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Detroit Is Dan Gilbert Territory

Meet the hometown billionaire leading a tech-sparked crusade to revive Detroit.

Rock Ventures

The coolest space in all of Detroit, says local revitalization magnate Dan Gilbert, is the basement of the Chrysler House.

Enter the glistening marble-floored lobby of the Griswold Street skyscraper — long known as the Dime Building, after the bank that built it — and take the one elevator that goes down. You’ll find yourself amid a potpourri of fabric samples, a plush neon-green booth that looks like a sea anemone, a water fountain that appears to be dripping with chocolate, a sculpture of the Detroit skyline made of old computer parts, and a $9,000 black metal full-size-horse lamp that hometown returnee Madonna thought was so neat, she called off the prohibition on social media she’d asked for during her downtown Detroit tour, and posted a picture of herself hugging it on Instagram.

It’s an office for an interior design firm called dPOP!, the one that puts the pizazz in the 70-some downtown Detroit buildings owned and controlled by Gilbert. DPOP! is run by his wife, Jennifer Gilbert.

The best part of the windowless dPOP! basement office is a conference room built into an ancient bank vault, with walls three feet thick and eight feet high. Accessed through heavy velvet curtains by stepping up and through an enormous circular steel door, the vault’s walls are lined with safety deposit boxes, still locked and waiting for their long-lost key holders. Two crystal chandeliers hang over a gleaming wooden table. On top: A modern Polycom starfish conference phone. It’s claustrophobic, sure, but it’s an awesomely steampunky bridge between new and old tech.

 A swanky conference room within an old bank vault walled with long-locked deposit boxes
A swanky conference room within an old bank vault walled with long-locked deposit boxes
Vjeran Pavic for Re/code

When Gilbert bought the Dime Building for a reported $15 million in 2011, his team had to clear a five-foot layer of flooded trash from the basement. Around the time Chrysler was making waves for its “Imported from Detroit” campaign, Gilbert persuaded Chrysler to set up an office in the building, a coup to bring the suburban automaker downtown. In honor of the relocation — even though it was fewer than 100 employees — Gilbert rechristened the building The Chrysler House.

Gilbert is certainly not the only driver of change in today’s Detroit, which we are exploring in a Re/code special series. But he is undoubtedly the biggest. He moved Quicken Loans, an online mortgage lender, to downtown Detroit in 2009 and now employs 12,500 people there under his parent company, Rock Ventures. Around the buildings where Rock Ventures employees work, nearly every adjoining parcel is under Gilbert’s control, one after another on the street.

“Isms” in action

When you’re a billionaire, you have to put some thought into what your legacy will be. Dan Gilbert picked the city where he was born.

The crazy thing is, it’s working. Somehow, in just five years, downtown Detroit looks to be transitioning from leap-of-faith noblesse oblige to a very smart investment. Though most other neighborhoods of Detroit are still extremely troubled, and the downtown area is still studded by vacant colossi — like the 38-story green-copper-roofed Book Tower looming just down the block from his developments — Gilbert is making an impact.

So he’s doubling down. “I think we’re just getting going here. There’s miles to go,” Gilbert says in a November interview at his downtown office. And he’s true to his word — in the months that follow, news of Rock Ventures’ acquisitions and retailer recruitments comes out on a near-weekly basis.

The appeal of Detroit is that Gilbert can do everything all at once: Take cheap, beautiful old buildings and turn them into offices for Quicken Loans employees, technology startups and other Gilbert tenants. At street level, bring in retailers like a salad place and yoga studio and sneaker store (the trio opened next to each other in the past few months). On the street itself, sponsor public basketball courts in summer and an ice rink in winter.

“It’s all about connectivity — not just technical connectivity, but geographic connectivity. That’s what makes a city go,” is how Gilbert explains it.

He built an enormous parking garage for his thousands of employees who commute from the suburbs and filled it with wall-to-wall murals. “We’re trying to make everything you do here be an experience,” Gilbert says. “Whatever you do here, you can’t find in the suburbs.”

Gilbert, whose net worth is estimated by Forbes at $4.4 billion, sold his business to Intuit during the dot-com boom for $532 million, and then bought it back for a tenth of the price and grew it to become the largest online lender in the U.S. Now, he has invested $1.6 billion into Detroit real estate and initiatives, with a slice of that money going toward technology startups and incubators.

