Proptech Putting the Pedal to the Metal in the Motor City

Detroit’s slow return from economic collapse is the result of a recommitment to the city by its auto and mortgage industries, with business leaders and companies discovering that investing in the metro area’s bottomed-out real estate market was a vital, and perhaps profitable, way to bring the city back to its previous civic glory.

Ford Land, a subsidiary of Ford Motor Company, and Rocket Mortgage, later known as Quicken Loans, are two of the major Detroit-founded companies that have expanded into real estate development.

Such business interest in Detroit real estate has in turn attracted a fleet of proptech startups to the city, said local entrepreneurs.

“Most of Ford Land’s business in Metro Detroit is now real estate,” said Grant Drzyzga, founder and CEO of Revela, a Detroit-based property management platform for property managers, investors and institutional funds. “They own hotels and multifamily properties. They own all the land their factories are on.”

Rocket’s much the same under its co-founder and chairman Dan Gilbert’s Bedrock Detroit.

“Everybody has sort of bled into owning real estate in and around the city,” Drzyza said. “Detroit went from the automotive capital of the world, and, when that went away, it became kind of the debt capital of the world. We had Rocket and United Wholesale Mortgage, two of the biggest residential moneylenders in the country. And now I really feel like there’s a lot of positive momentum in the proptech space in Detroit.”

Calling Detroit’s proptech scene a “secondary renaissance,” Drzyzga pointed to smart building tech platform Kode Labs, which closed a $30 million Series B round in April, and real estate investment funding platform InvestNext, which raised a $8.25 million Series A in March 2023.

“I really do think the future of Detroit is this sort of hub for technology in real estate,” Drzyzga said. “Part of that is culture, but the other part of that is it’s one of the few markets where you can still make [residential and multifamily] deals work. There’s still a bunch of buying activity going on. So from that perspective, as well, it’s an interesting place to build the types of things that we build here at Revela.”

After his graduation from Brown University in 2014, Drzyzga founded Revela in Providence, R.I. Having grown up in a suburb of Detroit, in 2015 he decided to move the startup to that city’s downtown to take advantage of what he felt was more entrepreneurial opportunity.

“The East Coast was not really a very friendly market for burgeoning technology in the real estate management space — kind of a more old school market,” he said. “At the time, Detroit was really beginning. It was a kind of fundamental metamorphosis that you see the end result of right now. Dan Gilbert started investing downtown, stabilizing certain pockets of the city. There was a lot of really good energy and momentum down there and we were lucky enough to get into a pre-accelerator program through TechStars, which drew us originally, and then we just never left.”

So far so good, said Drzyzga. After years of bootstrapping, in August 2023 Revela raised a $9 million Series A round from lead investor FirstMark Capital, along with Detroit Venture Partners, and MetaProp.

Detroit proptech startups can be a tight-knit community, as can be seen in Drzyga’s friendship with Kevin Heras, co-founder and CEO of InvestNext. They started out sitting across from each other in a Downtown Detroit coworking space.

“In this ecosystem, I’ve known other proptech founders that have started their companies from the ground level, bootstrapped, roots-grown operations, and eventually these became really attractive opportunities for local Michigan-based and Detroit-based venture capital,” said Heras. “We’re just one of many who have been a part of that.”

Like his fellow Detroit proptech entrepreneurs, Heras appreciates the small but growing support network they share.

“I personally feel very fortunate to be in this sort of current stage of Detroit proptech because it’s a small enough community that it’s still going to support a general kind of ecosystem where founders are resources for each other,” said Heras. “It feels like a very level playing field.”

Unlike Heras, who was born in Spain but raised in northern Michigan, Colleen Werner, founder and CEO of Lulafit, a Detroit-based office hospitality service, is a native of the city who decided to build her business in her hometown.

“Those of us who were born and raised in Detroit know that there is truly no better place to raise a family, as the quality of life to cost of living is extraordinary when compared to other markets,” Werner said in a statement. “As an entrepreneur, there is a pipeline of top talent pouring out from universities. Although commercial real estate has been battered in the same way we see the rest of the country, there is a real appetite for a strong comeback that is being backed by private and public institutions across the state. Detroit just doesn’t quit, and a proptech company coming out of a global pandemic could find no better home.”

After founding Lulafit in Chicago and living there for 10 years, Werner moved back to Detroit and has no regrets.

“I joke that I ‘office out of Delta airlines,’ ” she said. “Our proximity to a major and very nice airport that can take you almost anywhere in the country without a connection allows any proptech entrepreneur to scale a national and global business while quickly and efficiently interfacing with clients and colleagues on all coasts.”

Another Detroit-based startup is Hum, which enables internet service providers (ISP) to bring their offerings to multifamily units, said PJ Duffy, co-founder and head of growth for the company.

Hum’s team originally came together at Rocket Fiber, an ISP that is one of the “family of companies of Detroit” that came out of Rocket Mortgage and its other mortgage-related companies, said Duffy.

The challenges for Detroit startups in hiring talent and getting funding can differ from those of new companies closer to the East or West coasts, he said. “I think oftentimes you’ll hear from other founders in the Midwest that some of the capital here is maybe not as patient, not shooting quite as high as capital that you find on the coasts,” Duffy said. “So they have different expectations and it can be a long process to raise money.”

However, the Michigan Founders Fund, a not-for-profit founded in the Ann Arbor area in 2019 to aid startups in the state, is one of the major attractions for entrepreneurs, said Duffy. The fund is particularly focused on helping minority entrepreneurs, a major consideration in Detroit, where most residents are Black.

Duffy also noted that Black Tech Saturdays, a community-led initiative fostering innovation to increase Black tech representation and community wealth, has garnered national attention and is growing.

Another supportive cog in the Detroit entrepreneurial wheel is Newlab @ Michigan Central, which focuses on skills and solutions at what it describes as the intersection of mobility and society. Among other features, Newlab offers coworking space for startups, as does Bamboo, another Detroit-based company in which a number of proptechs started.

Although founded in Atlanta in 2009, Regrid, which bills itself as the leading provider of land parcels data in the country, is decidedly now a Detroit-based startup, said Jerry Paffendorf, CEO and co-founder of the company. “I like to say affectionately that I call Detroit my fourth co-founder.”

A New Jersey native, Paffendorf has lived and worked in various areas of the U.S., but eventually found his and his startup’s home in Detroit.

“We did city mapping, and, as a result of Detroit’s bankruptcy in 2013, we were hired by a task force chaired by Daniel Gilbert, supported by the White House, partnered with foundations and neighborhood groups, to map 100,000 parcels in the city,” Paffendorf said. “Pictures and notes were taken, and for the first time there was a picture of what was vacant and what needed to be fixed up or torn down in Detroit.”

From such civic depths, proptech startups are helping accelerate hope for the ultimate revival of the once and future Motor City.

Philip Russo can be reached at prusso@commercialobserver.com.