Special Edition CEO Podcast: SXSW | Why the Midwest Wins: Where Innovation Takes Off

Paul Krutko (Ann Arbor SPARK): Well, good afternoon. We're going to get started with our program today. Thanks for those of you who've joined us. I'm Paul Krutko. I'm president and CEO of Ann Arbor SPARK. Just for reference, Ann Arbor SPARK is a public private economic development organization focused on helping companies start, scale, and grow in the Ann Arbor region. We work very closely with entrepreneurs, global companies, investors, and in particular, the University of Michigan, to make it easier for innovation to turn into real businesses and have real impact.

For a long time, there's been an assumption among people that are trying to start companies who are working in technology that their only solution to grow their company is to go to the coast. I have a little point of reference here before I took this position in Ann Arbor. I worked in the Valley for 10 years. What I have found is that we are seeing a real shift, that the opportunities in the Midwest for companies to make intentional decisions about where they build, weighing talent, speed, collaboration, and capital efficiency means that the middle of the country is a very good choice for you if you want to grow your company.

So this session isn't teed up specifically to sell Ann Arbor or Michigan in particular or promote that ecosystem, but it's about helping those of you in the room understand how the Midwest, in particular, Michigan, Wisconsin, and other states like that are increasingly a great option for you to grow your company. Costs are less, talent's available, and there's a nurturing environment.

The panel that's joined me today, we're going to talk about why companies are choosing to build here and what that looks like in practice. And we're going to hear about their real experiences rather than the theory. So I have a great group of leaders joining me today from across various industry sectors. So let's start with some quick introductions, just your name, role, and what your company does. Maybe go from Mark this way.

Mark Smith (MI-HQ): Hi, I'm Mark Smith, owner operator of MI-HQ. We're a large incubator accelerator located in Ann Arbor, Michigan, and best classified as real estate as a service. And by that, I mean, not only space, but all the support services and hard-to-find spaces, such as wet labs, clean rooms, and the equipment that supports it.

Pete Mertens (Sartorius): I'm Pete Mertens. I'm with Sartorius. We're a German biotech company with our new investment in Ann Arbor of 130,000 square foot building. And we're a biotech company that provides instruments from discovery all the way to pharmaceutical manufacturing.

Rebeca Delgado (Torc): Hello, everyone. My name is Rebeca Delgado. I am Vice President of Engineering at Torc Robotics. Torc Robotics is an autonomy technology company. We're focused on long-haul trucking, and my team is focused on implementing and creating the software that actually drives these trucks. And we have a great big new development center in Ann Arbor.

Paul: Great. So we've got a few questions we're going to go through to get the conversation going. And I already alluded to one, which is that all three of you have been actively involved in working in technology and growing companies to scale. And the assumption has been in the past, I know if you talk to young people that, "Oh, I need to go to Palo Alto, or I need to go to Boston to be successful." And that if you wanted to build or scale something, you had to do that. From your vantage point, and anybody can jump in right away, what's changed, and why are companies now making different location decisions?

Pete: Well, I'll take that one. So we have locations on both coasts, on the west and the east as of right now, as well as some other locations in the US, but we chose Ann Arbor because we are doing R&D there as well as manufacturing. From a cost perspective, obviously, we found the advantage there: 35% less in personnel costs and up to 65% less in overhead from being on the coast. And after the few years that we've just gone through, all the way from COVID to now, it comes down to resilience, and within Ann Arbor and what we can do there with the resources and the money and everything, it was the strongest choice for us.

Paul: Torc just made a decision to develop an R&D facility. So you had choices all over the United States to work in the mobility space. What was involved in that decision for your company?

Rebeca: Absolutely. Well, I mean, I know we were just having this conversation this morning, but autonomy was one of the first industries of excitement and hype around AI. But then the whole industry realized that this is a long-haul investment play. So although what was being done 10 years ago was a lot of demos, truly what is being put on the table right now is really what is the path to industrialization to truly productize this technology. So you get ROI, you're investing all these billions of dollars in this technology. So for you to deliver autonomy, you don't do that in a vacuum. You need this to be doing it in an ecosystem where you really have a very fast loop of development and learning. So what we are able to tap into in the region is, yeah, we have to have some creativity around attracting talent on AI, but this is not just in the cloud.

