A Calgary entrepreneur sets up shop in business-friendly Detroit
TO CONVEY THE SPIRIT OF HIS PLAN to make bicycles in Detroit, Zak Pashak feels a tour is in order. At the wheel of his worn Toyota Prius, the 32-year-old entrepreneur narrates as the sprawl of Detroit unfolds, revealing a city broken but not dead. We pass the obvious blights symptomatic of a long-depressed city: rampant vacancy, overgrown land and lots of people sitting on stoops with nothing to do. But there are also signs of life, including a patch of downtown streets that people have taken to walking again and new businesses spun from an emergent entrepreneurial spirit. Local leaders are hoping these seeds will help to pull the city out of its 40-year funk. It was partly this spirit, partly an “irrational fascination with Michigan” and partly a need for change that drew Pashak to the Motor City from his hometown of Calgary two years ago.
Many Calgarians will know him as a bar owner and music promoter who lost a close race for city alderman in 2010. Pashak’s latest venture, however, has nothing to do with Calgary or concert spaces. It’s a company called Detroit Bikes, through which Pashak plans to mass-produce bicycles in a city that was once famed for auto manufacturing but is now known more for its murder rate and the sheer scale of its emptied neighbourhoods. Since the 1950s, Detroit’s population has dropped from nearly two million to roughly 700,000, shedding 25 per cent of its residents in the past decade alone. The decline runs deep, some say starting with the race riots of 1967, followed by a long history of corrupt local government, rapid suburbanization and the fall of car manufacturing, compounded more recently by the global recession.
As we cruise the wide, empty boulevards into the city’s grittier pockets, Pashak points out his favourite buildings, ornate vestiges of better times. There are at least two he half-heartedly considered buying (for practically nothing) and remaking into some kind of business, perhaps a concert hall. Unlike Detroit’s heyday as a boomtown, its utter blankness and thirst for revival is now attracting a new kind of industrialist, people like Pashak who have money, ideas and the audacity to carry them out.
Overdressed on this muggy day in long sleeves and oversized chinos, Pashak walks with small quick steps and talks about everything in the same even, unexcitable tone. It might be that he is someone who’d rather do than talk about doing, but when it comes to media attention he’s used to reciting his story. He comes from a well-known Calgary family: his father, Barry Pashak, was a local NDP MLA; his mother, Jackie Flanagan, is a philanthropist and founder of Alberta Views magazine; and his ex-stepfather, Allan Markin, is a wealthy oilman and the former chairman of Canadian Natural Resources. Pashak has also garnered his own attention: starting businesses in your twenties gets you in the papers.
At an early age, Pashak showed an interest in money and, particularly, how to grow it. When he was eight, he requested that the child-support money his mother had been saving for him be invested in his step-dad’s oil company. It was a sweet boyhood gesture that would spark a passion for investing. “Every morning I’d wake up and read stock reports and make investments,” Pashak says of his high school years. “I had brokers.” By the time he was 20 he’d made enough money to buy a house just before Calgary’s real-estate market took off. The well-publicized divorce of his mother and Markin landed her a sizeable settlement, of which she gave Pashak and his sister “a small amount,” he says, enough for him to open a music club in 2004 called Broken City. (He’s since sold it, but still owns a quarter share and the building.) “That ended up being a significantly helpful investment, just the real estate,” he says.
Pashak boils his fortunes down to “a string of luck and good investments,” which led to more investments and pet projects. In 2007 he created Sled Island, an annual music festival that ran on $1 million of Pashak’s own money until it found its footing. While it’s not as lucrative an investment as his early play on Canadian Natural shares, Sled Island was almost immediately popular and gave a noticeable lift to Calgary’s artists and venues. Amid all that (and during the same year, no less), while he was living briefly in Vancouver, he gutted and re-opened a 1960s-era cabaret in a hotel basement. Noting the creeping gentrification of Vancouver’s east end, Pashak sensed the need for a venue suited to the incoming demographic of young hipsters. “He was a huge catalyst for [changes to] the neighbourhood,” says the bar’s manager, Darius Minwalla, whom Pashak lured from Seattle more than three years ago. “He sees things that a lot of people may not see.”
Pashak clearly has a nose for business opportunities and is in the rare position, for someone his age, to have the means to execute them. But while he credits his success in the entertainment businesses to an interest in “creating spaces and cultural advancement,” in Detroit Pashak is dealing with raw materials – steel that will be cut, bent and welded into a three-speed commuter bike at a time when almost all mass-produced bikes come from Taiwan.
