Northern Michigan tries to expand its tech startups alongside tourism

• Startup incubator 20Fathoms launched just before the pandemic as a coworking space and hub for entrepreneurs.
• It’s now encouraging more startups in northwest Michigan by offering tech education, business programming and connections to funding.
• It expects a new alliance to capitalize on Michigan-based university research funding within the next year.

Windows at 20Fathoms overlook Grand Traverse Bay, reminding people in the shared workspace and startup hub that while they may be able to work from anywhere, doing so from Traverse City in northern Michigan brings recreation rewards. 

Executive Director Eric Roberts told Bridge Michigan the region is home to tourism and agriculture, yet it also is growing — giving rise to the need to make sure there’s corresponding growth in the year-round economy even as more and more people visit.

To do so, 20Fathoms is cultivating the startup ecosystem in Traverse City, Roberts said. The nonprofit’s goal is to increase technology jobs and access to capital for entrepreneurs, while offering a meetup destination that encourages collaboration, mentorship and innovation. It now has 120 members, up from 50 percent from fall 2021.

“We're growing the baseline economy,” Roberts said.

20Fathoms started in 2018, a year later receiving $1.5 million in funding, half of which came from a U.S. Economic Development Association grant that was matched by local investors, including the chamber and economic developers Traverse Connect. A second EDA grant is in progress, Roberts said, that “will literally set us on a really, really strong financial path for the next three to four years.”

Related:

• Grand Rapids tech firm is paying more to compete for software developers
• Michigan tries to lure tech workers after layoffs at Google, other giants
• Michigan loses 14K people a year to other states. It could be worse (and has)

Roberts spoke recently with Bridge Business Editor Paula Gardner about his perspective on the place 20Fathoms has in Michigan’s business growth. Here are excepts from the conversation. 

20Fathoms now has six startup incubator graduates after a few years of connecting entrepreneurs to each other through networking and classes. How do you describe what you’re doing here?

We’re the hub at the center of all of the tech startup culture in Traverse City. We're trying to create a segment of the community where we can have thriving, family sustaining jobs, and economic development for the future. That's what startups provide. And I think we do a fabulous job at that. 

We've got some really good startup stories going here that will show that these are really good jobs and that you can have a career or you can start your own business and feel supported without having to leave our area. 

There's a lot of talent in this state that leaves (for other states), so I would say that I'm proud to say we're working on that.

The top three employment sectors in Grand Traverse County are health care, retail and tourism, based on 2022 state data.  Do people there understand the role startups can play in the economy? 

I don't usually have to convince (anyone) that entrepreneurs and startups are a foundational element of a thriving, growing economy. And don't forget this is a town literally built on tourism and the cherry industry and other seasonal components.

The fact that we have a tech incubator here shows that the community in Traverse City is pretty open-minded about other types of businesses. Manufacturers create good, solid jobs that you could build as a foundation. Nothing wrong with it. But on top of that, there's an economy here for (tech).

You grew up in a rural area, then you and your wife lived in many places, including Chicago and San Jose, California, before moving to Traverse City. Your path is one that many younger people in Michigan follow. We watch them go, and we just hope they come back. Is there something that might have kept you here when you were younger?

For my generation, once you got a job, you lived where the work was. I grew up in a very small town in Wisconsin. I wanted to go to something larger than that … I stayed pretty urban (after moving), and enjoyed it. But I definitely have an identity and a pull back towards rural life. Today, we just have so much more flexibility to be able to live where you want to live and still have a great job. 

What does Michigan need to do to further encourage entrepreneurs?

It's almost like we apologize for something (like the weather). Michigan is legit, and in the way we brand and identify and tell our story,  we need to (say): What do you mean, you wouldn't stay here? Why in the world would you leave this? 

It’s almost like we expect people to be leaving and apologize for it and try to talk them out of it. Versus, ‘Well, I don't understand why you'd ever leave here.’

How do you see that play out?

Every single kid in (Silicon Valley) high schools believes they're gonna go work for Facebook or Google. Every single kid in Silicon Valley believes they're going to be rich and they're not going to have to leave and they're going to work for a big tech company. 

You ask a kid here,  ‘You think you will work for Google someday?’ The answer would be that’s their dream, but ‘I don't know if I could cut it. I don't know.’

I think students in Michigan may still grow up thinking that their STEM degrees will just prepare them for the state’s auto industry. That’s who we’ve been, and who we are.

The automobile industry has been phenomenal for Michigan. I would never say anything bad about it. But that's not all that's here. 

Startups are how you drive job growth and economic development. It doesn't have to do with automotive. 

What’s next for you as you help startups land capital?

If you are a local company up here, and you've got real traction and you have a solid story and you have a return, you have a plan, then the chances of connecting with capital and getting an investment are much higher.

We're in the process right now building out our access to capital guide. I know that there are family foundations in town here interested in investing.There are other sources that I'd rather not mention, sources of fairly significant capital up here. As a retirement community, there's a fair amount of wealth and people who want to put their money to work and support the local economy.

Traverse City stands out in northern Michigan because it’s growing. The city has a population of about 15,600 (which is up from about 14,000 in 2000 — yet down from 18,400 in 1960).  Grand Traverse County is close to 100,000, up 1.2 percent since 2020, while the state stayed flat. Because the city is bordered by Grand Traverse Bay, do you see a limit to how much you can grow?

At some point yes. We haven't found it yet. …  (Yet) there are lots of challenges that come with growth.

We get to live in a place where people save their money the entire year to come and visit for a week. There's a whole lot of cities … that would give anything for the resources that we have here. So I do think we have the capacity to keep building on this and still stay as a rural community-based place to live. 

What’s the biggest game-changer in your pipeline?

The reach-out I've had from Michigan universities in the last six months to a year has been incredible. There's no four-year university up here. What a great opportunity for them to expand, since 20Fathoms is already up here doing small business incubation. They think, why don't we get connected to them and start doing some technology transfer and commercialization of our intellectual property (created from research)? It’s just constant. 

I see how it would help a university to add students or programs, given the enrollment declines that aren’t expected to ease in Michigan. What’s in it for 20Fathoms?

We would produce more tech-based companies and more tech-based jobs if we had a strong university research presence here in Traverse City. My number one priority is to get university research happening and performing here in Traverse City. If you do that, small businesses come out of it. It's the seed based on intellectual property that allows you to grow business. 

What makes Traverse City a great area for a tech business?

People would rather sit down and partner with you and talk about where to collaborate then they would compete. … I've never seen anything like it.