It actually has to work in the real world, on trucks that are of very high-quality requirements. And we have to address safety, the latest and greatest edge of technology. So we get to tap into this great talent in the Midwest, particularly around the automotive industry where we have the talent, we have the expertise, and we have the experience of what it takes to bring technologies at scale through industrialization. So it's truly bringing that AI technology to the physical world through all of the challenges of what it takes to realize this technology at scale.

Paul: Mark, do you have anything you want to add?

Mark: I guess I have a little different perspective because we don't operate one company, we operate many. I guess our perspective comes from the investment community looking to bend the curve down and elongate the lifecycle of the capital that they put in. So reduce capital, longer runtime, access to talent, and access to the universities.

Paul: Right. Because one of the things I think that we emphasize a lot is that it's important for early-stage companies is the phrase 'burn rate' and the burn rate is much less your dollars that you have to deploy initially go much further. And so you alluded to it a little bit.

There is a legacy of engineering and manufacturing in Southeast Michigan. And I guess why is that important for the company locations that you might be considering?

Mark: Well, there's a lot of, it's a broad cross section of engineers and biomedical engineering, automotive. So we have a really strong talent across engineering, which allows for collaboration between the synthetic and the biologic and the computers. And the whole generational thing that we have going on between AI and firmware and hardware, all those people reside in one small geographic location with a lot of history of performing at high speed at a low cost.

Pete: For us, we're in this ecosystem that promotes the talent pool for manufacturing. So with the big three being there and the other industries, and as the population ages and the newer generations are coming up, that's one of the areas such as the trades that some of the younger people aren't going into and that is manufacturing and being technicians. So being in an ecosystem that is all about that and promoting it, our pool will stay adequate enough for us where other areas of the United States, I don't know.

Rebeca: And from our end, the technology challenge that we're tackling is so complex, right? Having this concentration of engineers that are having access to the physical systems that they're debugging and then they are developing allows for this shared set of expertise at a much more affordable rate in other areas while still allowing for some of that virtual work wherever you need some of these additional talent. But it's a conglomeration really of the expertise that the traditional automotive industry has built. What does it truly take to build these complex technologies in a safe manner in these highly regulated industries? So there's just natural know- how around that.

Paul: Yeah. Just to put a little cap on this part of the conversation, many people don't realize that the second-largest concentration of software talent in the United States is in Southeast Michigan. You may ask yourself why. And the answer to that question is the most complicated device any of us deal with on a daily basis is the automobile that you get in or the Waymo that you might've got in outside. Tremendous amount of lines of code. That means that the talent to do that work now amplified using artificial intelligence that is readily available to you in an environment where people know how to make things.

So we have some stories over this panel and into the follow-on panel that there are hardware devices that require great detailed engineering talent, and particularly in medical, that are both coded and need to be made physically. So it's a good environment for any of you who are working on that kind of product.

So we hear a lot about collaboration between companies and universities. What feels generally different about Ann Arbor, Southeast Michigan, and why does that collaboration between companies and university research matter in terms of your work in R&D?

Mark: I think there's a lot to unpack there. Access to cutting-edge research, but for some of these early-stage companies, having access to facilities that they can't otherwise reproduce or get access to is incredibly important to get these companies started. And it's also a cultural thing. We have a great multinational culture in and around Southeast Michigan, a diversity of population, so it makes it a great spot for first-in-human trials. There's a myriad reasons to locate there.

Pete: For us, it's a collaboration with the universities where we are in the industry. We can bring to them what our customers are discovering and what basically the education or curriculum needs to provide for the students that are coming now. And so it's a real-time connection of what's happening in industry, and then how can education keep up with it and make sure that the future stars are prepared.

Rebeca: And just to add to that, again, due to the legacy industry of automotive, there's a very clear understanding in that industry that it's an ecosystem of players, right? And that success looks like the shared distribution of liability and responsibility and technology. So there's that very collaborative mindset in the ecosystem.