Pashak has a longstanding interest in alternative transportation, something that figured heavily into his city council campaign. He also tells the story of when he went looking to buy a bike in Calgary a few years ago and felt underserved by the options: cheap, garish “Costco bikes” or sleek racing models at high-end shops. “I just wanted a practical, sturdy bike to get around on,” he says. So when he moved to Detroit with no real purpose, the idea of manufacturing this sort of bike in a city set up for – and in need of – new manufacturing businesses took hold. The fact that he didn’t know anything about bikes or the machines required to build them didn’t faze him. “People assume I know a lot about bikes,” Pashak says. “But I didn’t know how to manage a bar when I was 22. And I’ve figured out that it’s ok not to know. What I can do is put together a good team and make sure they’re happy. That’s just being a manager.”
It’s taken almost two years, but Pashak has assembled a small team of decidedly non-bike people. Turned off by the snobbery of the bike-frame builders he’d initially approached, Pashak looked for people who “understood machines.” Through friends of friends he was connected with a couple of seasoned engineers who’d built displays for the now-closed Detroit Science Center. Another guy on his team is a metallurgical engineer. One just graduated from college in supply chain management, while another – the only real “bike guy” – is a bike mechanic. Pashak paid to have him trained in frame-building. “I’m glad I have this crew,” he says. “There’s a lot of attitude in the frame-building community. It’s like those guys think they’re making Samurai swords. We just want to make a good bike and we’re not romanticizing everything that goes along with it.”
The staff of eight works out of a 50,000-square-foot former sign-making factory that Pashak bought a few months ago for $190,000. Right now, the space dwarfs the actual operation, but Pashak figures at capacity there will be 25 to 30 workers building, packing and shipping roughly 100 bikes a day.
The bike itself has an understated, spare look: an old-timey curved frame (unadorned and painted matte black), slim tires, three speeds, one handlebar brake, as well as a good old-fashioned pedal brake. (Pashak and the lead engineers are currently debating a kickstand.) The bike will retail for $500, which is in line with similar commuter models on the market. “Now you go into a bike store and there’s a ton of really interesting commuter bikes for around $500,” Pashak says, slightly alarmed. “They’re all made in Asia, so that’s kind of the thing we’re holding onto.”
Pashak is aiming to make each bike for around $100, not including labour costs. For now, Detroit Bikes will manufacture the frame, handlebars, rear rack, fenders, chain-guard, likely the wheels and, depending on how the math works out, the pedals. Anything they can’t manufacture economically, like the seat, hubs and brakes, will come from Asia. As soon as the steel tubing and steel cutter arrive (any day now, he says), they’ll make 50 bikes and hand them out to Detroit residents for some informal testing and buzz-building. Based on people’s feedback, they might make some changes before rolling out the final product, first locally, then to other urban bike-retailers across North America. If sales are promising, Pashak envisions branching out with different models and eventually supplying the bike-share programs that are popping up in cities around the world.
Though Pashak’s business hits on important cultural trends such as urban cycling and ethical consumerism, his product is also trading on the idea of place. Detroit is crucial for this business on many levels. First, it’s a continental transportation hub that offers the obvious bonuses of cheap real estate and a willing and skilled labour pool. But its story – a former manufacturing powerhouse, now depressed, appealingly resilient, a larger symbol of what’s wrong with the American economy – is what Pashak is betting will help sell this bike.
“Positive or negative, people know how they feel about Detroit – it resonates,” says Pete Lilly, owner of Sweet Pete’s, a Toronto bike shop that sells largely to the commuter crowd. “It’s a feel-good story, but more than that, it’s not an angle that other companies can copy.” That’s crucial, he says, for getting notoriously fickle retailers onboard. It’s the kind of bike Lilly thinks could sell well at his store based on past success moving other eco- or socially-minded bikes such as Kona’s 2006 AfricaBike, the proceeds from which went to supplying those very bikes to people in Africa. “Ultimately it comes down to the consumer and whether they’ll pay the extra money,” he says of Pashak’s bikes, if they do indeed wind up costing consumers more than similar, Asian-made bikes.
That hasn’t always been the case. A decade ago, a Vancouver-based bike company called Brodie tried to keep its manufacturing local as competitors shifted theirs to Asia. “Brodie had to eventually move offshore because their bikes were $200 to $300 more,” Lilly says. “Ultimately, the customer decided.”
Still, from a retailer’s point of view, buying local rather than importing from Taiwan is appealing, not just as a marketing angle but also because lead-times for Asian orders are long and there are always a few bikes that arrive damaged, rusted, or just badly made. “Everyone says making bikes here competitively can’t be done,” Lilly says. “But I would love to see someone do it.”
Pashak wants to be that person, and he’s got a lot riding on that outcome – more than $500,000, he says. But while he’s happy to be doing it in Detroit, he’s trying not to talk too loudly about it. “There are a lot of schemers that show up in this city who think they’re going to save Detroit,” he says. “Coming here and starting a business does a great thing for the city, but don’t say you’re saving it. This is a serious place to come to. It’s not frivolous. People are coming here to try and contribute to a really interesting community.”