 Dan Gilbert’s full-time tour guide, Bruce Schwartz, shows off a model of downtown Detroit with Gilbert-controlled buildings lit up.
Dan Gilbert’s full-time tour guide, Bruce Schwartz, shows off a model of downtown Detroit with Gilbert-controlled buildings lit up.
Vjeran Pavic for Re/code

The 53-year-old dad of five, grew up in the suburbs hearing stories of Detroit’s former glory, and hanging out at his dad’s bar in the city proper. He was one of those kids who started candy- and pizza-selling schemes in elementary school. He’s a true Midwesterner in that he never tried to go anywhere else.

Today, Gilbert is a self-made man who has been selling mortgages since his early 20s, when he and his brother started Rock Financial, the customer-service focused online lender that would become Quicken Loans. From the early days, even before being acquired by Intuit, Gilbert’s recipe for making the boring business of mortgages interesting was to make his company a cool place to work. Now, he’s using that same formula to breathe life back into his hometown.

More than most other lenders, Quicken Loans has avoided the stink of the mortgage industry, but not entirely. It did $140 billion in business last year and ranked No. 1 in consumer satisfaction among lenders.

Mortgages are not saving Detroit. It’s nearly impossible to get a loan in the city, from Quicken Loans or any other lender. In 2014, there were only 400 mortgages granted in 2014, out of 4,000 homes purchased.

But mortgage money is playing a massive role in Detroit, as it’s channeled into Gilbert’s relentless all-cash deals for some 10 million square feet of property.

 Quicken Loans salespeople work at desks festooned with giant “Fatheads” of each of their faces.
Quicken Loans salespeople work at desks festooned with giant “Fatheads” of each of their faces.
Vjeran Pavic for Re/code

Quicken Loans’ special sauce involves a personalization system that routes prospective customers to the person on the team most likely to get them to agree to a loan, and a positive management style that’s borderline cultish and lavishes benefits on productive staffers. When new employees — Quicken Loans religiously called them “team members” — join the company, they go through an orientation where Gilbert speaks about company values for eight to nine hours straight.

This is called “Ism day,” named for Gilbert’s productivity aphorisms like “Do the right thing” and “Ignore the noise” and “You have to take the roast out of the oven,” which are also printed on the walls of his buildings in Comic Sans font.

Gilbert grabs a copy of a paper-bound book called “Isms in Action,” filled with explanations of each Ism, his own motivational emails, employee testimonials and press clippings, to make sure I have one to take home (now I have two). The back cover has the names of all the companies in the greater Gilbert portfolio. As we talk, he squints at the tiny logos and circles them for emphasis: Wedit, Quizzle, Quikly, Stik, iRule.

Recruiting optimists

The first pioneer of modern downtown Detroit tech was Compuware, the mainframe support provider, which took the plunge in 2002 to headquarter itself downtown, to much local acclaim. But Compuware is not a story of tech optimism; the company was recently bought by private equity and split in two.

Each time I’ve been to the Compuware building, the guards have had trouble hearing me say the name of who I’m visiting over the thrash of the massive floor-to-ceiling fountain and the loud piped in pop music. Or maybe they’re just nauseous from the pervasive chlorine smell.

The Compuware building is where Gilbert works, up on the 10th floor. Amid the mainframe company’s recent turbulence this past fall, Gilbert took the opportunity to buy the building where his own office is. That must have been a niggling target on his list.

In November, Dan Gilbert bought the Compuware Building, a rare modern downtown skyscraper, for a reported $150 million.
In November, Dan Gilbert bought the Compuware Building, a rare modern downtown skyscraper, for a reported $150 million.
Vjeran Pavic for Re/code

As you rise up on the elevator through the central atrium, you see floors of boxy beige cubicles giving way to higher floors with bright orange, green and yellow walls, open floor plans, signs and tchotchkes, and succulents planted in vintage local soda bottles, inverted and suspended in the air. It’s an office-decor Pinterest board brought to life. You’re in Gilbert territory now.

In his glass office, walls covered with color printouts of his projects and potential projects, Gilbert is chattier and less imposing than I imagined he would be. But that’s not to say his vibe is relaxed; he wears a dark-blue sport coat and slicked-back hair. He talks with the same windy can-do pride that fills his frequent op-eds, blog posts and open letters.

Gilbert tells me that Quicken Loans is a technology company. I need convincing.

“A mortgage transaction is very complex, very complicated, and very localized — the rules are not just by state but by county, sometimes even by municipality,” Gilbert says, adding that Quicken Loans employs 1,200 engineers. “To process and close models in 50 states and 2,000-plus counties with the myriad of just tens of thousands of different regulations, customs, vendors — it’s a monster. So the only way to do that is with technology. It really is rocket science.”

