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Why This VC Is Bullish on Detroit Building the Internet of Things Jay Adelson of Center Electric believes Midwestern work ethic and manufacturing prowess are advantages Silicon Valley can't match.

By Amanda Lewan Edited by Dan Bova

Opinions expressed by Entrepreneur contributors are their own.


Successful entrepreneur and Detroit native Jay Adelson sees the Internet of Things (IoT) as the Internet's Third Wave, bringing new business and investment opportunities with it. Now a venture capitalist with his partner Andy Smith, their fund Center Electric will focus on the IoT space. They aim to capture part of a market that's estimated to reach a mindboggling $7.1 trillion by 2020.

But what's unique about Adelson's new fund is his bet on Michigan-based companies. Adelson wishes to see half of their fund invested in companies that hail from his home state. Why the Detroit area? It's ripe for creating innovations in this industry. Below are a few insights from Adelson on why Detroit and Michigan could lead in the IoT space.

Related: The 10 Best States to Start a Small Business

Manufacturing excels in Michigan.

Jay calls the environment for IoT "perfect in Michigan." Entrepreneurs can utilize Michigan's low cost of overhead, logistics infrastructure, and manufacturing expertise that has been built and honed over a century of producing cars, furniture and other goods. With other recent investments in technology infrastructure like Detroit's Rocket Fiber and the growing startup community, the right ingredients are present for IoT companies to flourish.

Related: 8 Things You Need to Know About Raising Venture Capital

Engineering talent and Midwestern work culture.

One thing Adelson points out as a great asset to a startup company in the region is the quality of talent. He sees a sense of entitlement in Silicon Valley that he hasn't noticed much in the Midwest. Adelson described an ideal entrepreneur to work with as one who is not entitled but rather very self aware of his or her's own limitations.

Michigan also has more engineers per capita than any other state, which means more help designing and building those IoT products. "If all of the business fundamentals and all of the talent fundamentals are there, then it's only a matter of entrepreneurs stepping up and taking advantage," says Adelson.

Making Michigan venture capital work.

There are some difficulties for entrepreneurs today in Michigan when raising venture capital. Adelson is aware of the gaps of funding in Michigan and the often forceful requirements of VCs in Silicon Valley that require startups to move out west. That's not going to be Center Electric's approach. Instead, they aim to work with the community and the entrepreneurs with a more long term mindset. This means no requirements for relocation and a stronger focus on relationships. Adelson also hopesto see more succesful Michigan businesses to get involved in the IoT space.

"Part of making Michigan work, is taking the current successful businesses in Michigan and getting them involved too," he said. "Let's focus on what works, what customers need, and what strengths Michigan has."

Related: What 'They' Are Not Telling You: The Downsides of the 'Internet of Things'

Amanda Lewan

Founder and Editor of Michipreneur

Amanda Lewan is a Detroit based writer, Editor of Michipreneur, and co-founder of Bamboo Detroit.

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