’s degree from James Madison University and a master’s degree from Virginia Tech University, according to the Richmond-area development group, the Greater Richmond Partnership. He is also a graduate of the Economic Development Institute at the University of Oklahoma. He now teaches regional economic development there, is on the institute’s board and is head of its curriculum. He was also chair of the International Economic Development Council and aims to implement his global experience while traveling often for the new role. Annalise Frank: (313) 446-0416 Twitter: @annalise_frank

Ramco-Gershenson Properties Trust (NYSE: RPT) will have a new name effective Nov. 13 and has a new New York City headquarters, the company said Wednesday. RPT Realty will be headquartered in the Big Apple, a shift from its longtime Farmington Hills headquarters. “Rebranding allows us a fresh start to refocus our strategic plan to unlock and drive embedded shareholder value,” said new CEO Brian Harper, who replaced Dennis Gershenson in June and is based in New York. “In the four months since the change in leadership, we have streamlined our operating platform, reset our organizational culture, opened a new corporate headquarters in New York City, experienced strategic board of trustee changes, and identified the building blocks to deliver tangible and sustainable long-term growth for our shareholders.” Earlier this month, Crain’s reported that the company is downsizing its west Oakland County headquarters footprint and staff, and opened a 6,000-square-foot office at 19 W. 44th St. in New York City as part of Harper’s vision. RPT Realty will maintain 10,00012,000 square feet in Farmington Hills, a representative said Wednesday morning. The company had about 30,000 square feet at 31500 Northwestern Highway. Harper said Aug. 10 on a conference call following its second-quarter earnings report that the downsizing is part of a broader organizational shift. Harper joined Ramco-Gersh-

organizational culture, opened a new corporate headquarters in New York City, experienced strategic board of trustee changes, and identified the building blocks to deliver tangible and sustainable long-term growth for our shareholders.”

Brian Harper

Need to know

JJRamco-Gershenson Properties Trust to

be named RPT Realty as of Nov. 13 JJREIT shifts from its long-time Farmington Hills headquarters

JJMoves follow change in leadership earlier this year

enson from Rouse Properties, a real estate investment trust in New York City, which he led as CEO for two years. He called it “an immediate streamlining of staffing to eliminate redundancies including but not limited to those created by the two region structure as we position the company for the future,” according to a transcript of the call. “In total, we expect these actions to result in approximately $2 million in annual net cash savings.” Harper called the shrinking of the Michigan space “the planned rightsizing and rebranding of the corporate Farmington Hills office in 2019.” Gershenson departed his chair-

man position on the company’s board Sept. 6. Harper was named president and CEO in April and started his new post June 15, taking over for Gershenson, who had been president and CEO since 1996. Andrea Weiss, the founder, president and CEO of Retail Consulting Inc., was also appointed to its board. She is also a board member for Lebanon, Tenn.-based Cracker Barrel Old Country Store Inc. and Philadelphia-based NutriSystem Inc. RPT Realty has a market value of $1.05 billion and its stock opened at $13.05 per share Wednesday, according to MarketWatch. The REIT had $265 million in revenue in 2017, compared to $260.9 million in 2016 and $251.8 million in 2015. The company says its real estate portfolio is 13.6 million square feet across 56 properties with an annualized base rent of $14.91 per square foot. Its portfolio is 93.9 percent leased.

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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 // N O V E M B E R 5 , 2 0 1 8

OPINION COMMENTARY

It is about time S

ome time ago, there was an organization that was dedicated to promoting Detroit and Southeast Michigan. For some unknown reason, it decided to become more interested in the whole state of Michigan and simply became irrelevant. Although it has continued to exist, it doesn’t seem to have a focused agenda anymore. Meanwhile, Gerry Anderson of DTE Energy Co. realized that there was a substantial void in Detroit and Southeast Michigan and had recreated an informal organization to keep doing the work once done by Detroit Renaissance, the prior organization. Now, that group of CEOs has even gone so far as to hire an executive who will be busy promoting the area for business development. Although they haven’t yet picked up the old name of Detroit Renaissance, it would appear obvious that this informal organization is going to gain a higher and higher profile and will be functioning exactly as the old Detroit Renaissance did several years ago. I would simply refer to it as Detroit Renaissance 2.0. It makes great sense. And even

KEITH CRAIN Editor-in-chief

though some organizations have been trying to fill this void for some time, having a group of CEOs behind it is going to give this new organization the clout and horsepower it will need to be effective. Hiring a full-time executive and other staff will help kick it into even higher gear. Detroit’s powerful recovery after its bankruptcy has become one of the country’s great success stories. That gives this new organization a stronger platform to build on. We wish Detroit Renaissance 2.0 a healthy and prosperous life. We wish Barry Matherly, its new economic development executive, great success. This is a rebirth that was long overdue.

When cannabis gets boring, it shows how far industry has come

ays ahead of the Nov. 6 election, which will decide the fate of legal recreational marijuana sales and use, Michigan’s cannabis industry is preparing for victory. The lower hall near the atrium in Cobo Center in Detroit held a commercial cannabis conference and expo, called Cannabis-Aid, Tuesday and Wednesday. The conference brought together those dabbling or all-in on the marijuana industry supply chain. Exhibitors included insurance brokers, accountants, compliance consultants and of course the industry’s more recognizable players like agriculture lighting suppliers, hydroponic technologies and even vape pen distributors. Thomas Tong, the show’s executive director and a former technology industry executive, said the state’s cannabis industry will be successful only if the industry, business and government leaders work together toward smart legislation, permitting and market intelligence. He said the conference is supposed to be a springboard for the state if Proposal 1 passes in this week’s midterm vote. He has reason to be optimistic. The proposal has garnered wide support among Michigan voters. In a poll last week by The Detroit News and WDIVTV, 57 percent were in favor of the proposal — which would allow adults over the age of 21 to possess up to 2.5 ounces of marijuana, among other more minor legalese. Of the 600 polled, 40 percent opposed. However, several businesses and business organizations have dumped significant cash into opposing the proposal, including Dow Chemical,

DUSTIN WALSH dwalsh@crain.com

ITC Holdings, Haworth Inc. and Business Leaders for Michigan. Business is concerned with how legalization will impact the workforce as many workplaces remain drug-free and many regularly test for the substance, which stays in a person’s system even after the effects have subsided. Theoretically, if a horde of new marijuana users crop up, employers could face more drug test failures that result in terminations and shrink their workforce. Of course, businesses could also alter their testing practices by eliminating tests for marijuana or maintain their policies and demand workers adhere. At Cobo, exhibitors talked about being in on the ground floor of Michigan’s cannabis industry, which is expected to reach several billion dollars in short order. Michigan’s medical marijuana industry, which was second in the nation behind only California before it legalized recreational use this year, is worth nearly $900 million. For exhibitors like Orion Township-based Dunaskiss Consulting and Development, run by former Republic state Sen. Mat Dunaskiss, and Okemos-based Risk Managers Inc., the industry provides another verti-

DUSTIN WALSH/CRAIN’S DETROIT BUSINESS

Exhibitors line the lower hall of the Cannabis-Aid conference and expo at Cobo Center in Detroit on Wednesday.

cal in their business. Dunaskiss provides permitting, compliance and consulting to growers and dispensaries, helping them navigate the murky waters of establishing a business in the nascent stages of legalization. Larry Harb, president and CEO of Risk Managers, said it’s a growing industry that provides ample business for its insurance brokerage. Harb views of the industry are that it holds no more risk than any other. “It’s essentially farming,” he said. “We’ve been insuring farmers forever. What’s the difference? There isn’t one to me.” Several out-of-state exhibitors, in-

cluding California-based iKrusher, a cannabis oil cartridge maker, and California-based IndicaOnline, a point-of-sale software provider for dispensaries and delivery services, were present. But other than a few obviously over-the-top marijuana T-shirts bearing the iconic plant leaf more typical at a Phish concert than a business convention, the exhibit felt exactly like any other trade expo: equal parts elevator pitch and boredom. Which may be an indication of just how far marijuana and its industry have come in recent years. The majority of polled voters favor recreational legalization and its industry is

already falling in line with the norms in any other business. The result of Tuesday’s vote will likely determine whether marijuana and its fledgling local businesses continue to thrive and burn their way into the local psyche further and will eventually show how long the tentacles of its supply chain will reach.

More on WJR Hear Crain’s Group Publisher Mary Kramer and Managing Editor Michael Lee talk about the week’s stories every Monday morning on WJR 760 AM’s Paul W. Smith Show.

C R A I N ’ S D E T R O I T B U S I N E S S // N O V E M B E R 5 , 2 0 1 8

A show of unity at a time it’s needed

A recent dinner to support Yeshiva Beth Yehudah gathered 2,540 supporters who include a roster of regional leaders that crosses political, religious and ethnic lines. This year’s dinner honored Mark Davidoff, managing partner-Michigan for Deloitte.

n a time of deep division, we look for signs of unity. In Detroit, there was no better show of unity, mutual respect and support than a recent dinner to support Yeshiva Beth Yehudah, the 100-year-old Jewish day school system. The dinner gathered 2,540 supporters, many of them families of the school, which is home to 1,000 students grades Pre-K through 12 on three campuses in Oak Park and Southfield. But it also gathered Michigan’s top leaders of business, philanthropy and government — an appropriate assembly, as one of the dinner’s resounding themes highlighted the school’s role in building leaders of tomorrow. The dais was like an in-person guide to this week’s ballot, but there were no Republican or Democratic labels. In fact, at a reception before the dinner, gubernatorial candidates Gretchen Whitmer and Bill Schuette posed for photos alongside one another; so did Democratic U.S. Sen. Debbie Stabenow with her opponent, Republican John James. In his remarks, the Yeshiva’s board president and Chemical Financial Corp. Chairman Gary Torgow furthered this message of harmony, mentioning all of the candidates for the state’s elected leadership positions by name and offering a message of support to whomever is elected. No left or right. No religious divides. No racial barriers. Just one group, united in championing the education of children. The annual dinner is the largest event of its kind in the country. A highlight each year is the guest speaker; over the past four years, President George W. Bush, Vice President Joe Biden, First Lady Laura Bush and Secretary of State Hillary Clinton have addressed the crowd. This year’s dinner welcomed Tony Blair to Detroit. The former prime minister of the United Kingdom has spent most of the 11 years since leaving office fighting religious extremism in the Middle East. The dinner took place one day after the mass shooting at Tree of Life synagogue in Pittsburgh, which was allegedly carried out by a man who had posted anti-Semitic rants online. Blair’s remarks about that crime were poignant; his overall message was one of optimism. For Blair, last week’s Detroit trip was his first. “A few years ago, I remember reading it was a city that was going to be closed,” he said. “But now, there’s a renaissance.” Mark Davidoff, Michigan managing partner of Deloitte LLP, was the Yeshiva dinner’s honoree. Davidoff is the former executive director of the Jewish Federation of Metropolitan Detroit and has made dozens of mission trips to Israel, connecting business leaders there to business leaders back home. He’s used his influence for so much good in the city; the honor was well-deserved. It’s promising to see the Detroit community come together to support children — our future leaders. The event is a great example of what can happen when people work together with dignity and respect and support one another for a common goal.