Part of the reason I ask is that any project on this scale is going to be in the creator’s image — whether it’s a person or a company. While Gilbert is financing Detroit’s future, he’s also shaping it.

 Dan Gilbert’s massive new downtown parking garage is covered with colorful murals — an experience you wouldn’t get in the suburbs, he says.
Dan Gilbert’s massive new downtown parking garage is covered with colorful murals — an experience you wouldn’t get in the suburbs, he says.
Liz Gannes for Re/code

So I ask: Why will technology startups be good for Detroit?

Gilbert offers two reasons: First, tech companies can do a lot with a little investment. “It doesn’t take the capital or manufacturing facility and it doesn’t take the time,” Gilbert says. “So your bets don’t have to be a $250 million auto plant that it takes seven years to start.”

And also, people pay attention to technology, so having a big tech success would “put Detroit on the map.”

And why is Detroit good for technology startups?

Three reasons, Gilbert says: The local talent, from the universities and auto companies. The cheaper cost of doing business. And larger potential for impact.

“It’s a place where if you want to impact the city and hopefully do well for your company at the same time, it’s really the place you can do that.”

In this generalized sense, technology equals potential for quick growth. Gilbert needs bodies to fill up his buildings, and tech startups — when they’re doing well — grow really, really fast.

In downtown Detroit, Dan Gilbert’s acquisition rampage is outpacing ground-floor retail’s commitments to move in. Rather than leave them empty and waiting, many storefronts advertise fake potential businesses — another of dPOP!’s projects. Imaginative window displays of a chandelier made of violins, or a punky mannequin with a skirt made of tulle and CDs, or a spread of comic books, also feature the phone number for Gilbert’s Bedrock real estate leasing office.

Gilbert is an opportunistic investor, with an expanding empire of investment vehicles that he personally leads. Two of his other big projects are sports teams — he owns the Cleveland Cavaliers, and recruited hometown star LeBron James back this season; and casinos — he owns six of them, including the Greektown Casino in downtown Detroit. Outside of Detroit, Gilbert’s technology investments include leading a $40 million funding round for New York City-based Genius, the annotations site with exceedingly quirky founders.

 While Gilbert’s real estate arm waits for first-floor retailers to move in, fanciful window displays for imaginary stores fill the space.
While Gilbert’s real estate arm waits for first-floor retailers to move in, fanciful window displays for imaginary stores fill the space.
Liz Gannes for Re/code

In Detroit, Gilbert is gambling on tech companies to grow and inhabit downtown offices as fast as he can renovate and decorate them. After spending some time with him on his turf, I come to understand that, just like in gambling and basketball, he is recruiting optimists.

But while Gilbert’s projects maintain the legacy of Detroit’s historic buildings, they are not always as inclusive when it comes to local residents. The technology scene in Detroit is as much of a white male monoculture as it is in other cities, and here in a majority black city, it is even more at odds with its surroundings.

“The tech startups here, their talent is not coming from Detroit,” says Stella Safari, an analyst at Invest Detroit who works with minority and female entrepreneurs.

Safari isn’t a native Detroiter, either — she’s originally from the Congo. She came to town two years ago as a post-college Venture for America fellow.

“I just think a lot of what’s happening in the tech space in Detroit doesn’t feel relevant to Detroiters,” Safari says. “I struggle with what’s the impact of me even being here. Who are we really creating jobs for?”

Everyone in Detroit technology, including Dan Gilbert, knows that lack of diversity is a valid criticism. “It’s a challenge,” Gilbert says. “Entrepreneurial culture and different cultures are … different.”

GilbertVille

Downtown Detroit feels very much like a Silicon Valley corporate campus transposed onto the body of an old city — with all the concerns about the disparity of income, power and opportunity that you’d expect.

One night I’m walking out in front of the Compuware building, through the park downtown right by the Detroit Point of Origin that radiates roads like spokes out into the city. I’m typing out a text on my phone. “Hello,” says a friendly security guard employed by the Gilbert empire. I understand that he is reminding me that his protective presence allowed me to be so oblivious of my surroundings.

Gilbert doesn’t only employ a private security force, he also has a fleet of corporate Quicken Loans shuttle buses that hover outside of Gilbert-owned office buildings, and racks of bikes await “team members” who want a ride off the shuttle loop. He sends staffers over to the Detroit Land Bank (the public authority that holds foreclosed lots) every day to try to help accelerate teardowns of blighted properties — they’re up to 1,000 demolitions per month now.