But more importantly, as a midsize startup, let's say at Torc, we need to attract talent and this talent wants quality of life. They can afford to go work at many places. So we contribute by having an exciting technology for these employees to participate, but then we get to offer a quality of life and an ecosystem at a personal level in Ann Arbor and the Midwest where there's a great quality of life because of schools, because of just general experience as people. So we have the industry and the ecosystem, but as well, people can have great lives.

Paul: One of the things that we want to note, not to steal the following panel's thunder, but one of the things that we should clearly point out that many folks in the audience may not know is that the University of Michigan is one of the largest, if not close to being the largest research, publicly-funded research university in the United States with over $2.6 billion of research happening. Not putting two of my panelists on the spot, but I do know companies that are coming to Ann Arbor for R&D, one of the first things they say to us always, "We want to be close to the University of Michigan because the university is preeminent across not just single verticals, but multiple verticals." And so that's an important piece, and I'm going to ask that question.

Do any of you have some concrete examples of that sort of collaboration between what you're working on and research and activities that are going on at the university?

Pete: We just met two weeks ago with the university, and there is the collaboration right now on our biotech discoveries that we're working on. And so we have about five or six projects right now ourselves with our R&D program with the university. I couldn't tell you what they are because I'm not a scientist, but I know we have that.

Rebeca: We're in early stages of exploration with the incubators at U of M, but more than anything, it's a great talent pool of early pipelines of bringing some of this talent on board while they get to stay in the area where they went to school. So it's truly an opportunity there. That being said, Torc has multiple partnerships with research institutions and universities. So that's definitely a strategy that we have.

There's the element of owning fully that research pipeline, but then it ends up being - don't quote me on this - 10X, 20X more expensive than having this collaborative approach where you don't own exclusive rights to the IP, but you get there 10 times faster and 10 times cheaper. So that formula's absolutely crucial, particularly in these domains of time-to-market and first-mover advantage, we truly absolutely need to be expedient and efficient on how we go and innovate in so many of these areas.

Paul: And Mark, your collaboration has multiple dimensions because you're actively creating facilities in which early technologies that are being formed as companies are leaving the university.

Mark: Right. So we're a landing pad for those spinouts, not just from the University of Michigan. And to your point, $2b to Michigan, but $3.1 or two billion in the region between Michigan State, Michigan, and Wayne State. We also collaborate with companies that come out of Michigan State and Michigan Tech, but we are sort of that next step when they come out of the university. So we not only see collaboration with the university, but collaboration between the companies that land within MI-HQ and that collaboration can take many forms. It can be sort of a cross-pollination approach. It can be shared equipment, shared space, shared knowledge. So building that community of collaboration, both inside the university and outside the university is incredibly important for the success.

Paul: Because one of the things that we want to make sure we share is that over the last two decades, we have built an ecosystem that is incredibly nurturing to early-stage companies. And from a community perspective, that is a long-term commitment as opposed to what you might find in some other parts of the United States where acceleration of early stage companies is, well, are you to revenue in six weeks, where we've just had a major success with a unicorn that was 10 years in the making and that was patient-nurturing principally from the university over time, but also the surrounding community.

So just changing a little bit here in the conversation and asking you to give more of a general view of how you're seeing things - are things like climate resilience, access to water, you've already mentioned quality of life. Are those key factors for companies these days as they try to recruit talent? Because we've noticed that young people, young talented people, are now choosing where to live first as opposed to who to work for. Is that your experience? Does that resonate?

Mark: Certainly has been our experience. Wacker Chemical, that you're well aware of, incubated in Ann Arbor first, primarily for talent attraction. We also see the investment community saying, "Look, we want to fund a company, but we don't want to put them on the coast because we want to reduce the burn rate, better quality of life, a place where family can own a home." So all those things certainly are impactful in deciding where to go.

Pete: For myself, because our home office is over in Germany, the climate change that is very apparent there is, obviously they don't have the same HVAC needs that we do in the United States, and now many of my colleagues are in older buildings that now they have to go back and put air conditioning in because they never had to have air conditioning. And that's just one small observation, but also being in Midwest with our weather, it creates a hearty people. And matter of fact, our CEO was very impressed with the Midwest spirit when he was here two weeks ago. And it's been one of the toughest winters for us, but the team was still energetic and really liked it.

