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Entrepreneurs find success in Detroit

By John Yang, Correspondent, NBC News

DETROIT -- It's a scene that fits most people's image of Silicon Valley, not the Motor City: young engineers taking a break with a ping pong game, a business meeting in bean bag chairs, and rows and rows of 20-somethings intently studying computer code on screens.

The setting is two floors of downtown Detroit's Madison Building, which was built in 1917 -- just four years after Henry Ford revolutionized manufacturing with the assembly line. It's now home to more than two dozen high-tech start-ups backed by two venture capital firms.  

"The tipping point is here," declared Jacob Cohen, vice president of Detroit Venture Partners. The firm, whose backers include Quicken Loans founder Dan Gilbert, has invested more than $11 million.

"The entrepreneurs of Michigan are now staying in Detroit and they want to be part of this story," Cohen said.

'Detroit has given us opportunities'

After getting his master's degree at MIT, Michigan-native Paul Glomski moved to Detroit to start his company, Detroit Labs, which makes smartphone apps. Clients include GM and Domino's Pizza. In less than two years, the workforce has grown from four to 32--and is expected to hit 60 later this year. The company has already outgrown its workspace and is moving to a new location.

Glomski doesn't think he would have had the same success somewhere else.

"We're not about the sort of big, fancy announcements about what our start-up's going to do. We just go and make stuff and clients really like that," he said. "We definitely have that Midwest work ethic."

The potential for growth is what prompted Harvard classmates Jay Gierak and Nathan Labent to move their website from San Francisco, where they started it, to Detroit, near the suburbs where the pair grew up.

The company, which collects word-of-mouth recommendations for professional services like lawyers and accountants, got $2.5 million from Detroit Venture Partners.

"Detroit has given us opportunities that San Francisco never really presented," said Labent. "Here we immediately stand out and it's been a lot easier than it would have been."

Gierak added, "There's a ton of talent and there's not a lot of web companies like us competing for their services."

Beyond the traditional auto industry 

Entrepreneurship and new technology haven't forsaken Detroit's mainstay auto industry. Albert Lam, a former top executive of England's Lotus Cars, hopes to turn around four years of setbacks and begin making an electric car in the Detroit area. His company bears the same name -- Detroit Electric -- as a company that made electric vehicles in the first half of the 20th century. Among the owners of those Detroit Electric models: Thomas Edison, John D. Rockefeller Jr. and Mamie Eisenhower.

Another new company with an old name is hoping to play on the boast "Made in Detroit" with watches and bicycles. Shinola -- the old shoeshine polish brand immortalized in the unprintable World War II-era aphorism -- has set up shop in the former General Motors Research Laboratory, where engineers once designed such iconic cars as the Corvette.

It's owned by Bedrock Manufacturing, a private equity and venture capital firm backed by Tom Kartsotis, founder of the watch and clothing company, Fossil.

Bedrock CEO Heath Carr said that when they looked for factory sites, "Detroit was at the top of the list because of manufacturing, it's history, it's heritage in the auto industry."

The company's already provided second chances for its workers.

Watch assembly line leader Willie J. Holley III studied engineering in college and was working as a security guard for the building as Shinola was setting up shop. He was curious about what they were doing -- and ended up getting hired.

"Everything is still fresh, everything is still being put into place," he said. "And being a part of something like that is just amazing."

Five years ago, Lakishka Raybon lost her auto industry job to automation and lost her home as a result. After that, she worked with Alzheimer's patients in nursing homes, but now works on Shinola's watch assembly line. She feels confident this job will be more secure.

"I don't think a machine can do what we do," she said. "Machines don't have passion."