KC CRAIN

President, Crain Communications Inc. AARON PERGAMENT

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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 // N O V E M B E R 5 , 2 0 1 8

FOCUS TECHNOLOGY

Taking tech transfers to market

ichigan’s research universities are powerhouses of innovation. In this special report, we profile technological breakthroughs made at Michigan State University, Wayne State University and the University of Michigan and the businesses that

have spun off to market those break- In this package JJParabricks finds its niche in growing throughs. These companies have the po- field of genomics. This Page tential to change how diseases are treat- JJMitovation sees path to commercialed, how energy is delivered and stored, ization. Page 12 how devices are secured and more — JJSwitched Sources creates “detours” maybe even to be Michigan’s next big around electrical grid trouble. Page 12 JJJolt Energy gets funding, research thing.

support in battery technology. Page 13 JJCardiosound wades into blood pressure monitoring market. Page 14 JJThe internet security company Dug Song is betting on. Page 15 JJEvoq Therapeutics catches eye of big pharma. Online at crainsdetroit.com

Mehrzad Samadi (left), Ankit Sethia and Scott Mahlke of Parabricks.

Parabricks finds a niche to target its computing power By Tom Henderson thenderson@crain.com

Parabricks LLC, a 2015 spinoff from the University of Michigan that signed an exclusive licensing agreement with the school last year, is a case study in why entrepreneurs need to be flexible when trying to figure out their business model and who their customers are, or will be. It took the company’s founders more than a year to realize they needed to be a genomics company. Once they did, equity funding and paying customers soon followed. As did large federal funding. In October, Parabricks was awarded a National Science Foundation Small Business Innovation Research Phase II grant of $748,000, which came with a matching grant of $125,000 from the Michigan Emerging Technologies Fund. That followed an NSF SBIR Phase I grant of $225,000 in 2017, which had a matching state grant of $25,000. The name of the company is a reflection of the founders’ original intention. While Ph.D. students in computer science and engineering, Mehrzad Samadi and Ankit Sethia developed software that allowed computer chips called graphics processing units to be used for a variety

Need to know

Parabricks processing technology speeds up genomic sequencing J

Spun off from UM in 2015

J Company has raised $315,000 in equity funding in a seed round; targeting up to $1.5 million

of applications, able to replace the much more common chips called central processing units. GPUs are much more robust and faster than the CPUs used in most computer functions. Traditionally, the chips have been used to manipulate the huge amount of data and pixels used in video games and smartphones. Samadi and Sethia figured out how to use GPUs for processes that had nothing to do with graphics. They could, they thought, spin off a company that would create software tools that would in turn allow other developers to build software applications of their own using GPUs instead of CPUs. They thought of their software tools as parallel-processing bricks that could be used to build a powerful application — hence the company name. They got their professor, Scott Mahlke, to serve as the company’s technical adviser.

Samadi is now the CEO, Sethia is the chief technology officer and Mahlke is the chief science officer. But doing market research, they realized people wanted to buy software and not the tools to build their own. So, time for their first pivot. Instead of selling tools for others to build with, they would target the auto industry. When autonomous vehicles are on the street, making decisions now made by humans, they will require enormous amounts of computing power. What better way to manage that volume of data than GPUs? But, again, what made sense to Samadi and Sethia didn’t make market sense. Auto companies had invested billions and were well down their own paths toward autonomous vehicles. They weren’t going to pay attention, or write checks, to a couple of UM grads just because they’d done a licensing deal with the school’s tech-transfer office. What other market needed copious amounts of fast computing power? Aha! Genomics. Genomics is widely expected to lead a personalized medicine revolution. But for it to be a fast revolution, and one that is affordable to individuals in need of a specific cure for their specific cancer, it will require ultrafast data crunching —

the kind of thing GPUs are great at. Patti Glaza, the vice president of Invest Detroit, a nonprofit that invests in early stage companies in Michigan, is an adviser on the advanced transportation hub of the Michigan Translational Research and Commercialization program, which was founded at UM in 2012 and later became a statewide program with funding from the Michigan Economic Development Corp. She first encountered Samadi and Sethia there. Ultimately, Parabricks got an MTRAC grant of $100,000. “I’ve been watching them a long time. They were able to realize there were better markets with a stronger business case. They were extremely coachable,” said Glaza. As a result of their pivot, Invest Detroit became an investor, as did Invest Michigan, another nonprofit, and UM’s Monroe-Brown Seed Fund. The company was also able to enlist Dave Gregorka, an experienced and well-regarded local entrepreneur and venture capitalist, as its president. The Monroe-Brown Seed Fund is the largest investor, with a first investment tranche of $50,000 and a second of $150,000. Invest Detroit invested $65,000 and Detroit-based Invest

Michigan invested $50,000. Ann Arbor Spark, an economic development nonprofit, awarded a grant of $50,000. In all, the company has raised $315,000 in equity funding in a seed round it is targeting at up to $1.5 million. Perhaps more important than those investments is a partnership with Santa Clara, Calif.-based Nvidia, which marketed the first GPU chip in 1999. The partnership began when Parabricks attended the company’s GPU Technology Conference in San Jose, Calif., in May 2017. Nvidia executives were impressed by Parabricks’ technology, eventually naming it as a preferred partner and introducing it to three of its genomics customers, in Thailand, Japan and Singapore, who are now paying customers. Samadi said nondisclosure agreements prohibit him from naming them. Monroe-Brown was created more than two years ago with a $3 million endowment from the Monroe-Brown Foundation to commercialize faculty research. Hirak Parikh, the program manager at Monroe-Brown, says the fund has invested about $1.6 billion in nine companies, with have in turn raised $12 million in other equity funding. SEE GENOMICS, PAGE 16

C R A I N ’ S D E T R O I T B U S I N E S S // N O V E M B E R 5 , 2 0 1 8

SPECIAL REPORT: TECHNOLOGY

Mitovation uses light to prevent brain damage By Tom Henderson

thenderson@crain.com

Venture capitalists have a saying: “We bet on jockeys, not horses.” Investors in Ann Arbor-based Mitovation Inc. have a proven jockey in Mark Morsfield, the chairman, president and CEO, and he says he’s riding a good horse. Mitovation has licensed three patents from Wayne State University and has built a prototype device designed to stop cell damage that occurs because of a lack of blood flow after cardiac arrest, something called post ischemia brain injury. The device looks like a small bike helmet, and it shoots infrared light through the skull and into the brain. The goal is to improve clinical outcomes of hospital patients who suffer cardiac arrest during their stay and reduce long-term disability of those affected by brain injury in the wake of a cardiac arrest. Research at WSU has shown that a combination of various wavelengths of infrared light minimizes cell damage in the brain after a patient is resuscitated and the blood begins flowing again, a process known as reperfusion. The findings were accepted by the journal Nature and published online this year. In 2016, WSU helped vet the technology and build out a commercialization program through a pair of $25,000 grants from its technology incubator program. Morsfield was then a mentor-in-residence at WSU and thought the technology promising and its co-founders coachable. “What was intriguing to me was their depth of understanding of the mechanism of action. In my history of this, a lot of people say, ‘Look what it does.’ And when you ask them how it does it, they say ‘I don’t know.’ They know the mechanism of action, and that’s a big

Mark Morsfield (left), chairman, president and CEO of Mitovation Inc., Maik Hütteman, Wayne State University, and Thomas Sanderson, University of Michigan.

Need to know

JJMitovation Inc. has a prototype device

designed to stop brain cell damage after heart attacks

JJDevice uses infrared light, a safe, noninvasive technology that should have a clear path to FDA approval JJLed my Mark Morsfield, who has a background in medical device startups

box to check.” At the end of 2016, the technology got a grant of $100,000 from the Michigan Translational Research and Commercialization (MTRAC) program, part of the Michigan Economic Development Corp.’s entrepreneurship and innovation initiative, to develop a prototype. Early this year, the university

signed a license option with the company. The technology has been well-funded by a combination of 16 large and small grants totaling almost $8.1 million. In addition to the MTRAC funding, grants have included $2.8 million from the U.S. Department of Defense; three grants totaling $4.4 million from the National Institutes of Health; $200,000 from Wilson Medical Research Foundation; $143,000 from the American Heart Association; and $125,000 from the Kellogg Foundation. The company is currently raising a seed investment round of $500,000 to continue prototype development, expand its intellectual property and begin the regulatory process. “We’re talking to angel investors and institutional investors who like early stage

companies,” said Morsfield, who hopes to finish that round by the end of this year and soon after start to raise a Series A round of $3 million to $5 million to build out the team and begin human trials. He said trials should be relatively fast and inexpensive because infrared technology is well understood and considered very safe, minimizing the need for safety studies. Large animal studies should be finished next year, at which point Morsfield said he will meet with representatives of the U.S. Food and Drug Administration to plan human trials “It’s a really simple technology. The beauty is it’s noninvasive and easy to administer,” said Morsfield. “You don’t need special training. There’s no black box. You put it on and turn it on.” Hugo Braun, a co-founder and man-

aging partner of Ann Arbor-based North Coast Technology Investors LP, a venture capital firm, is on Mitovation’s board of advisers. He said Mitovation is too early for North Coast to invest in, but considers it a good possibility if expected milestones are reached. The technology offers a rare combination for a medical-device startup, Braun said. The market is big and the path to approval by the Federal Drug Administration is fairly straightforward. “The downside to patients is minimal. You’re treating them with infrared light,” said Braun. “... They’re taking well understood technology and trying to do something with it no one has thought of before.” “We like Mitovation for multiple reasons,” said Joan Dunbar, associate vice president of technology commercialization at WSU. “We’ve put a considerable amount of resources into the technology and keep getting to go instead of no-go when it comes time to make decisions about it. I’m optimistic about this one.” The company co-founders are Maik Hütteman and Thomas Sanderson. Sanderson has since left WSU and taken a faculty position at UM. They share the title of chief science officer at Mitovation. Hütteman is professor of molecular medicine and genetics and of biochemistry, microbiology and immunology and division director at the school’s Center for Molecular Medicine and Genetics. Sanderson is an associate professor of emergency medicine and molecular and integrative physiology in UM’s Center for Integrative Research in Critical Care. Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