 Detroit’s equivalent of the Google Bus shuttles Quicken Loans “team members” around town.
Detroit’s equivalent of the Google Bus shuttles Quicken Loans “team members” around town.
Liz Gannes for Re/code

On my first reporting trip, I stayed via Airbnb in a high-rise that some people call the Gilbert Dormitory, not because he owns it, but because so many of his employees live there, just a couple blocks’ walk from the office, as well as places to eat, shop, play, go bowling and drink coffee that also pay rent to their boss.

Actually, just about the only thing Gilbert — who lives with his family in the suburbs — doesn’t control downtown is residential housing, which is reportedly 97 percent full. Only about 2,000 of Gilbert’s 12,500 Detroit employees live in the city, which he says is a capacity issue. (A capacity issue! In Detroit!) He tells me buying and building housing is one of the next things on his list.

Gilbert is rebuilding a Detroit that never existed. “Detroit in its heyday — let’s say, 1920s to the ’60s — was never a huge downtown living thing,” he says. “People lived in the neighborhoods.”

Changing perceptions

The engine behind Gilbert’s technology investment is Detroit Venture Partners. Founded in 2010, the VC firm has a $55 million fund, more than half of it supplied by Gilbert. DVP has made some 15 investments, with a nonspecific focus on software startups. Partners have offices in Gilbert’s Madison Building, surrounded by open seating for portfolio companies and partners.

The Madison (sometimes unfortunately spelled M@dison to symbolize its techiness) is Dan Gilbert’s epicenter of downtown startup life, which he bought as an empty decaying building for $1.4 million and spent $12 million remodeling.

Some of the more promising and quick-growing DVP investments, like the app shop Detroit Labs, which has grown to 75 employees in three years, and the sales-optimization platform LevelEleven, which has 200 customers and an investment from Salesforce, are moving out and setting up their own stylish industrial-chic offices across the alleyway.

 Tech startups, investors and outposts for companies like Twitter cluster at the Madison Building.
Tech startups, investors and outposts for companies like Twitter cluster at the Madison Building.
Vjeran Pavic for Re/code

Others haven’t been so lucky. The first time I visit the Madison, I’m introduced to the gregarious founders of a DVP-funded online office supply store called Chalkfly. The next time I stop by, Chalkfly’s formerly bustling cluster of desks doesn’t seem to have anybody working that day. A month later, Chalkfly has been sold off for parts, and the desks are filled by employees of another company.

Meanwhile, Greg Schwartz, the CEO of a DVP-funded and Madison-located calendaring startup called Upto, tells me he’s trying to decide between raising a bridge loan or getting in a deeper relationship or being acquired by a strategic partner. It’s hard work to convince people that Upto’s mobile calendar app is better than the one they already have preinstalled on their phone. And, I have to think, being based in Detroit doesn’t make it any easier.

DVP wields enough power in town that some startup founders tell me they are concerned about openly criticizing Gilbert’s motivations for investing in technology, for fear that DVP might blackball them. What was the awful thing they needed to go off the record to say about him? That Gilbert is primarily trying to increase the value of his real estate holdings.

Well, yeah.

But despite the insider status, Detroit Venture Partners has no hits to its name. Over time, it has gotten more true to its name, though. Partner Jake Cohen tells me, “We thought it would be two-thirds Detroit, one-third outside. But we found it difficult to really impact the outcome if they’re far away. So I don’t think we’ve made a deal outside Michigan and Ohio in the last two years.”

Gilbert will admit that his tech investments are probably due for a reckoning in the coming months.

“We sort of wanted to get a bunch going at once, and we’re probably about six months away from honing in on a few,” he said in November.

This Madison Building office kitchen offers free slushies and popcorn and looks out over Tiger Stadium.
This Madison Building office kitchen offers free slushies and popcorn and looks out over Tiger Stadium.

That same week, DVP CEO Josh Linkner stepped down to pursue his writing career — generally not a more fruitful alley than venture capital, but he’s had a couple of business-book bestsellers.

“It came to a breaking point where he had to pick one or the other,” explains Cohen. “I don’t think he could have chosen to do both, and the partners and everyone else wouldn’t have accepted that.”

In December, the firm lost another partner, Ted Serbinski. He was tapped to lead the new TechStars Mobility program, a joint project between DVP, Ford and other local partners to bring transportation-focused startups to a three-month incubator in Detroit starting in 2015. It was a big deal to land such a well-known franchise in town.

“The biggest thing Detroit needs is people’s perception of Detroit to change,” says Serbinski. “Now, having a platform like TechStars here, perceptions instantly change.”

This article originally appeared on Recode.net.