Rebeca: I love that call out to the resilience of the Midwest. I'm going to take a little bit of a side way here. In long-haul trucking, we are in the business of resiliency and through pandemic, economics, tariffs, ups, downs, the heart of the economy is truly transportation of these goods and these benefits. So at the core of Torc's business is particularly resiliency of business. So how do we help our customers deliver on this premise? So that's absolutely at the core. It jives really well with the culture in the Midwest because of the longevity of the industry. And then last but not least, weather-wise, for you to have a full capable product of autonomy, you need to be able to manage weather. So although we are starting our product in the South, because you start in a reduced environment, the constraints are what are going to allow us to industrialize and productize fully our product.

So at the end of the day, us being in Michigan would allow us, with the seasonality, to truly augment our product, while at the same time addressing the cost of having a development center, having these very tight loops around having concentrity of our teams and the ecosystem we're talking about. But definitely weather plays a role because we need it to develop our product. And just generally speaking, the resilience of the culture and the ecosystem.

Paul: And one that I can bring to share with the conversation. So here with us today are two different verticals in R&D: vehicle autonomy and the medical research space. One of our other recent companies that has grown significantly is a company called KLA. KLA is headquartered in Silicon Valley, but they were making a choice. They make the equipment, this is very important equipment, that actually tells chip makers that their chips do what they say they're going to do. So it's very much a precursor technology. They have locations all over the world, headquartered in Milpitas. They made a choice to locate their R&D facility. Again, choice was to be close to the University of Michigan because of the research going there. They in fact purchased their site from the University of Michigan. But what I want to share with you is they saw the quality of life for what they had developed there, and they then subsequently have moved corporate functions from California to Ann Arbor.

So these are the functions of their legal department, their financial department, other things. And their workforce that has relocated from California really enjoys the quality of life that they have in Michigan. One of them, which for many young talented people on the coast, the notion of buying a house is a very foreign concept. It's not a foreign concept for us Michiganders. That's something that's easily accomplished where we live.

So just a couple final questions from me, and then we'll open it up to the audience to see if there are any questions.

One of the points that would be important to reflect on is, we are blessed with a global university in Ann Arbor that attracts people from all over the world, but you both are trying to attract talent as well. Your headquarters are in Germany. What resonates with the people coming from overseas about the Midwest?

Pete: Well, first of all, the Midwest has always been, if you think about it, the attraction for immigrants and the industrial belt, the rust belt, whatever you want to call it. So for centuries, we've had an influx of people from overseas. Again, for us, just the airport of Detroit [DTW], it's really nice for our German colleagues to come. It's a direct flight, which is a big deal because we had other sites in the US, but it was not a direct flight. And the fact that we are located well enough within North America that we being the center of excellence for them, we do our sales meetings there, our trainings there, and everything else. So location as well as in proximity to our customers is the attraction for us.

Rebeca: I mean, back to the comment you made earlier, Paul, around some of these employees choose where to live first and then who they're going to work for. So we're very proud of Torc to offer great leadership opportunities because you get in at the ground of developing this amazing technology, so great influence. But at the end of the day, we actually moved, we had a site in Germany, we shut it down and brought people to both Montreal and the Ann Arbor area. And at the end of the day, what we're offering people here is that quality of life with great impact in their work, but truly where they can see their families grow. So there's the element of real estate, but it comes down as well to a marketability for themselves at the end of the day, right? They're going to be doing great things for us, but then by making themselves available in this industry, it just paves the way for additional career opportunities if they were ever to consider other options.

So it's truly a very well-balanced formula. Personally, it's hard to make a formula against the Midwest economically, right? The opportunities are there and then the affordability and the quality of life is absolutely there while keeping access to excellent education and sports and excitement in life. So it's just a great balance of it all.

Paul: So just amplifying for those in the audience who may not know Pete's point, the airport, the international airport, Detroit, Wayne County, DTW is the code, is the Delta hub. It's a global gateway. We in Ann Arbor are closer to the airport than the city of Detroit is. I can leave my office and be through the gate in about 30 minutes, and I can get anywhere in the world from that location. And then as Pete pointed out, for the company that might choose to be located there, your ability to get anywhere in the United States is incredible as well. And so it's a really distinct advantage. I know for my colleagues here in Austin, they are trying to build the air service here to those other places in the world, which we already have access to.