Switched Source creates ‘detours’ around electrical grid trouble By Tom Henderson

thenderson@crain.com

Switched Source LLC, a 2017 spinoff from Michigan State University, is partnering with NextEnergy, the Detroit-based nonprofit that works to advance energy technologies, and has moved into the Tech Town incubator across the street to commercialize its power-grid technology. The tech has been heavily funded by the U.S. Department of Energy’s Advanced Research Projects Agency-Energy, or ARPA-E, program, which supports promising energy technologies that are too early for private sector investment. ARPA-E first awarded Switched Source with a $2.4 million grant in 2011, followed by a $1.5 million grant last year. At the heart of Switched Source’s technology is what it calls a unified power-flow controller, hardware created by Dr. Fang Peng, a professor in MSU’s Department of Electrical and Computer Engineering. In 2011, ARPA-E announced its first grant for Peng, covering the period of February 2012 to November 2015 for him to develop a prototype controller to more easily integrate power from renewable energy sources such as wind and solar into the grid, allow for a reduction in the need for expensive transformers and make

Michigan State University Professor Fang Peng’s work led to the founding of Switched Source.

it easier to reroute electricity around trouble spots, such as a downed line. The DOE liked the prototype well enough to help fund its commercialization through last year’s grant. In 2016, before a company was formed or the technology licensed from the school, MSU, hoping to commercialize the technology, reached out to the Energy Foundry in Chicago, a venture-capital firm that

invests in early stage energy-technology companies, which in turn hooked MSU up with Charles Murray, a veteran of the energy industry who vetted the technology and founded a company as its president in September 2016. A licensing agreement was signed with MSU last year. The company has two patents granted and three in process. Previously, Murray was manager of business development for Chicago-based Invenergy LLC, where he managed the construction of more than 65 megawatts of energy-storage projects in the U.S. and large power projects in renewable generation and natural gas in Latin America. Murray said that the second ARPA-E grant had been announced late in 2016, but the award was held up until August by the Trump administration, which had voiced strong opposition to the program but eventually permitted Feng’s grant. “In hindsight, it was one of the best things that ever happened to us,” said Murray of the delay. “We didn’t have the money, so we couldn’t do engineering, so we talked to customers and went through a lot of startup boot camps.” Meanwhile, Jim Saber, the president and CEO of NextEnergy, told Murray about the financial and infrastructure support available in Michi-

Need to know

JJSwitched Source spun off its pow-

er-grid technology from MSU in 2017

JJHas received $3.9 million in funding from the U.S. Department of Energy JJCompany has raised $600,000 in various pitch, entrepreneurship competitions

gan. Murray decided to move the company to Detroit instead of launching it in East Lansing or Illinois. NextEnergy helped Switched Source get matching funding for the ARPA-E grant of $200,000 from the Michigan Economic Development Corp., a contract managed by NextEnergy, which makes sure milestones are met as payments are made over time. Last year, Switched Source was also a finalist in NextEnergy’s Next Challenge: Smart Cities contest, winning $40,000 to help develop components for its grid-system-management system. Saber said he likes that Switched Source’s design allows energy from solar, wind and energy-storage systems to more easily be fed into the grid. And in the event of downed power lines, its technology makes it easier and much faster for electric companies to redirect current within

circuits. “It is a smarter, lighter, more easily deployed technology that is married to large generators,” he said. “If a road needs to be closed for a sinkhole, you need to create a detour for traffic. Switched Source’s technology creates a detour around downed electric wires quickly and efficiently.” Switched Source could be considered a poster child for cooperation among a variety of institutions nationally in support of entrepreneurship and innovation. Most recently, on Sept. 25, New York Gov. Andrew M. Cuomo announced that Switched Source won $250,000 at the annual 76West Clean Energy Competition, one of the largest competitions in the country that focuses on supporting growing clean energy businesses. In all, the company has raised about $600,000 in various competitions. Switched Source is testing its hardware now and hopes to have hardware deployed in the field in the first quarter by a variety of utility companies. Murray said he has begun talks with investors for a Series A funding round, the size of which will be determined later. Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

C R A I N ’ S D E T R O I T B U S I N E S S // N O V E M B E R 5 , 2 0 1 8

SPECIAL REPORT: TECHNOLOGY

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Tom Guarr (left) and Jack Johnson, co-founders of Jolt Energy.

Jolt Energy gets support as it aims to keep batteries from exploding By Tom Henderson

Need to know

Major financial and research support from the Argonne National Laboratory in Lemont, Ill., have put a jolt in Jolt Energy Storage Technologies LLC, a Holland-based spinoff from Michigan State University that hopes to reduce or eliminate the danger of lithium-ion batteries overheating and exploding from being overcharged. It came in April when Argonne announced that company co-founder Thomas Guarr had been named one of six winners of its Chain Reaction Innovations program from a national field of 83 applicants. The program pays recipients a salary of $89,000 a year for two years and provides the company $220,000 for R&D work at Argonne. It also provides $20,000 in travel money for Guarr and coaching on customer acquisition, entrepreneurship and manufacturing. The program, overseen by the U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy, will also provide introductions to potential investors. Jolt got a second jolt in October when it won the grand prize of $100,000 at the Orcelle Awards, the annual pitch competition hosted by the Ocean Exchange, a seven-year-old nonprofit whose mission is to help advance technology and create prototypes in energy sustainability. Guarr and his co-founder, Jack Johnson, have demonstrated in the lab that they can use organic-based molecules that change their shape when lithium-ion is verging on overheating. The carbon-based molecules look like butterflies, but as they begin to overheat, they fold in their wings, which causes heat to dissipate. Jolt calls their compounds voltage-regulating-electrochemical shunts. “The first step for us at Argonne is to make and test lithium-ion batteries with our additives,” said Guarr. “We’ll look at different lithium-ion chemis-

technology to make lithium-ion batteries safer

thenderson@crain.com

JJMSU spinoff Jolt Energy testing

JJArgonne National Laboratory in Lemont, Ill. to provide major financial and research support JJCompany has raised a total of $650,000 in funding

tries. There are several out in the marketplace batteries. And we’ll look at different levels of our additives.” Guarr said that while they could do a lot of that sort of testing in Holland, “If we were to test cells ourselves, battery manufacturers aren’t going to take our word for it. But if Argonne is doing the testing, we can get a foot in the door with manufacturers.” The business plan is to sell their organic-based compounds to battery manufacturers. In addition to making small batteries safer for things like cell phones and laptops, Jolt hopes to prove that its technology can be applied to what are termed redox flow batteries, which provide large-scale energy-storage applications for commercial power companies. Because energy from renewable sources like wind and solar tends to be intermittent, reliable energy storage at the grid level is important to provide consistent power. Guarr retains his position of director of research and development at the MSU Bioeconomy Institute in Holland, a former Pfizer Inc. facility, where Jolt has recently opened a small lab, and he continues to run the internship program at the institute. Jolt, which was formally launched in 2014 but remained below the radar while it worked on its technology, licensed intellectual property on the use of organic compounds in batteries from MSU in 2016. The technology was developed in the Organic Energy Storage Laboratory at the Bioeconomy Institute.

Jolt has three patents pending. While Guarr is the point person for research and has the title of chief scientist, Johnson is chief engineer and heads up business development. At the same time he co-founded Jolt, which does not yet pay him a salary, he founded Holland-based Volta Power Systems LLC, a maker of energy components and energy-storage systems for the RV, marine and heavy equipment markets. It now employs 13. Johnson spent almost 16 years at Johnson Controls, the last five as manager of advanced manufacturing for lithium-ion battery production. Under his leadership, Johnson Controls’ plant in Holland grew to be the largest lithium-ion plant in the country. He left the company to co-found Jolt and found Volta. “I have a relationship with all the major battery manufacturers,” said Johnson. “They all know I’m working on something big. They just want me to come back with data.” Jolt has raised a total of $650,000 in funding, including $100,000 from the Muskegon Angels, $25,000 each from three other angel investors and $50,000 from Red Cedar Ventures, a funding subsidiary of the nonprofit Michigan State University Foundation created to commercialize faculty research. “The Muskegon Angels want to invest in companies first in Muskegon, but also West Michigan that have the potential to impact the triple bottom line — profits, people, planet. Jolt’s technology clearly hit all three aspects,” said Bill Cousineau, the group’s president. “As the technology is proven out, the growth will in turn provide additional jobs to support families and profits to those that have invested in their vision. The Muskegon Angels are thrilled to be a part of this exciting opportunity.” Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

For more information, visit: ltu.edu/mba or ltu.edu/msit

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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 // N O V E M B E R 5 , 2 0 1 8

SPECIAL REPORT: TECHNOLOGY

Cardiosound wades into blood pressure monitoring By Tom Henderson thenderson@crain.com

Turning a university research project into a for-profit company typically takes a veteran of the startup ecosystem, someone familiar with defining market opportunity and figuring out how to find customers in that market and make them pay for what you have. That was true for Cardiosound LLC, which formally launched in August. The company grew from efforts by Gaurav Kapur, a physician and associate professor of pediatrics at Wayne State, to find a better way to measure blood pressure, particularly in infants, where current methods are notoriously inaccurate. The company checked that box with the addition of Kevin Wittrup as president and CEO. Wittrup, who got his master’s degree in mechanical engineering from Michigan Technological University in 1995 and spent a decade as an automotive engineer, understands technology. He earned his MBA with high distinction from the Ross School of Business at the University of Michigan in 2004, so he understands business. And as a former venture capitalist who helped launch or run several early stage tech companies, he checked a few other boxes, as well. Before Wittrup joined the picture, Kapur reached out to some colleagues at WSU — Sean Wu, a professor of me-

Kevin Wittrup: Understands tech, business.

Gaurav Kapur: Company grew from his efforts.

