SOUP and pickles: Entrepreneurs see opportunity in ailing Detroit

What if you took the Mo out of Motown?

That's what some entrepreneurs are asking as Detroit sets off into uncharted waters with the largest municipal bankruptcy in U.S. history.

Detroit's entrepreneurs and community leaders haven't been waiting for a bankruptcy filing or court resolution to determine their fate. From parsing out microgrants to repurposing old warehouses, entrepreneurs—some of them millennials—have been harnessing the business adage that there’s opportunity at the bottom. While some efforts are just beginning, these entrepreneurs aim to help Detroit to reinvent itself as a city less reliant on manufacturing and auto jobs.

"Some people feel like 'Oh my God,' there should be panic in Detroit! But I felt a sigh of relief," said Amy Kaherl, who runs a program selling meals to fund entrepreneurial ideas. "Time to just move on."

'Don't feel sorry for us'
Community leaders started creating small urban renewal projects several years ago. As a point of reference, Detroit is a sprawling city, about 140 square miles with diverse neighborhoods and needs. The days of corporate giants such as General Motors pumping jobs into Motor City are over, some entrepreneurs say.

A dinner at Detroit SOUP.
A dinner at Detroit SOUP.

"We love GM. We love the Big Three (automakers) and the jobs they do create," said Phillip Cooley, a Detroit entrepreneur behind several city projects, including Slows Bar B Q restaurant. "But the idea those hundreds of thousands of jobs in manufacturing (will) come back here, that's absurd to think we can wave a magic wand and they will come back," he said.

"There's not one big industry that's going to come in and save us," Kaherl said. She runs Detroit SOUP, a community meal and pitch fest for aspiring business and community leaders. "We can be an innovation city. We love living in Detroit," she said. "Don't feel sorry for us."

(Read more: Detroit's bankruptcy battle likely to be long and painful)

Detroit SOUP
Launched in 2010, Detroit SOUP hosts residents for a monthly public dinner. For $5, attendees get a meal and an opportunity to pitch a project or business. The night's winner pockets the money from the meal and drink sales.

The monthly prize money has ranged from $900 to $2,000, with guests pitching projects and small businesses, including food distribution to seniors and mowing lawns to reduce blight.

Kaherl, 32, knows one dinner pitch session isn’t going to save Detroit. The city's population, which in the 1950s reached its peak population of 1.8 million, is now around 700,000. In recent months, the city has used state-backed bond money to meet payroll for 10,000 employees.

Kaherl's peers, hungry to improve Detroit, include millennials, those in their 20s and early 30s. "Can large corporations be social innovators? That's a conversation millennials are having," Kaherl said.

(Read more: Millennial train hopes to inspire a 'nation of tinkerers')

McClure's Pickles recycles old auto warehouse
Removing blight is another challenge crafty entrepreneurs have tackled by repurposing cheap, under-used structures.

McLure's Pickles moved to Detroit because the warehouse there was so inexpensive.
McClure's Pickles moved to Detroit because the warehouse there was so inexpensive.

When McClure’s Pickles outgrew its Brooklyn, N.Y., facility, its owners relocated the pickle factory last year to an abandoned American Axle & Manufacturing warehouse in Detroit.

Founder Joe McClure, a Michigan native, chose the warehouse for its sound structure; and no need for a new roof or floor. And the $250,000 price tag was far cheaper than the cost of a new plant.

The building has history, too. There, car parts were made by people whose jobs were moved to Mexico. The pickle factory employs three, with plans for about five more hires by 2014. McClure saved American Axle's old signage. "We kept a lot of the things they had up," he said.

The jar labels for McClure's Pickles, available in outlets including Whole Foods and Williams-Sonoma, proudly declare, "Brooklyn * Detroit."

(Read more: Best and worst U.S. cities for small-business workers)

Cooley is also tackling blight by repurposing structures. During the depths of the Great Recession and foreclosure aftermath, the entrepreneur bought a Detroit warehouse for $100,000. With the help of fundraising and an army of volunteers, Cooley offers his business tenants a roughly 75 percent discount on rent.

Detroit's "landscape isn't conducive in its current condition for innovation and productivity," Cooley said.

The multiple-use space, called Ponyride, is home for about 40 small companies and community projects—some of them generating jobs. Tenants include music producers, Web developers, printers and clothing designers—with one business making domestically sourced blue jeans.

(Read more: Welcome home: 'Made in U.S.A. on the rise)

Tear down chunks of Detroit?
Another Detroit entrepreneur, Dan Gilbert, who founded Quicken Loans, told CNBC last week that he supports demolishing abandoned structures to move the city forward. Gilbert, among Detroit's largest landholders, estimates about 120,000 commercial and residential properties need to be removed. As chairman of Quicken Loans, he moved its headquarters to the Motor City in 2010. The company employees about 9,200 people in downtown Detroit.

Whether it's demolishing or recycling structures, the larger point is to act—not wait for a manufacturing miracle to resuscitate the Rust Belt. The court battle over Detroit's future, meanwhile, continues. On Wednesday, a judge ruled that a federal court can decide whether the city is eligible for Chapter 9 protection.

Beyond Detroit's borders, more Americans may be affected by the Motor City's financial crisis. One analyst already doesn't see Detroit as a one-off. "You can hold your breath and wait for government and big banks to save you," Cooley said. "Or you can change it."

(Read more: Youngstown's story: Rust belt turns to 'tech belt' for jobs)

By CNBC's Heesun Wee. Follow her on Twitter @heesunwee.