So my last question before we open it up to the audience is just maybe really a broad one. You are all leaders. You are thinking about not only the company you're in, but companies you may in the future be connected to. And if you were thinking about where to build over the next decade, what are some factors, and I'm talking in a general way, what are some factors that you would want to think about if you were considering to locate in a particular location?

Pete: So obviously for us, cost is a factor. We've made a great CapEx investment in Ann Arbor, and this is our first phase of hopefully two more on our campus that we have. But also too, I think as companies are looking, climate is an obvious one, but you want to locate in the hubs that are promoting obviously what your company is looking for. So if it's R&D, Ann Arbor is the place to be. You have a great combination of SPARK, academia with the universities, and industry. And I think that just promotes an environment for a company to come in and settle and be very comfortable. And I can say that because we're the result of choosing Ann Arbor and we've had our building open for a year and a half, and our choice to come to Ann Arbor, in my opinion, is proving itself as of right now.

Paul: And you consolidated from four other locations -

Pete: Well, more than that, we had four local locations, but we also brought in locations from New York, Albuquerque, New Mexico, and California. And because our campus is not totally built yet, we're looking at a future influx of our other business products and businesses. So that's why our campus, we chose it to be expandable.

Rebeca: Very similar, right? We absolutely, being a subsidiary of Daimler Truck with a high burn rate of investment, we want to make sure we are conscious of cost. As well, we are in a very competitive landscape of first movers. And due to the nature of the technology and how close it is to the physicality of operations, we need to be very efficient in operations efforts. So where do you run these trucks? Where are you debugging these systems? So that's critical to have that concentricity. And then last but not least, talent. So there, we have to have an opportunity for having an area where people want to live in and they want to develop in. Well, we allow for flexibility as well and in partnerships with Universities. So we may have satellite offices for more specific talent like in AI, but for the rest of the systems problems that is physical AI, we are creating these areas of attraction.

So for that reason, Ann Arbor worked really well. But last but not least, we were able to partner very closely with MEDC, which is as well as an innovation and pushing economically for the State of Michigan to support us. So we have a local ecosystem like Ann Arbor SPARK, MEDC, and the government of Michigan that wants to transition the state from purely automotive and manufacturing into innovation. So you need to have that ecosystem of support as well.

Paul: Yeah. Just for the audience, MEDC is the Michigan Economic Development Corporation. It's the state's economic development organization.

I guess a question that I have that we hear, and I wonder if it resonates with you, is that one of the advantages across the Midwest is the ability to retain talent in your company. I know when I was in the Valley, one of the concerns that companies had all the time was the churn that you would be bringing someone into your company, getting them to work for you, having them get training or whatever, and they were immediately leaving to go someplace else. Now, for an individual, obviously, who might be in the audience and in the room, well, that's an advantage for them to be able to move from company to company. But as a business, that is a challenge. And what we think we hear from our companies is as they grow in Southeast Michigan and Ann Arbor, they have the ability for the employees to have a chance, as you said, to grow through the company and want to stay.

And it is kind of a more of a Midwestern character trait of commitment and staying and growing a company. Does that resonate?

Mark: Yeah, I think that's culturally very much the Midwest, more of a loyalty to the local community and to your company. So we don't see that as much, although the younger generation does seem to want to job hop a little bit more.

Back to your last question about what we're looking for, why we would locate, things that we're looking at as we scale companies that are now moving into manufacturing and building up manufacturing sites, we're looking for stability of the grid, cost, infrastructure that we can tap into that's low cost, that we can get to market quickly.

But I think to your current question, there is not the same job hopping that we see. And there is the diversity of the talent pool, as well as new job and new business creation that allows for scientists and workers to know that there is a next opportunity if something fails.

Paul: Right. That's very good. Great. So at this point, we'd be happy if there are questions from the audience. I have a few additional ones I could ask, but is there anybody in the audience that has any questions they'd like to ask?