Need to know

 WSU spinoff Cardiosound LLC aims to improve continuous blood pressure monitoring technology  Kevin Wittrup, president and CEO, is a veteran of the startup ecosystem  Has raised seed funding of $250,000 to do testing, build a larger data set

chanical engineering; Yong Xu, a professor of electrical and computer engineering; and William Lyman, a professor of pediatrics. Wu has a history of entrepreneurship, too. A professor at Wayne State since 1988, he co-founded Detroit-based SenSound and was its chief technology officer from 20032008. The company helped auto engineers analyze how sounds are generated by complex machines and how they travel through structures and re-radiate into their surroundings. He

has been president and CEO since 2015 of Troy-based Signal-Wise LLC, which develops software to study and mitigate noise and vibration-related issues for manufacturers. Xong Yu is an expert in something called MEMS, which stands for microelectromechanical systems — used in neural interfaces, medical implants, smart textiles, flexible sensors and a wide range of health care sensors. Lyman understood their potential market and the needs of patients. Lyman is now at Michigan State University and no longer affiliated with Cardiosound. The other co-founders remain at Wayne State and will serve Cardiosound as consultants. What they came up with was the idea of developing a sensor-based algorithm that would allow for noninvasive continuous blood-pressure measurement in an intensive-care setting. Early in 2016, they got a proof-ofconcept grant from the school’s Technology Development Incubator, built a prototype sensor-based tool capable of sophisticated signal processing and monitored 25 patients at Detroit’s Children’s Hospital, with good results. They were then shepherded through the process of how to get funding to advance the technology by Scott Olsen, part of the team in the office of technology transfer. The result, in October 2016, was the news that the four had won a $100,000

COUNTDOWN TO THE BOOK OF LISTS

grant from the Michigan Translational Research and Commercialization program, which is funded by the Michigan Economic Development Corp. to commercialize university research. It was time to form a company, and time for Olsen to reach out to Wittrup. Wittrup was formerly partner and COO at Ann Arbor-based MacBeedon Partners LLC, which was formed by now-legendary Dick Beedon to provide funding and management help for seed-stage companies, most successfully with Ann Arbor-based Amplifinity Inc., which helps client companies market their wares using social media recommendations by employees and customers. (Beedon died earlier this year.) From 2011-2018, he was a partner in Ann Arbor-based RSVP Capital, a venture capital firm. During his tenure there, he helped find funding for Advanced Battery Concepts LLC, a successful and growing Clare-based company that makes what is called a bipolar lead battery for the military, industrial, renewable and automotive markets, and whose board he sat on, and for Ann Arbor-based Biovigil Hygiene Therapies LLC, which marketed a hand-hygiene system for health care workers. He founded the company and was CEO from 2012-2017. RSVP recently became fully invested, which freed Wittrup up to look for

the next challenge. “What I liked is the founders’ expertise, it’s a huge market, I understand the technology, and we have good data,” he said. Wittrup has raised seed funding of $250,000 from the founders and an angel investor to do animal testing and build a larger data set. He said he hopes to have what he called an alpha device within two months, which should prove if the tech works. If it does, he says he wants to raise a follow-on round of $750,000. Wittrup said two challenges with Cardiosound is that it is very early stage, and it’s in an area where there is a lot of competition. “I know a lot of investors, but this is a hard sell. It’s a little bit early,” he said. “There are a lot of people chasing a noninvasive continuous blood-pressure monitoring solution. It’s a huge market, so I’m not worried about being the only one. There will be more than one winner, but a lot of people have crashed on the rocks.” The company doesn’t have a lab or headquarters yet. He said he will soon settle on one of the numerous tech incubators in Ann Arbor to call home for testing and product development. He hopes to hire one or two researchers by the end of the year and will do most of the product development in-house, with some work being done by contract research organizations.

The Book of Lists is an annual data resource which culminates Crain’s year-round efforts to gather business intelligence and data in Southeast Michigan. It is a staple resource used all year long. BOOK OF LISTS FAST FACTS

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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 // N O V E M B E R 5 , 2 0 1 8

SPECIAL REPORT: TECHNOLOGY

The internet security company Dug Song’s betting on By Tom Henderson thenderson@crain.com

Dug Song knows a good internet security thing when he sees it. And he thinks he has seen it in Ann Arbor-based Censys Inc., which spun off from the University of Michigan in October 2017 and formally launched in January. Censys continuously monitors all of a company’s devices and equipment that connect to the internet or are part of the internet of things. IT staff at companies can use Censys to discover new threats and assess their possible impact. Song has helped fund the launch of Censys and sits on its board of investor advisers, which also includes his co-founder at Duo, Jon Oberheid, and H.D. Moore, a nationally known IT researcher, programmer, entrepreneur and now venture capitalist. Duo closed in October on its $2.35 billion sale to San Jose, Calif.-based Cisco Systems Inc. In 2003, Moore created Metasploit, a network security tool that evolved into the Metasploit Framework, which tested computer systems for vulnerabilities and issued warnings about software vulnerability and the need for patches. It was bought in 2009 by Rapid7, a Boston-based publicly traded IT security company that provides vulnerability-management solutions. Moore has been dubbed the computer industry’s “most important white-hat hacker.” Having Song, Oberheid and Moore as investors and advisers is an important validation for Censys as it continues to raise what it calls seed funding, plans to go out for a much larger A-round of equity capital and gets the word out in the marketplace about its capabilities. The company grew out of a previous software tool developed at UM called ZMap, which discovered or provided analysis of some of the most significant worldwide Internet vulnerabilities, including FREAK, Logjam, DROWN, Heartbleed and the Mirai botnet. Song said Censys solves what is becoming an ever bigger problem as companies and their workers get ever more connected to ever more devices. “To protect yourself, you have to know what to protect, but you often don’t know where all your data is. It’s a big problem,” said Song. “What they’ve done that differentiates them is they’ve brought academic rigor and created tools to scan on a much more scalable basis and at a much cheaper cost. There’s a lot of research around it.” Zakir Durumeric, Censys’ chief technologist, was one of the researchers at UM who helped spin it off. He is now an assistant professor at Stanford University. The other academic co-founders are David Adrian, the principal engineer, who is a Ph.D. candidate at UM whose research focuses on computer security and cryptography; and J. Alex Halderman, the chief scientist, who is a professor of computer science at UM. The CEO is Brian Kelly and the COO is David Corcoran, both serial tech entrepreneurs. Both Kelly and Adrian worked for Duo Security. Kelly was Duo’s principal product marketing manager from 2012-2015, and Adrian was an intern at Duo in 2013. After Kelly left Duo, he joined Nut-

Need to know

JJUM spinoff Censys monitors all devices

connected to the internet for threats

JJCo-founders of Duo Security among early investors JJPlans to begin raising a Series A round later in 2019 or in 2020

shell CRM, an Ann Arbor company developing software for customer-relationship management, as vice

president of product, then in 2016 co-founded Ann Arbor-based Third Rail Group Inc., a software consultant firm, with Corcoran. Corcoran has been a principal at Fort Wayne-based Digital Cowboy/Big Throttle Ventures, a consulting and investment firm in tech startups, since 2013, and was a mentor for the Techstars incubator program in 2016 and 2017. SEE SECURITY, PAGE 16

HEALTH EQUITY FOR ALL We know this city. We know its neighborhoods. And we know its people. We’ve been meeting the needs of this community for 150 years. At Wayne State University, we believe our responsibility includes serving the underserved of Detroit. It’s part of our medical mission. From the millions of dollars in uncompensated health care our doctors provide each year, to the 34,000 volunteer hours our med students contribute to the community, few do more to serve this city than Wayne State. Why do we do it? Because we believe equality should include health. And because Detroit is our neighborhood. And taking care of our own is one more way we show we’re Warrior Strong.

wayne.edu

Brian Kelly (left), CEO, David Corcoran, COO and Zakir Durumeric, chief technologist, of Ann Arbor-based Censys Inc.

C R A I N ’ S D E T R O I T B U S I N E S S // N O V E M B E R 5 , 2 0 1 8

GENOMICS FROM PAGE 10

“I’m really excited that Parabricks is focusing on genomics, which is going to be a really big and we want to get there early. Eventually, everyone’s genome will be sequenced,” Parikh said. “Parabricks speeds up the genomic-sequencing process 48 times, and when you tell people that, they just don’t believe you. The founders are great coders and they have an extremely good partnership with Nvidia, the lead manufacturer of GPUs. And Dave Gregorka brings a ton of connections.” Samadi said that what takes 48 hours of computing power to sequence can be done in less than an hour with their technology. Parikh said the fund will likely invest more in the company as needed. “I have high hopes for them. They are going to be a breakout company and get acquired,” he said. “Through all our discussions, they were very focused on the market, who potential customers are and how to reach them. That’s important for a university spinoff,” said Charlie Moret, Invest Michigan’s chairman and CEO, who invested in Parabricks last year. He said the partnership with Nvidia can’t be overrated. “It’s a go-to-market partner that accelerates your path to market. For an early stage company, Parabricks is hitting all the milestones you like to see.” Gregorka, the Ann Arbor-based venture partner for the Chicago-based venture-capital firm of Baird Capital, is also a mentor-in-residence at UM’s tech transfer office. The key for him was the pivot to genomics. “My reaction was they had a very strong value proposition in a space that was growing very rapidly. Genomics is just exploding,” he said. Parabricks offered, he said, huge improvement in

efficiency at a dramatic reduction in cost. “And the relationship with Nvidia was huge. That helped convince me.” Parabricks, which has five full-time employees and two part time, is based in the A2 Startup Garage, an incubator facility that shares space in the downtown Ann Arbor headquarters of Menlo Innovations, a software development firm. Rich Sheridan, Menlo’s co-founder and CEO, was impressed by Parabricks when it was one of 36 semifinalists in the 2016 Accelerate Michigan Innovation competition in Detroit and offered the company one year of free space in his incubator. It has since become a paying tenant. “There are two big trends in the technology world, speed and data. Data is exploding, particularly in the area of genomics. When data explodes at the rates we are seeing, speed becomes critical and this is where Parabricks comes in, turning computing processes that currently take days to ones that can be done in minutes and hours,” he said. “Using GPUs to their fullest extent is the future of computing, and the founders of Parabricks are among the brightest minds in this field of computing. Quite frankly, it is one of the joys of being in Ann Arbor, nestled up against one of the most prolific research universities in the world, that we get to hang out with guys like Mehrzad and Ankit.” “I’ve known Mehrzad and Ankit since before they launched the company. They are a couple of the most humble and knowledge-hungry young entrepreneurs I’ve met in a long time,” said Adrian Fortino, managing director of the Ann Arbor office of the Houston-based Mercury Fund. “We spend a lot of time on cloud-biology investment themes, and they have built a truly impressive platform to accelerate analysis of genomic sequencing data.” Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2

SECURITY FROM PAGE 15

Kelly and Corcoran have been partners off and on since 2006. In 2006 they co-founded TrustBearer Labs, a Fort Wayne software security company, and ran it until 2010, when it was sold to VeriSign. After starting Third Rail, Kelly said he and Corcoran wanted to find a company to focus on, invest in and run. “We threw stuff against the wall. ‘What kind of company do we want to do?’” said Kelly. Song introduced them to the UM team that became Censys’ co-founders. Last summer, Kelly and Corcoran had a series of conversations with the technology transfer office at UM. “They said, ‘We think this can be big, but we don’t know what big is,’” Kelly said. The two of them decided Censys would be their next thing — hopefully a next big thing. “We wanted a company in Ann Arbor with a lot of technical differentiation, a company with real science behind it, not just a better way to do a spreadsheet,” said Kelly. Drew Bennett is the associate director of software licensing in UM’s tech transfer office. “The work these guys had done in the lab initially is what got us excited,” he said, referring to the three researchers. “Alex [Halderman] has a very strong reputation as far as security is concerned. He’s got a very good reputation, especially, in voter security. The other thing that is very compelling is having a very experienced management team with significant business capability,” said Bennett, referring to Kelly and Corcoran. “The thing you have to worry about with startups is: Do you have the right guys driving it? Sometimes the technology is fantastic, but you really

