Ann Arbor's Small Business Job Growth: The Who, What , and Where

Nothing drives growth in Ann Arbor's emerging new economy more than software and IT these days. And driving that growth are two distinct engines: start-ups scoring big sums of seed capital and growing companies hiring considerable numbers of new employees.

 

Software/IT firms accounted for the creation of 285 new jobs in the Ann Arbor area, according to stories reported here in Concentrate over the third quarter of this year. During that period, a handful of Ann Arbor-based software start-ups cumulatively landed $3.75 million in venture capital, and TreeTown welcomed yet another venture capital firm that plans to specialize in early investment in local tech firms.

 

The stories show encouraging signs about how well Ann Arbor's entrepreneurial ecosystem is developing for tech firms, both large and small, with sizable hiring numbers and even bigger investment figures. Leading the way are gazelle-like start-ups maturing into second-stage firm, and already established software companies opening or expanding offices in downtown Ann Arbor.

 

 

Probably the most notable growth in the region's software/IT sector is the continued expansion of Barracuda Networks. The California-based software firm specializes in email and web security protection, along with server load balancing and message archiving appliances. It opened an office in Ann Arbor to drink from Tree Town's talent pool in 2007.

 

The company has become a fixture just north of downtown Ann Arbor in recent years, filling out a large office space at 201 Depot St with 180 employees. Barracuda is now taking over the lion's share of the old Borders flagship store on Liberty Street near State Street to accommodate further growth. They have hired 75 people over the last year and are on pace to add three to four people per week for the rest of the year.

 

HookLogic is another software firm staking a very visible claim in downtown, turning the former Leopold Bros location on South Main Street into its new home. The loft-style office space houses the company's 80 employees and 10 interns, a staff that has grown by 25 new hires over the last year. There, the growing staff works on web-based software that delivers, manages and measures customer incentives and promotional messaging for companies.

 

Arbor Networks is yet another of those local gazelles that are springing through second-stage status. The IT security firm, spun out of the University of Michigan in 2000, is adding 10,000 square feet of office space in its Ann Arbor facility, along with 1,200 square feet of lab and data center space. Arbor Networks has hired 30 people over the last year and had 25 job openings when we last wrote about it in August. The company expects to grow its Ann Arbor presence from its current state of 100 employees to 150 within the next year.

 

Metro Detroit companies are opening offices in Ann Arbor as well, attracted to the city's culture and talent base. Livonia-based WorkForce Software opened an local office in 2011, which now employs a dozen people and has openings for 10 more software developers, interface designers, and technical support as of mid-September. Bloomfield Hills-based Lakeside Software also opened an Ann Arbor office last year and has grown to a dozen people. The firm expects to increase its Ann Arbor staff to 195 within five years.

 

 

As the second-stage software firms keep growing, the next generation of medium-sized firms are capitalizing to make the leap. Three software start-ups have nailed down $3.75 million in venture capital this last summer with two of them shattering the seven-figure mark.

 

Leading the way is DeepField which landed $1.6 million in funding from the likes of ROM Ventures and Resonant Venture Partners. The Tech Brewery-based start-up is developing software that helps large corporations adapt to the Internet's changing back-end infrastructure. They had a staff of a dozen people and five openings as of early August.

 

Not far behind is Amplifinity with $1.5 million in fresh venture capital. The Ann Arbor-based firm specializes in Internet-referral software. It raised $2 million in seed capital when it launched in 2008 and another $2 million last fall as part of a Series A round. The most recent addition of $1.5 million last summer will be tacked onto its Series A round. The 15-person firm hired four people last year and has a couple of job openings now.

 

Ann Arbor-based Larky also landed $650,000 in an initial seed round with money coming from angel investors, the Michigan Microloan Fund and the Michigan Pre-Seed Capital Fund. Larky develops mobile apps that help consumers maximize discounts available to them through membership organizations, loyalty programs and coupons from local businesses. It has a team of three people and was looking to add two more people last summer.

 

And helping keep all this seed funding going is Michigan eLab. The new downtown Ann Arbor-based venture capital firm specializes in early stage investments in tech firms. Michigan eLab is led by Doug Neal, who is also the executive director at the University of Michigan's Center for Entrepreneurship. The four-person firm expects to raise a $40 million fund.