Audience question: It's great to hear about all this innovation and growth has been in a great place here and I was just figuring out some numbers here in Texas. I think the vast industry here is about a $15 billion industry, with the prison industry about $14 billion, and then tech is about $350 billion in Texas right now, which is fantastic, but it's also creating some concerns about water. And that's obviously not going to be the biggest challenge in places like the Great Lakes, but what do you foresee to be some of the cap challenges to growth? You mentioned great civilian infrastructure. Can you think of any other foreseeable caps to growth that you might have to navigate your growth around to achieve sustainability?

Mark: I would start with the sustainability of the grid. And as we're piling on data centers and the ability to absorb those demands, highly important. One of the benefits that Michigan has obviously is water, and it's an opportunity for blue water economy or water economy companies to locate and have access to water. As far as caps, I think really the graying of the population and the gray hairs that have the knowledge in say, pharmaceutical and life science that we're losing that we have to replace is probably one of our biggest challenges from my perspective.

Paul: I think one of the things that we brought to our community's attention is the fact that climate migration is already happening in America, that there are people moving now, making individual decisions to move to Michigan and other states, which seems counterintuitive, but people are recognizing that some parts of the United States, as we are not, maybe it sounds political, but we're not taking action that we should be taking. And that means some places in the United States are going to potentially become unlivable or only those with lots of resources can live in. So some people are beginning to make those choices and we brought that to our community's attention in a book called On the Move, which is a study of what's happening in America right now. I think for us, the cap may be more in the evolution from one type of economy to another, if that makes sense.

We have many people that live in Michigan who were very much in the manufacturing world and were very happy with the manufacturing jobs that they had and this notion of lifelong learning and adjusting something else and the change, I think that's a cap for us in the sense that we need to, as a state, as communities, acknowledge that change and begin to bring our communities along. Mark mentioned, we're very aware that the Stargate Project is happening here in Texas. One is happening right adjacent to Ann Arbor. It's one of the five. And that has caused a lot of consternation from rural communities about what this massive thing means in terms of their quality of life, which they perceive. So I think that that's an issue, but the other flip side of it is, and this is more of a response about sort of the Midwest and maybe the Northeast in general, one of the ways we're responding to the power demand of the data centers that are coming is we have excess capacity because manufacturing has gone away.

I saw data just recently that our utility industrial usage has declined 3% a year every year for the last 20 years. So in the book that I mentioned, he [Abrahm Lustgarten] speaks to the fact that Midwestern and Northeastern cities have capacity that was built many, many years ago that can now be redeployed.

One of the things - I'll give Mark a shout out here - he's developing a facility, developed in a part of our community, which was the disadvantaged part of the community where our minority population is primarily concentrated and he reused a building that was not being used very appropriately and turned it into this kind of life science tech center. I mean, you might want to talk about your experience with that a little bit.

Mark: It's a work in progress, but it's an old university building that has been repurposed into tech space, incubator space, a large health clinic, and we'll have labs within an opportunity zone, which creates multiple opportunities for investors to put money into companies that are located in the opportunity zone and take advantage of those tax benefits.

Paul: And one more thing that I would add, I don't think it's a cap. It's more having been a student of Austin over the years in past jobs, I brought other city delegations here to study Austin and having worked in Silicon Valley, it's not a cap. It's how do we respond to growth from the tech companies that we are nurturing that have impacts on traffic, on housing, on other things. And so we're trying to do a better job, I think, overall as a community about how do we grow the community in a way that we keep the things we like about the community while we're creating this new economic prosperity. So we're really no different to some extent than Austin in the sense that you get five minutes out of, 10 minutes out of core Ann Arbor and you are in rural America right away. So we're seeing a proliferation of subdivision development.

I, having been in the valley for years, never was concerned about traffic in Ann Arbor, but people that have lived there for years, when their five minute drive turns into a 15 minute drive, they get concerned. So those are the kind of things I think that it's not a cap, but you can create an engine that creates other social dynamics that then are problems that have to be solved that you didn't have before.

There's a question in the back.