“We wanted a company in Ann Arbor with a lot of technical differentiation, a company with real science behind it, not just a better way to do a spreadsheet.” Brian Kelly

struggle to find people from a business standpoint to come in and run it. The management team has a good track record and knows what needs to be done.” Bennett said that as the internet of things becomes ubiquitous, with nearly every electronic device in the home or office, from TVs to refrigerators to coffee makers, connected to the internet, “there are more access points for threats,” and consequently more need for technology like Censys. Censys is on the radar of local venture capitalists. “It has a team and advisers with great startup DNA,” said Jim Adox, managing director of the Ann Arbor office of Madison, Wis.-based Venture Investors LLC. Venture Investors invests in health care spinoffs from universities, so Censys isn’t a likely good fit for Adox, but he is impressed with its technology and management. “Censys is building a really interesting analysis tool for enterprises. The company has been taking a very interesting and successful approach to showing what sort of exposure an enterprise might have and then walking in with solutions,” said Adrian Fortino, managing director of the Ann Arbor office of the Houston-based Mercury Fund. “In fact, anyone can check an IP

address on the Censys website and see how bad things are.” The IT world was well aware of Censys’ predecessor, ZMap, which launched in 2012. Censys made its evolving technology free to users after its search engine began operating in October 2015, and by 2017 it had about 50,000 registered free users. The company has about 60 paying customers now and hopes to be at 100 by year’s end. Kelly said the company landed its first contract of $5,000 in December, a month before its formal launch. The company moved into its newly renovated second-floor headquarters on Main Street in downtown Ann Arbor in early September. It now employs 14 and plans to add to head count by the end of the year. Kelly said the company finished raising what he called a pre-seed round of capital in January and hopes to announce the closing of a seed round soon. He said the company had raised several hundred thousand dollars but declined to say how much of that was the pre-seed round or if any of that was part of the seed round. The pre-seed round included Song, Oberheid and Moore. Kelly said he plans to begin raising a much larger Series A round later in 2019 or in 2020. For Song, Censys’ spinoff is particularly resonant as a regional success story. He raised many millions of dollars at Duo, much of it from Silicon Valley venture capitalists eager to have him move the company to California. An avowed fan of the Midwest and Ann Arbor, he repeatedly declined. “Brian’s first company was created in Fort Wayne. He came here for Duo, and then he started his new company here. We’ve become a virtuous ecosystem here, and I hope to see a lot more things to come. At the end of the day, Duo is a great company to be at, as well as a great company to be from,” he said.

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BDO USA, LLP, one of the nation’s leading accounting and consulting organizations, announced that Andy Zaleski has been promoted to Detroit Tax Office Managing Partner. In this role, Zaleski is responsible for overseeing professionals, managing financial operations, and fostering client and prospect relationships for tax services in BDO’s Greater Detroit office. Zaleski has more than 25 years of experience in public accounting, advising both public and private multinational companies.

BDO USA, LLP, one of the nation’s leading accounting and consulting organizations, announced that John Marquardt has been appointed as the Tax Managing Partner for the Central region. Marquardt will be responsible for establishing objectives and managing all aspects of the Central region practice offices including overseeing the region’s aggressive growth. Marquardt has over 25 years of professional experience serving manufacturing and distribution, technology, and private equity companies.

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C R A I N ’ S D E T R O I TCRAIN B U’SSDIETROIT N E SBSUSINESS // N O V E M B E R 5 , 2 0 1 8

November 5, 2018

YOU MADE NEWS IN CRAIN’S

SPOTLIGHT Gov. Snyder names next director of MDOT

Gov. Rick Snyder named Mark Van Port Fleet as director of the Michigan Department of Transportation, effective Nov. 1. Van Port Fleet is MDOT’s senior chief deputy director, a role to which he was promoted in July. He has been at MDOT Van Port Fleet for 38 years and spent the last four years as Michigan’s negotiator with the Canadian government on development agreements for construction of the Gordie Howe International Bridge. Van Port Fleet, 61, replaces Kirk Steudle in the role. Steudle is retiring from MDOT after 13 years as its top administrator to join California-based traffic management solutions company Econolite as a senior vice president.

Dickinson Wright elects new CEO

One of the state’s largest law firms is set for a new CEO who brings an eye for new opportunities. Detroit-based Dickinson Wright PLLC elected 30-year company veteran Michael Hammer to the top leadership position, effective Jan. 1. He replaces William Burgess, who is handing Hammer over the reins after serving out his third three-year term at the helm, per company tradition established by past leadership. Hammer is based in the firm’s Ann Arbor office, where he will remain.

Head of JPMorgan Chase philanthropy in Detroit takes new job

The philanthropic head of JPMorgan Chase & Co.’s $150 million commitment to the city is taking a new job as a senior loan officer at Invest Detroit. Tosha Tabron resigned from her job at Chase for the newly created role at the nonprofit commuTabron nity development financial institution Nov. 1. “She will be leading business development and real estate loan originations that support our mission to create catalytic change in Detroit communities as our work moves into more neighborhoods,” Dave Blaszkiewicz, president and CEO of Invest Detroit, said in an email announcing the hire. Tabron is a 2016 Crain’s 40 Under 40 honoree.

Page 171

LARRY PEPLIN FOR CRAIN’S

Connie and Steve Ballmer discuss their philanthropic support of local organizations and causes.

BALLMER FROM PAGE 1

The Ballmers focused their efforts locally on a wide swath of organizations and causes, such as City Year Detroit; Detroit Employment Solutions Corp.; Planned Parenthood of Michigan; Live6 Alliance; Mack Avenue Community Church Community Development Corp.; Detroit People’s Platform; Community Foundation for Southeast Michigan; among several others. “Whatever need we’re supporting, we’re supporting people who do good work,” Ballmer said. “Go out 20 years, I hope whatever we’ve done helps kids move up the economic totem pole ... I call that the American Dream ... when they are saying, ‘Can I elevate myself ... can I have a big wage job when my parents did not?’” Ballmer said the group is not targeting a specific cause because the concept of improving the lives of impoverished people is broader than housing or safety or jobs — the entire spectrum needs to be addressed. “Long term, we have faith that things will improve, we can’t get tied up in the when,” Ballmer said. “This is about the whole outcome. We’re fortunate that we can afford to fund more broadly and fund more patiently ... wait out that 30 years (for positive results).” As the foundation learns more about the needs in the region and existing efforts to address them, more grants will become available, Ballmer said.

Among other strategies, the Ballmer Group is making unrestricted, longterm grants over 5-10 years to support national and regional organizations with demonstrated impact in improving economic mobility for children and families. It has already distributed grants in Los Angeles and Washington state. In Detroit, the group has a staff of three, including Kylee Mitchell Wells, who serves as the executive director for the group in Detroit. She formerly served as the executive director of the Detroit office of national nonprofit Enterprise Community Partners and was the associate director for the city of Detroit’s U.S. Department of Housing and Urban Development’s grant portfolio. Connie Ballmer said it was important that her group not add another service to the already-plentiful community organizations in the region, but instead focus on helping these organizations work with each other and government to accomplish goals. Ballmer said to accomplish this, the group will work to aid to strengthen the services and community infrastructure sectors, connect governments and, eventually, assist in using more technology to simplify the work. That means taking chances on a lot of organizations, he said. “If we don’t invest in organizations that fail, then we’re not taking enough risk.” Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

Tigers local TV ratings fell 41 percent from last year By Bill Shea bshea@crain.com

The Detroit Tigers’ local TV ratings this season fell 41 percent from last year, a sign that some fans have lost interest in watching a team that’s lost 98 games two years in a row. Southfield-based Fox Sports Detroit averaged a 2.64 household rating. A year ago, the games averaged a 4.48 rating, meaning the 2018 rating had fallen 41 percent year over year. Fox Sports Detroit airs almost all of the Tigers’ 162 regular-season games apart from a small number shown on national network broadcasts. The ratings data is from the Nielsen Co. Detroit’s 2.64 average ranked 18th among the 29 U.S. regional sports networks airing Major League Baseball games. They were 17th over the summer. Five years ago, they were No. 1. It’s been quite the tumble for the Ti-

gers on local TV. While they’re still the top-rated prime-time local cable-satellite programming, the ratings have plunged 71.3 percent since 2013’s peak of a 9.59 average, which was tops in all of baseball. That coincided with their last trip to the American League Championship Series. Tigers games saw their audience erode from midsummer when they averaged a 3.0 household rating going into the All Star break after the 97 broadcasts on Fox Sports Detroit. One household rating point in the Detroit market equates to about 18,000 households, and there are nearly 1.8 million TV households in the region. That means there were about 47,520 homes across metro Detroit tuned into Tigers games on average. At the peak in 2013, when the Tigers finished 93–69, it was nearly 173,000 homes.

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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 // N O V E M B E R 5 , 2 0 1 8

DIAPERS

Ecovia’s biopolymers (top left and bottom right) and AzuraGel (top right and bottom left).

FROM PAGE 3

The startup traces back to the graduate work of Jeremy Minty, 34, company co-founder and CEO, who earned undergraduate and doctorate degrees in chemical engineering at UM. From 2008 to 2013, Minty worked alongside Xiaoxia “Nina” Lin, company co-founder and associate professor of chemical engineering at the university, on ways to produce the absorbent material. The business is based on the engineering of microbial co-cultures for the production of superabsorbent biomolecules — basically, making absorbent, biodegradable material. The research was originally conceived in the framework of biomedicine, until the founders began to realize the commercial potential of their lab-grown material. The difficulty of the health care market, a time-sucking and expensive tangle of regulatory approvals, turned them in a different direction. Around the time Minty spun his research out from the university and started seeking ways to jumpstart his company, he met Hertig, who had recently earned an MBA from Boston University and was looking for work. Hertig helped write a commercialization plan that earned the company its first grant — a $225,000 Small Business Technology Transfer federal grant — and joined the company shortly after. The name Ecovia came from “via microbial eco system,” which is the essence of its technology — “engineering synthetic microbial communities for novel functions,” Lin said. During a

ECOVIA

Ecovia employs seven full-time staff members: (from left) Harry Poppick, research and development engineer; Drew Hertig, chief business officer; Jeremy Minty, president and CEO; Ian Graves, research and development engineer; Chao Peng, polymer chemist; Constance Bahr, research associate; and Sam Kohley, innovation manager.