Audience question: Thank you so much. I think it's so valuable for us to hear all of your experience. We come from Mexico, from an innovation district that is from a university, Technological and Monterey, the biggest university in Mexico, the private biggest university, and we are betting for innovation districts. So we have an innovation district in Mexico City that is focused on biotech and health. So we're working in three different areas, innovation, community, and urbanism. So I think it's a perfect match with what you're saying, and we can learn a lot from your experience, but actually I have three questions that I'm going to just put in one.

So how long did it take you to develop these mechanisms for partnership with industry and the academic part? That's the first question. Then what were the main challenges you faced along the way of doing those mechanisms, and what key recommendations will you give us to successfully sustain those partnerships and the whole ecosystem?

Paul: Really excellent question.

Rebeca: And if I may, I'm an alumn of the Tecnológico de Monterrey (ITESM) Guadalajara. So shout out. Thank you for being here. Thank you.

Paul: And I've been there. So we are going to a third decade of an overnight success. So your first question was, what's the anchor institution that you have and are they willing to take leadership? So in our case, it was the University of Michigan. There was a view, and this is sort of like we were having a conversation about Austin 40 years ago, how big Austin was or all that. So if you go back 20, 25 years to Ann Arbor, this was this major research university that was licensing technology and it wasn't creating opportunity for the people that lived around there. The companies were moving to the coast and the university took a leadership position and said, "We want to see that economic prosperity happen in and around us." And so my organization was initially founded by the university, but getting to your point, the university president at that time said, "We're not doing this alone." I'm shorthanded. She basically said, "I need to be matched by the private sector and by local government." So when we were founded, the board consists of those, the triple helix. You've probably heard that term. Yeah, I see you're not here yet. And so that was how we started, and we've continued that way.

But the point being, in many communities, an anchor institution has to take the lead to do the convening and the organizing to move forward. Sustaining these efforts is a challenge. I'll just put it that way. Many times the community gets it going and lots of people around the table and they say, "Good idea, we're going to do it. " And then you get to the fifth year, the sixth year, and then it kind of may dissipate. We've been fortunate that that convening power and anchor institution of the university has stayed committed to the effort.

And in fact, internal to the university, you should come back for the panel after this, which is about the university, but the preview, the university's done many, many things since then that they're going to talk about, which is continue to nurture and feed the ecosystem. And so I think that's what was important. I don't remember what your third question was, but …

Audience question: The part of your biggest recommendation, no? Or maybe for example, the key actions that you identified that the university made in order to reach the goal.

Paul: Well, and again, I said definitely encouraging you to stick around for the next one, but the main thing is that the university has been incredibly committed to the notion of entrepreneurship among its researchers and its faculty and has a myriad of programs and engagement to foster that. It's way more than tech transfer. So I'm going to leave that. Mike's in the audience and he's got a panel and he's going to talk about that. So that's the important thing.

But what I would say from my perspective, having worked in economic development across the United States, the genius, and I wasn't there, I'm the second CEO, was the platform that was created because we do have in a leadership way, local government leaders, senior academic leaders in the community and CEOs from companies. And they then, have worked on a number of things. Our response to COVID was because we existed, we were there and could respond.

And that's what I would say to you. It's how do you create a resourced platform that as your innovation district encounters new issues, these people already have built trust in working with each other and will then say, "Oh, okay, we can work together on that next thing." But I think creating some kind of dedicated platform that people buy into, but I will tell you, we continue to have to raise money to continue our operations from that. So you have to show ROI. If you're not showing, if you're not hitting performance measures that the community can understand, that your stakeholders can understand, then they will disappear in terms of your funding support.

Rebeca: And if I may add, just being an alumni from Tech de Monterey, the biggest strength that you have is in your alumni force because these are the leaders of industry, but not just within Mexico, internationally. I mean, not to self-point, but my class of 2001, we're at all levels of leadership in very, very, very many industries across the globe. And I feel like these initiatives are crucial and they need to be sustained back to what Paul, with all his experience has there, but the strongest network you have is in your alumni base because those are very established leaders in the industry across the globe.