science entrepreneurship event hosted by Michigan State University in 2015, the team was dubbed simply as the “diaper guys.” Rather than balk at the moniker, the company owned it. “In truth, we take pride in being called the diaper guys because our mission is to reduce waste and make the world a more sustainable place,” Hertig said. “I incorporated that theme into our presentation, having the audience close their eyes and visualize the great mound of diapers that we will save from entering the landfill.” That mound saved could also create a mound of money. Revenue generated by diaper sales in the U.S. is expected to be around $6.2 billion this year with a compound annual growth rate of 1 percent, according to market research company Statista. Worldwide, the market is more than $50 billion. While companies such as Irving, Texas-based Kimberly-Clark Corp.,

which makes Huggies, and Cincinnati-based Procter & Gamble, which makes Pampers, have the lion’s share of the market, Ecovia is after a niche it believes will grow as companies and consumers try to curb environmental impact. Around 20 billion disposable diapers, or 3.5 million tons, are thrown into landfills each year in the U.S. alone, according to the U.S. Environmental Protection Agency. The synthetic material of most diapers takes an estimated 500 years to break down completely. At full production, Ecovia estimates its diapers would be within 25 percent of the cost of conventional synthetic diapers, with the same absorption quality, company founders say. They believe consumers will be willing to pay more for the environmentally friendly alternative. Ecovia also claims to have products superior to companies it would be competing against, such as Ra-

leigh-based Tethis and Chicago-based Archer Daniels Midland Co., which also manufacture bio-based superabsorbent products, but with polymers based on modified starch. Ecovia’s diaper material, which it calls AzuraGel, is made up of an amino acid-based polymer that it says has a stronger chemical backbone, i.e., is more durable, and composts into carbon dioxide with no toxic footprint. The polymer is made in fermentation reactors, in which bacteria and yeast turn a waste product into a polymer that is then purified. Unusually, the process is completed by engineering a team of microbes rather than a single microbe, which is more common. “Microbes live in diverse communities, working together to achieve something that any one alone cannot do,” Lin said in a written statement. “The idea is to basically recruit specialists like in human society. By having each specialist do really well in their own job but also coordinating

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together, we can achieve something that is much bigger.” Producing the absorbent gel is a lengthy, complicated process on which the company’s success depends. Since the technique was developed at UM, the university owns the patent. Jeremy Nelson, senior licensing specialist at UM, said the school granted the company a license for research and development on the engineering process, and plans to issue a license for commercial rights once the patent is approved. The school is helping Ecovia through the application, typically a five-year process, which the company hopes to complete in the next year or two. Ecovia’s motivation is, of course, going to market, while UM strives to “close the loop on taxpayer-funded research,” Nelson said. He said that compared to the hundreds of patents he has worked on in his 10-year career, Ecovia’s ranks near the top in terms of viability for a business. For now, diapers are still a few years out. The plan is to focus on the higher-value cosmetic application of its material. Paris-based chemical manufacturer Seppic Inc. recognized the polymer’s moisture retention capabilities and bought a minority share of the company with a $1 million investment in the spring. Hertig said as part of the multiyear deal, Ecovia’s polymer will be used in the company’s topical creams. The company is in talks with hygiene companies to form a similar agreement. Hertig declined to say which ones, but he did say several of them are Fortune 500 companies active in the hygiene industry, and there’s also international interest. He said the company aims to start prototyping the biodegradable superabsorbent diaper by the first quarter of 2019. “The limitation will be on the supply side until we’re able to build up infrastructure to reach scalability,” he said. With funding secure for the next couple years, Ecovia expects revenue to be minimal in 2019 before sustainability and industrialization in 2020, Hertig said. It will still apply for grants during that time. It’s eyeing a $600,000 federal grant early next year, for example. Owners do not plan to raise more venture capital funding until 2020. At its peak, Hertig sees Ecovia churning out 80,000-100,000 metric tons of its superabsorbent material per year, which, at the $200 a kilogram asking price, would generate right around $200 million in annual revenue, which wouldn’t be a bad haul for the diaper guys. “If people remember us, they remember the mission,” Hertig said. Kurt Nagl: (313) 446-0337 Twitter: @kurt_nagl

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VOTERS FROM PAGE 1

With geofenced digital advertising zones, Hudson said, “you can start to showcase last-minute ads that are incredibly relevant to what you’re trying to make a push on.” “You’re literally being delivered ads in real time. It’s absolutely going to happen,” said Hudson, who declined to reveal the political campaigns her firm is working for in Tuesday’s midterm elections. As voters cut their cable cords or mute their television sets during the barrage of political advertising in this year’s record-breaking spending binge, campaigns have turned to different digital media to both identify and reach voters. “What can be done online and geotargeting is much more efficient than blanketing a neighborhood with fliers,” said Mark Gilman, president of Pitchnoise LLC, the strategic communications division of Inbound Lead Solutions. Political campaigns certainly haven’t abandoned print mail advertisements, which filled the mail boxes of active Republican and Democratic voters all summer ahead of the August primary and resumed in late September as ab-

C R A I N ’ S D E T R O I T B U S I N E S S // N O V E M B E R 5 , 2 0 1 8 sentee ballots began arriving in the mailboxes of senior citizens who routinely vote by mail. Handing out pencils at the polls with the name of a candidate “isn’t going to work in a congressional race,” Gilman said. “But they sure are going to work for somebody running for water commissioner or judge,” he said. “You still can’t get rid of all of the traditional stuff.” As pollsters have found out this election cycle though, fewer and fewer voters are answering their phones, making voter-irritating automated robocalls even less effective, Gilman said. “Robocalls are just wholly ineffective anymore,” he said. Hudson and Gilman said the technology has practical applications to marketing business services and consumer products, especially because millennials seem more inclined to receive text messages than answer a phone call from a telemarketer. “You can target specific messages to people rather than doing the old Gatling gun where you spread messages across an entire group and see what hits,” Gilman said.

Both parties experimenting Before political campaigns start-

ed using the technology, the service industry and restaurants were the earliest adopters of micro-targeted digital marketing using geofenced data, Hudson said. For example, the data can show whether a particular consumer eats out for dinner every Friday night — based on the cell phone’s location — and restaurants in their area can use the data to send them micro-targeted ads on Friday afternoon when they may be deciding where to eat that night. “When you think about it, it captures the intent of what someone is doing,” Hudson said. “As we’re on our phone looking for a restaurant, a bar or happy hour special, that location and geofencing has been so important for the local restaurant and or national franchises that actually have the money to purchase the ads.” Michigan’s two major parties have been experimenting with the technology to lure in their own customers. On Election Day in 2016, the Michigan Democratic Party geofenced a handful of precincts in Detroit with high numbers of likely Democratic voters to send them messages at the polls with the names of Democratic-nominated Supreme

Court justice candidates to vote for on the nonpartisan portion of the ballot, state party chairman Brandon Dillon said. “It’s a way to get you at the last minute,” Dillon said. Last year, the Michigan Republican Party geofenced a skilled-trades education convention at the Lansing Center convention hall to gather the internet addresses of the cell phones of every participant and vendor who attended, said Jonathan Duke, political director for the state GOP. The Michigan GOP then used the information to send digital advertising to those people who talked about Republican support of funding for skilled-trades programs, Duke said. Republicans also have been geofencing mega-churches in West and Southeast Michigan on Sundays to identify evangelical voters who attend church on a weekly basis and may be receptive to the GOP’s conservative stance on social issues, Duke said. The churchgoer’s IP address is matched with other consumer data the Republican National Committee has purchased to pair with Michigan’s qualified voter file to create profiles of voters and assign a score that’s used to determine the likeli-

hood a person may vote for a Republican. Regular churchgoers aren’t being sent digital ads during church, but at other times throughout the election cycle, Duke said. “When we get those device IDs, we can target them for all sorts of ads at different times,” he said.

Campaign of the future Hudson and Gilman believe future political campaigns will increasingly rely on geofencing for real-time intelligence about voters. “It’s incredibly efficient, especially when you only have so much money to spend,” Hudson said. Dillon, the state Democratic Party chairman, said the technology remains expensive. But if Dillon had his way, he would use geofencing to send voters text messages alerting them when a Republican legislative candidate was knocking on doors in their neighborhood and arm them with questions to “ask so and so why they voted against funding for schools.” “You could do that,” Dillon said. “That’s how crazy this is.” Chad Livengood: (313) 446-1654 Twitter: @ChadLivengood

Cannabis tax money unlikely to be panacea for pavement By Chad Livengood clivengood@crain.com

The proposal on Tuesday’s ballot to legalize the sale and use of marijuana for recreational purposes in Michigan may be a bit of buzzkill for voters looking for a panacea to fix the state’s roads. Based on the most generous estimate, the proposed 10 percent tax on the sale of cannabis would generate enough money by 2023 to pave about 39 miles of the more than 89,400 miles of county roads in Michigan. “Pot won’t fix the potholes,” said economist Patrick Anderson, CEO of the Anderson Economic Group in East Lansing. Anderson’s firm published a fiscal analysis of Proposal 1 last week that estimates the sale of recreational marijuana and end of taxes on medicinal cannabis would produce $50 million to $74 million in net tax revenue in 2020 and between $81 million and $175 million in the fourth year once the market has matured. Of those amounts, just $10 million to $15 million would be earmarked for roads in 2020 and $27 million to $47 million by 2023, according to the Anderson Economic Group’s analysis. If approved by voters, legalized marijuana would be subject to the 6 percent sales tax plus a 10 percent excise tax. The excise tax would be divvied up four ways: 35 percent to the School Aid Fund; 35 percent to the state’s main road fund; and 15 percent each to cities and counties with licensed marijuana retail stores. Anderson’s projections are far less rosy than the Senate Fiscal Agency’s projected $262 million in new tax revenue by 2023, while slightly higher than the $160 million in new tax revenues projected by VS Strategies, a Denver-based cannabis policy consulting company hired by the group advocating for a “yes” vote on Proposal 1. By comparison, the state’s general fund is $10 billion and the School Aid

CHAD LIVENGOOD/CRAIN’S DETROIT BUSINESS

Proponents of Proposal 1 have pitched it as a way to generate tax money for roads and schools, but even the highest estimates would pave only about 39 miles of county roads.

Need to know

JJProjected tax revenue from recreational

marijuana sales varies from $81 million to $262 million JJRoad funding from marijuana sales could be as little as $27 million by 2023

JJAdvocates argue taxing and regulating marijuana outweighs the current underground drug trade

Fund is about $14 billion. “This is not a proposal that people should be thinking about in terms of dollars for state government,” Anderson said. “It doesn’t really produce much money for the state.” The Senate Fiscal Agency estimates the marijuana excise tax would generate $63 million for the state’s transportation fund by the 2023 fiscal year — the highest assessment among the three.

The potential tax revenue from marijuana sales also won’t be anywhere near the revenue generator the Michigan Lottery is for public schools. In the 2017 fiscal year, the lottery generated $924 million for schools and has consistently contributed more than $700 million annually to public education for the past decade. Josh Hovey, spokesman for the Coalition to Regulate Marijuana Like Alcohol, the group campaigning for passage of Proposal 1, said the taxes collected from cannabis sales will still outweigh the longstanding underground drug trade. Police departments and prosecutors spend tens of millions of dollars annually in Michigan enforcing state and federal marijuana prohibition laws, Hovey said. “We’ve been very clear all along that this initiative is going to raise a

whole lot more than the zero dollars we’re collecting today,” Hovey said. Proponents argue there are other benefits to taxpayers, such as fewer people being jailed for marijuana drug offenses. In 2016, Michigan judges sentenced 199 people to state prisons — at an annual cost of about $35,000 each — for marijuana-related offenses. An additional 3,620 individuals got jail time in county lockups, probation or a combination of both, according to the Senate Fiscal Agency. The intake cost for each new prisoner is $5,315, while probationers cost the state Corrections Department $3,024 annually to supervise, the Senate Fiscal Agency said in its analysis. “Taxation is a benefit to legalization, but it’s not the reason people should be voting for this," Hovey

said. Anderson said his firm’s analysis accounts for the elimination of a 3 percent excise tax on marijuana for medicinal purposes, the cannibalization of medical pot, and fewer consumer purchases of other goods, such as alcohol. “When they buy cannabis products, they tend to buy less alcohol,” Anderson said. In the past, Anderson’s firm has worked for alcohol industry giants like ABInBev, Labatt Brewing Co. and Diageo. But he said the analysis of Proposal 1 was paid for by his firm, not a client. Anderson’s firm has been studying the national market for legal marijuana sales since 2015 as states have been passing laws ending decades of prohibition of the drug. “We didn’t just start smoking the produce,” Anderson said.

C R A I N ’ S D E T R O I T B U S I N E S S // N O V E M B E R 5 , 2 0 1 8

TROPHIES FROM PAGE 3

They feel they’re poised for serious growth. Sales last year were about $350,000. The price point they try to stay beneath is $100 for the large trophies, and under $20 for miniature replicas. A full-sized replica Little Brown Jug retails for $200. Besides hardcore fans, the trophies are often bought for wedding parties — especially if the bride and groom attended rival schools, said McDonald, who is the company’s president. They’re also common gifts at Father’s Day, graduations and bachelor parties, he said. Companies have bought them for offices split over school loyalties. Ironically, a major customer has been Jim Harbaugh and the University of Michigan football program. “Our football staff, including Coach Harbaugh, thought that the replicas of the Little Brown Jug and Paul Bunyan Trophy would be a great keepsake for our players and staff. They presented those as holiday gifts during his first two seasons,” David Ablauf, UM associate athletic director, said via email. Rivalry Trophy replicas were part of Michigan State’s player “swag” gift bags for playing in the 2013 Rose Bowl game. The company’s Paul Bunyan Trophy replica leads all sales, McDonald said, followed closely by the “Floyd of Rosedale” pig trophy for the winner of the Iowa-Minnesota game. Third is the Little Brown Jug that’s kept by the victor in the Michigan-Minnesota game. Sales surge in the hours after a rivalry game. “We usually see a spike in the neighborhood of 50 to 100 trophies in the next day or so,” McDonald said. “We target happy fans because they are the ones that are going to purchase trophies. Once the game is over, we focus on the winning team. Someone is always going to win.” October-December is their busiest sales period because that’s the heart of college football rivalry game season, and that coincides with the holidays. The company makes and sells thousands of Christmas ornament-sized trophy replicas, as well, McDonald said. The trophies are sold in a few brickand-mortar stores such as Michigan MDen and Michigan State’s campus bookstore. McDonald, 43, and Kelly, 50, needed help to get to this point. Creating and licensing a retail product wasn’t among their skills, so they studied up, met with the appropriate officials at different schools to get them interested, and got help from Plano, Texas-based college sports licensing giant Learfield Communications LLC. McDonald credits Learfield with the company’s early success. “They helped navigate the early stages — helped us with licensing holograms, box design and royalty reporting. They really helped us streamline the royalty reporting process,” McDonald said. The company submits its sales data and a lump sum payment to the Big Ten every quarter, and the conference pays royalties to each school represented by trophies, McDonald said. “Standard licensing is between 12 and 15 percent, with the royalties split equally between schools,” he said. The licensing process involved oneon-one talks with the schools and conference, McDonald said. The athletic departments were helpful in providing hundreds of photos of the tro-

The Paul Bunyan Trophy replica leads all sales. LARRY PEPLIN FOR CRAIN’S

phies, and those pictures were used to create prototype replicas by the China-based manufacturer. Each participating university got models to inspect and sign off on before they went into production, McDonald said. The universities own the rights to the trophy likenesses. The large Paul Bunyan Trophy isn’t a full-sized replica. It’s 14 inches tall and sells for $75, while the real trophy is a 48-inch carved wooden lumberjack that sits atop a five-foot base. McDonald said a replica that size would have to retail for $500, and the demand at that price wouldn’t justify the product. The trophies are as detailed as they can make them, and the quality helped convince the Big Ten and the schools to grant them licenses — an often long, complex process for anyone that wants to sell retail souvenirs. “It wasn’t as hard as it could have been, because we had a unique product,” McDonald said. One licensing industry insider said McDonald and Kelly are a bit unusual because they successfully navigated a licensing process that’s normally (but not always) a pipeline reserved for bigger brands. “(Licenses) are issued to companies that have significant wherewithal, that are more financially sound, established, with distribution networks. So these guys are outliers,” said Pete Canalichio, CEO of Atlanta-based Licensing Brands Inc., which has counted Coca-Cola, Major League Baseball and the U.S. Olympic Committee among its clients. He also praised the Big Ten and the universities for identifying a good product to license: “To the credit of the universities, they saw this as an opportunity to take advantage of something that wasn’t being exploited at the time,” Canalichio said. The college licensed retail product industry is estimated at $4.6 billion, according to Atlanta-based Collegiate Licensing Co., which represents about 200 schools, bowl games and athletic conferences.

The process for Rivalry Trophy still took months — years, in some cases. Sales began in earnest in 2011. “The Little Brown Jug was challenging,” McDonald said. Then-Michigan coach Brady Hoke allowed him to personally handle and photograph the trophy in the basement of UM’s Schembechler Hall. The problem with getting it right was because the jug has all the scores of the Michigan-Minnesota games from over the years, and shows a lot of wear from handling. “We try to make them as authentic as we possibly can,” McDonald said. “You can’t recreate a hundred years of tradition of the thing getting passed back and forth.” They ended up going with a cleaner replica. The standard model is $98. Other famous replicas among the current inventory of 11 trophies available are the Old Brass Spittoon (Indiana-Michigan State) and the Illibuck (Ohio State-Illinois). There are some Big Ten trophies they’ve yet to license, including the enormous bookcase-like Land Grant Trophy for the Michigan State-Penn State winner, the Land of Lincoln Trophy that in 2009 replaced the old Sweet Sioux Tomahawk for the Illinois–Northwestern victor, and the recent Twitter-created and very unofficial “$5 Bits of Broken Chair Trophy” that goes to the winner of the Minnesota–Nebraska games. Those could happen in the future, McDonald said. “We ask about trophies annually. In order for a trophy to move forward there must be agreement between the conference and all schools. We have yet to receive permission for the others, for a variety of reasons. We’ve specifically asked about the $5 Bits of Broken Chair in the past year, and the universities are a bit reluctant because of the uncertainty over who actually owns the rights to that trophy,” he said. They plan to add more schools and conferences, such as the Big 12, Pac12 and SEC. Expansion is limited because there are only so many trophies

and they are most common in the Big Ten, but there are some prominent trophy games elsewhere, such as the Stanford Axe that’s been a trophy for the winner of the Stanford-Cal game since 1933. “There’s just not the passion elsewhere that exists in the Big Ten,” McDonald said. As the company does add more replica trophies to its product lineup, it’s also expanding its sales reach by using Amazon.com. However, using the e-commerce giant to scale up sales is a Catch-22, according to McDonald. For starters, they’re reluctant to give up control and the ability to interact with customer that they get from direct sales. He said they’ve built good relationships because clients talk directly with them about sales or problems, and that’s created goodwill they may lose with third-party online sales. That can be lost by using Amazon sales. “We pride ourselves on customer service. We like the direct connection we have with customers and don’t want to lose that,” he said. But Amazon’s scale (and free shipping for Prime customers) is too powerful to resist. “It’s become the world marketplace,” McDonald said. Their plan is to sell just the ornament mini-size trophies in time for Christmas, rolling them out in the coming weeks, he said. Also, it’s simply too expensive to deal with long-distance shipping inhouse, he added. Shipping to the western U.S. can add $30 in costs. “That’s difficult to absorb or pass on to customers,” McDonald said. As a small retailer, there are wider issues far out of their control. Because the replica trophies are manufactured overseas, McDonald and Kelly have been keeping an eye on the Trump administration’s trade wars, which have not yet affected their business but remain a worry. “We are in the process of making another order, and there is some uncertainty. It’s definitely a concern moving forward,” McDonald said. He added that they looked into a domestically produced version of the Floyd of Rosedale trophy, and the cheapest they could get it produced and realistically sold to consumers for a small profit was $498. Still, they’re seeking North American manufacturing options. One area where they’ve found success at a discount is marketing. The company has paid for traditional advertising in alumni magazines, national college football periodicals and even Lansing radio spots, but it gets its best results from social media, McDonald said. That’s because it gets invaluable targeting data from Facebook and other platforms. “We get immediate results. Social is measurable. The ability to target and re-target potential customers is insane,” he said. “We know who is likely to make a purchase.” The success so far has McDonald and Kelly thinking about expansion into other products related to the trophies. “We’re looking at everything. Clothing is a different animal altogether from a college licensing perspective, but we’re looking at everything that a college fan has at a tailgate or in their basement and we are considering if a large pig, or a statue of Paul Bunyan, would look great on it,” McDonald said. Bill Shea: (313) 446-1626 Twitter: @Bill_Shea19

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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 // N O V E M B E R 5 , 2 0 1 8

LARRY PEPLIN FOR CRAIN’S

The former McLouth Steel plant in Trenton was once a state-of-the-art steel-making plant a half-century ago.

MCLOUTH FROM PAGE 3

The largest building in the plant complex that stretches along Jefferson Avenue is 3,100 feet long with a clearance bay of 100 feet. Last September, Crown Enterprises paid Wayne County $4 million for the old steel plant, covering unpaid taxes dating back to 2006 that the previous owner, Detroit Steel Co., owed before the county took the property in a tax foreclosure. Under the purchase agreement,

Crown committed to investing $20 million over six years in the cleanup and redevelopment of the property. If the company fails to meet that investment threshold, it will be fined $1 million, according to the agreement. The McLouth site in Trenton is adjacent to 76 acres of land to the north in Riverview that billionaire trucking mogul Manuel “Matty” Moroun bought in 2000 through an entity called Riverview-Trenton Railroad Co. Crown Enterprises officials have said the combined 260 acres could

be redeveloped into a logistics hub with access to rail, a port along the Trenton Channel of the Detroit River and nearby connections to I-75 and Detroit Metropolitan Airport. “Let’s not sugarcoat this — the project is getting this site ready for development,” said Matthew Moroun, vice chairman of his father’s logistics, trucking and real estate company based in Warren. “That’s going to take a few years.” The total cost of cleaning up the facility and how much taxpayers will shoulder through the EPA’s Superfund remains unknown.