Paul: One other thing, and I would want to get my panelists' response to this. I think the other thing you have to be focused on is to be open to opportunities. It seems to me in technology, it's the collision between two different verticals or something like that, that results in the innovation. So what I know about Monterey is that there has been always been a real focus in automotive and things like that. Part of it is to be open to what our new opportunities to respond to. One of the reasons we exist beyond what I told you is the State of Michigan was concerned that the economy was sort of mono-industrial and it was just automotive and that we needed to broaden sort of what the economy and what the region was working on. So that's a point I would make. You have any other thoughts on that?

Mark: Oh, I was just going to add that building a culture of collaboration and not building a traditional business park that's separate from the university, but really conjoined with the university in a setting where it's technology-agnostic, where you put lots of different industries under one roof. To me, that's a formula for success. You have people with different views, different skill sets, and knowledge bases coming together, and that's how the magic sort of happens. There's cross-pollination. And as Paul was alluding to, you start to innovate and iterate on new opportunities when different ideas come together.

Audience question: Yes. Thank you. Thank you so much.

Paul: Do we have any other questions from the audience? So any kind of final thoughts from the three of you about sort of what our theme was here? Why would we say the Midwest wins? What would you be your few final thoughts on that assertion?

Mark: There's a number of things that you could touch on that we didn't talk about. The location close to the east, west, north, south, main lines through the country. Having an international airport hub, a broad base of engineering talent, a climate that's hospitable most of the year. And there's just great opportunities. There's a lot of old industrial sites that could be repurposed. So infrastructure's already in place. You can lower the time and cost to get into the market.

Pete: For us, it's the long-term investment. If you invest on either coast, it's like buying an expensive car. You buy it, it looks great. Initially, everybody's proud of you and all this other stuff, but the upkeep that continued, especially being resilient to get through bad times, good times. During COVID, we had to expand our operations quickly to respond, but then 23 and 24, we had the down years. And so the resilience that our company's been able to have by being in the Midwest and having that ebb and flow, I don't think you could do that on either coast because obviously when times are good, yeah, the coast is great, but when times are tight, you reconsider where you put your money.

Rebeca: And just to add to that, personally, I've been in the US, always in Michigan for the last 21-ish years, right after graduating from college from Tech de Monterey. And it's incredible to see the renewal and the reinventing that is happening in the Detroit metro area. Ann Arbor was always a great place to be, but just seeing what's happening there and with the intercept of automotive with technology, back to what Paul was mentioning, the most complex technology there, everyday person uses is their car. So it's just the best or worst kept secret, right? Truly the beauty of the state from a quality of life, just the nature of it all, but as well, the incredible combination of talent, industry, ecosystem, infrastructure, and affordability. So we're seeing that in other areas of hospitality and entertainment in the Midwest of reinvention over the last 20 years, really. And truly the long-term play that exists there is truly something that is not well understood, I think.

So shout out to what Ann Arbor SPARK is doing in that sense, but it's truly an incredible place to just root yourself in.

Paul: So we're going to close out, but I wanted to give you a couple, two factoids that really aren't related to the technology-specific innovation topics here. One is that when you're in Ann Arbor or Detroit, Canada is south of you, so that's important to know. The community is ready to open a new international crossing that, although the president thinks that they should earn some tolls, Canada paid for it, so we don't think that's going to quite work, but it's a brand new crossing. The integration between Ontario and Michigan. So when we talk about the Midwest, we do talk about American states, but it's also our neighbors in Canada that are very integral to the success there.

And last, just to know on the quality of life perspective, if I asked you what is the second most significant agricultural state in the United States, you might guess many others, but we are second only to California in terms of agricultural product production and the kinds of food and things you can get in our state.

So I thought I'd just throw that little factoid out. If there aren't any questions, we really appreciate those of you that did come today. And if you want to talk with us afterwards, we would really appreciate it. And like I said, the follow-on panel really does have a lot of information specifically about how universities engage in this activity.

And if you stay all the way after that, we have a reception that you could participate in. So again, thanks for those of you that came today. We really, really appreciate it. And like I said, we'll close out and if you want to chat further, we would be happy to talk with you. So I want to thank the panel for participating today and thank you for coming.

Paul Krutko
Ann Arbor SPARK

Rebeca Delgado
Torc

Pete Mertens
Sartorius

Mark Smith
Michigan Innovation Headquarters (MI-HQ)

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