Crews remove the Detroit Steel Company sign from the old McLouth Steel plant in Trenton last week.

LARRY PEPLIN FOR CRAIN’S

“Our company, myself, we’ve got a lot of imperfections,” Moroun said. “I never dreamt of becoming partners with the Environmental Protection Agency. But I am. And I’m proud to do it.” Wayne County Executive Warren Evans presented Moroun with the title to the property Thursday during a rainy ceremony before the plant’s old sign was torn down by an excavator. “Hopefully in 24 months, we won’t see the hulk there,” Evans said. Moroun noted the project will

change the landscape of Downriver. “You might be able to drive down Jefferson Avenue here and see Grosse Ile — I think that’s pretty cool,” he said. “And the folks on the island will be able to see Jefferson. I look forward to that day.” Trenton Mayor Kyle Stack welcomes the coming change after a generation of McLouth serving as a post-industrial eyesore in the city of 18,000 residents. “This is a monumental day in the city of Trenton,” Stack said. “Never in my lifetime did I think this would happen.”

LARRY PEPLIN FOR CRAIN’S

The pickling building in the former McLouth Steel plant in Trenton.

C R A I N ’ S D E T R O I T B U S I N E S S // N O V E M B E R 5 , 2 0 1 8

THE WEEK ON THE WEB

RUMBLINGS

Knight Foundation gives $20 million to the arts in Detroit

Patterson: OU purchase of Palace a ‘pipe dream’

OCTOBER 26-NOVEMBER 1 | For more, visit crainsdetroit.com

etroit’s arts community is getting $20 million from the John S. and James L. Knight Foundation to continue its growth and innovation. The new grants come on the heels of a Knight-commissioned study that found in spite of the Great Recession and Detroit bankruptcy, arts programming, support and spending have grown in Detroit and Wayne County over the past decade. The goal is to continue that momentum, CEO Alberto Ibarguen said. Knight has worked to be an important funder of traditional art institutions in Detroit and grassroots arts organizations. Its support for the arts “allowed for authentic voices at a time when Detroit was reinventing itself,” he said. “In the art world, Detroit has become the new Berlin.” The new grants provide money to help Detroit’s arts organizations continue to grow and innovate, said Katy Locker, Detroit program director. They build on $52 million in funding from the Miami-based foundation to the Detroit arts since 2012 and a $30 million commitment to the “Grand Bargain” deal that preserved the Detroit Institute of Arts and its collection and shored up the city of Detroit’s pension funds, helping the city to exit bankruptcy. The bulk of the funds will be split three ways: J $8 million will go to anchor institutions — the Detroit Symphony Orchestra, Detroit Institute of Arts, Sphinx Organization, Michigan Opera Theatre and Museum of Contemporary Art Detroit — to fund program innovations that include activating outside spaces at the Detroit institutions, further incorporating digital technology into their programs and exhibits, new cross-disciplinary programs and efforts to grow diverse leadership in classical music. J $6 million in grant commitments will provide three years of renewed funding for the Knight Arts Challenge, which funds community-based art projects and will shift to running every two years in 2019. J $3.175 million in grants will fund capacity-building to help strengthen the operations of medium-size arts organizations “that are younger and smaller and need to be scrappier” because they are a critical part of Detroit’s arts culture, Ibarguen said. Those include Creative Many Michigan, CultureSource, Arts League of Michigan, The Heidelberg Project, Young Nation, Design Core Detroit and a collaborative of local theaters through a grant administered by the Community Foundation for Southeast Michigan. J $2.8 million will fund yet-to-be-determined arts projects and organizations that will be finalized next year.

BUSINESS NEWS J General Motors Co. is offering voluntary buyouts to approximately 18,000 salaried employees in North America who have 12 years or more experience. The Detroit-based automaker, after inquiries about the offer,

The Detroit Institute of Arts is among the anchor institutions to receive $8 million from the Knight Foundation to fund program innovations.

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

$63M

The expected cost of the redevelopment of Summit Place Mall in Waterford Township, including $8 million for demolition.

28%

The number of arts groups that created new works in 2015, up from 17 percent in 2011, according to a study commissioned by the Knight Foundation.

425

The number of businesses participating in Project Green Light, the City of Detroit’s crime-monitoring surveillance program, up from 250 in January.

confirmed the plans as “proactive” measures to address future headwinds that GM expects as it invests in autonomous and electrified vehicles and as auto sales in North America and China slow. The automaker reported a 25 percent increase in pretax profit in the third quarter and net income of $2.5 billion. J Metal stamping manufacturer Ernest Industries Co. is closing its Westland plant and permanently laying off 70 employees. The company blames the closure on customers unexpectedly pulling business. The plant was expected to close by last Wednesday, according to a notice filed with the state. J The new Hyatt Place hotel in downtown Royal Oak is scheduled to open next week, marking completion of the first half of a long-awaited $60 million development. The six-floor, 120-room hotel at 422 N. Main St. will be guest-ready on Nov. 8, in plenty of time for the Thanksgiving holiday, while crews aim to finish the roof of the adjacent eight-story apartment complex by the end of November, said Chris Abbo, vice president of Madison Heights-based Namou Hotel Group, which will operate the Hyatt. The 101,111-square-foot hotel space includes 4,700 square feet of restaurant or retail space on the ground floor. Abbo said owners hope to have a tenant signed by the end of the year, most likely one restaurant occupying the entire space.

J Automated welding system manufacturer HTI Cybernetics Inc. is investing $20.6 million to expand its Sterling Heights headquarters at a new site under development. The company that serves automakers and suppliers expects to create 100 jobs in five years, doubling its workforce, according to the Michigan Economic Development Corp. HTI will lease a 189,000-square-foot building being built as part of the redevelopment of the former Sunnybrook golf course. J Wholesale food distributor Lipari Foods LLC has acquired Dearborn-based Jerusalem Foods, a Mediterranean and Middle Eastern food distributor. Terms of the deal, which closed Oct. 19, were not released. The acquisition brings a full ethnic food division to Lipari and fits with its goal of becoming one of the premier U.S. distributors of specialty and “perimeter of the store” groceries, President and CEO Thom Lipari said in a release. It follows Lipari’s purchase of Waterloo, Wis.-based Jim’s Cheese LLC in March and an acquisition each year between 2014 and 2016. J YumVillage, a West African and Caribbean food caterer, is planned to open in Detroit’s New Center neighborhood at 6500 Woodward Ave., with a soft opening in January and official launch in February, said owner Godwin Ihentuge. The restaurant will replace Atomic Chicken, whose owners closed the restaurant a little more than a year after opening. For an undisclosed price, Ihentuge is acquiring all of the restaurant’s fixtures and equipment, and taking over the 4,000 square feet on the street level and a 4,000-square-foot basement.

OTHER NEWS J Mayor Mike Duggan said last week there’s an effort underway to provide universal preschool in Detroit for 4-year-olds that involves state and city government, philanthropic foundations and educational providers. Duggan disclosed the project while speaking on a panel of U.S. mayors at the CityLab conference in Detroit. “I don’t want to get ahead of myself, but we will very shortly, I think, have a universal pre-K for 4-year-olds in place,” Duggan said. In a brief interview with Crain’s after the speech, Duggan didn’t elaborate on how Detroit would offer free preschool to all 4-year-olds. “I didn’t mean to bring it up, but we’re working on it,” Duggan said. “We’re trying to pull everybody together — philanthropy, the state, providers. I’d love to see universal 4-year-old pre-K. I’m working on it.”

Brooks Patterson thinks Oakland University’s quest to purchase the Palace of Auburn Hills is a “pipe dream.” The longtime Oakland County executive said following a Friday morning event that his administration hasn’t been involved in the negotiations between Palace Sports & Entertainment and the university, which would reportedly have their men’s and women’s basketball teams play in the 22,076-seat arena that opened in 1988. “I don’t think it ever has a chance of getting off the ground,” Patterson said in Pontiac. “It costs millions a year just to keep it up. Taking the Oakland University basketball team out there ... you can’t support a facility that size. That’s a pretty small (basketball) program; they barely fill the O’rena.” The Golden Grizzlies basketball teams play at the O’rena on OU’s

campus, which seats about 4,000. The Palace is about five miles from campus. The Palace hosted its last Pistons game on April 10, 2017, five months after Patterson the team announced its pending move to the new Little Caesars Arena downtown. Real estate sources have long anticipated that the Palace would be demolished to make way for private redevelopment. Palace Sports asked several developers and other real estate companies this summer to pitch ideas and provide their assessments on the property’s value as well as how much it would cost to tear the arena down, a source familiar with the meetings said last month.

KURT NAGL/CRAIN’S DETROIT BUSINESS

Cadillac Square hosted a dozen glass huts for small business owners to test their business ideas during the 2017-18 Downtown Holiday Markets in Detroit. The same is planned for this year.

Winter markets to feature new vendors, food offerings A round 20 new vendors, a redesigned winter lodge, more street decorations and new food and beverage hubs are planned for this year’s Downtown Detroit Markets activation by Quicken Loans Inc. and Bedrock LLC. With logistical assistance from the city and Downtown Detroit Partnership, the Dan Gilbert-owned Detroit-based businesses are sponsoring the markets, set for a soft opening Nov. 14, said Francesca George, director of tenant relations and experience for Detroit-based Bedrock. The markets — in Cadillac Square, Capitol Park and 1441 Woodward Ave. — and decorations, concentrated on Woodward, Monroe and Library streets, are being launched in tandem with the city’s annual tree lighting ceremony, scheduled for Nov. 16. The aim for sponsors and city stakeholders is to create downtown into a place that draws shoppers and visitors from across Southeast Michigan.

“We want people to feel the winter magic when they’re walking up and down the block,” George said. “It’s about really making it a great shopping experience and giving vendors a place to test business concepts.” While entrepreneurs and small businesses have had holiday popups downtown for many years, last year was the debut for a comprehensive glass-hut activation. Like last year, there will be a total of around 30 vendors. Those returning will be stationed inside 1441 Woodward, while newcomers will have extra visibility in Cadillac Square and Capitol Park. By popular demand, the markets were extended through Jan. 28 last season. Previously used for holiday markets, the space at 1001 Woodward has been taken out of the rotation as Bedrock white-boxes the prime ground-floor retail space for something else “very exciting,” George said. The company has been mum on details.

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