A pedal and a prayer: Canadian loses run for Calgary city council, moves to Detroit, starts manufacturing bikes

It was a winding path that Zak Pashak rode to arrive at his idea of building nonmotorized transportation in the Motor City.

Pashak launched Detroit Bikes LLC in March 2011 with the idea that the city’s industrial edge would make a great marketing angle for a bicycle manufacturing business, especially at a time when bicycling is popular among young urban dwellers.

He plans to sell bikes online and through independent retailers — local ones first and then others in 20 cities throughout North America.

Pashak’s price point target is just under $500, with plans to lower it if sales are high enough. Online buyers would have to pay $150 for shipping. Retailers who buy Detroit Bikes in volume would be able to mark down the price by $100 or more, he said.

But he didn’t move here to build bicycles. Pashak, a Canadian citizen, just wanted an activity that would satisfy immigration rules for living in the U.S.

“I wanted to move to Detroit and needed a reason, so I did this,” Pashak said.

He moved to Detroit in October 2010, having just come off a failed bid to become a city council alderman in his native city of Calgary, Alberta.

“I said, ‘If I don’t win, I will move to Detroit,’ ” he said. “I found out my family came through four or five generations ago. From a distance, I always found Michigan to be interesting. When I visited, I felt like I just had to stay.”

To do that independently — without marrying someone or getting an employer to sponsor him — required either attending a university or starting a business. He thought about attending Wayne State University while harboring a few business ideas.

“I originally wanted to open a bar, but I realized Detroit already has a lot of good bars,” Pashak said.

Varied interests

That would have been a good fit, since he owns a bar in Vancouver, British Columbia, called the Biltmore. Pashak has been involved in other businesses, too.

He started a club in Calgary in 2003 called Broken City and later sold his majority share. He invested in a Calgary tech company called GuildOne that services oil and gas companies. He also has sold his share in that business.

The proceeds from those sales, along with money from the sale of a house in Vancouver, are what Pashak is using to start Detroit Bikes. He anticipates it will cost up to $400,000 to get it rolling.

By year’s end he wants the business to have the capacity to crank out up to 100 bikes a day. He plans to build a staff of 10.

For now, four employees work out of the garage of Pashak’s home in Detroit’s Boston-Edison neighborhood, building prototypes and a production line. The garage actually is a former carriage house on the grounds of a home built in 1919 by Jacob Siegel, founder of the American Lady Corset Co., according to the Historic Boston-Edison Association‘s website.

“It’s great. How many businesses start out in the garage, right?” said Gav Baderca, one of the employees.

Baderca’s previous job was as an exhibit designer for the Detroit Science Center‘s exhibit-building subsidiary, DSC Design & Exhibits LLC.

Baderca and another Detroit Bikes employee lost their jobs when the center closed last year because it had run out of money. So did Baderca’s then-boss, Ed Summers, who is his boss once again as foreman of Pashak’s operations.

Former science center President Kevin Prihod recommended Summers, a mechanical engineer, to Pashak.

“Kevin told him I was the guy that could make it happen for him,” Summers said.

Summers has helped Pashak find used machining equipment at discount prices. He has spent about $100,000 on equipment so far.

Pashak was swept up by Detroit’s entrepreneurial spirit when he first came here and quickly met others who were excited about starting businesses.

“I felt connected right away. I felt I could start something to contribute in this new business scene,” he said. “There’s a lot of entrepreneurs here; there’s a sense that there’s something to capitalize on. I can see how some people might think that’s not good, but it is good as long as it’s constructive.”

Land of opportunity

There have been plenty of stories from the media, local and national, about the opportunities Detroit offers, not in spite of its economic situation but because of it. Cheap space and industrial equipment coupled with a talented but underemployed workforce make it a choice place for the right kind of business and a person with some money to spend.

But for all the attention, examples are scarce, especially when the examples move beyond heavy hitters such as Dan Gilbert and his kid-in-a-candy-store approach to downtown real estate investments, small retail businesses in relatively flourishing neighborhoods like Midtown or the perennial favorite, Slows Bar BQ in Corktown.

Pashak is intent on taking advantage of the industrial opportunity here. He said that he doesn’t think he would have been able to easily find welders and machinists in Calgary and that in Detroit he can buy an industrial building for $300,000 that would cost more than $2 million in his native city.

Manufacturing bicycles “doesn’t seem like the kind of thing I could start in Calgary,” Pashak said.

He’s willing to take the risk to do it. To make the economy-of-scale numbers work, Pashak needs to make bikes in volume instead of building them to order like some custom bike shops do. That means he could very well face a situation where he has to store hundreds or thousands of bikes before sales take off — if they take off.

“It’s a total gamble,” he readily admits.

The approach is “not a long-term business strategy” and will only be employed during the startup phase, Pashak said. So putting the cart before the horse means Detroit Bikes will need the brand cachet he hopes the city brings.

“The company needs to blow up,” Pashak said.

It’s possible to produce affordable, American-made bikes in volume, especially in Detroit, he said.

“Instead of ordering parts from Taiwan for $6 for a little piece of metal, we’re making them for 12 cents apiece,” Pashak said. “There are people in Detroit who are really good at making pieces of metal in certain shapes.”

He figures he will need to sell about five bikes a day to break even.

Pashak is not a biking enthusiast. He originally got the idea to build a bike when he was running for office and wanted a bike to ride to work. He tried a used bike he bought for about $65, but it soon fell apart. And he wasn’t impressed with the low-priced Asian makes available at large department stores.

Pashak also didn’t want to throw himself into the enthusiastic biking scene just to get a durable yet affordable bike. “I felt like I had to get a tattoo and join the cult,” he said.

He figured there must be others like him who wanted a good-quality, simple bike without first becoming a bike-wrenching enthusiast.

Pashak’s working design is that of a simple, utilitarian bike with a black frame. It will have three speeds with either a thumb or grip-type of shifter. There will be a chain guard, fender and rear bracket for carrying bags but no shocks or other off-road features.

He plans to reach out to local retailers once he has a finished prototype. The marketing end of the startup will be the biggest challenge, Pashak said, but he thinks Detroit will bring brand cachet to his product.

His target audience will be young, urban dwellers who want transportation that’s environmentally friendly and also happens to be good exercise. The made-in-Detroit aspect will make it all the more attractive to that crowd, Pashak said, because of the buy-local marketing angle.

A customer will know that the bike “wasn’t shipped across the world to get to you, polluting along the way, and wasn’t made by a 10-year-old in another country,” Pashak said.

Experimenting, risk-taking can pay off

Jan Gensheimer, a business consultant who runs Seracon Consulting in Saline, applauded Pashak’s risky approach but said that’s all the more reason that entrepreneurs like Pashak should plan carefully.

“You have to be a little crazy to do this entrepreneurial stuff,” Gensheimer said. “He’s going to have a thousand people telling him what’s wrong. … You have to believe you can pull it off, but you have to be a smart believer.”

Identifying and understanding a target market and how long it will take to break even are especially important points, she said.

“In a big company, you can make mistakes. When you’re a startup, where does the do-over money come from?” Gensheimer said.

Pashak said he isn’t worried.

“This is the fifth business I’ve started. The other businesses were things people said wouldn’t work out,” he said, offering the example of a music festival that he started in Calgary called Sled Island. “It’s still going,” Pashak said. “It’s in its sixth year now.”

Seth Kleinglass, owner of Sweet Bikes LLC in Canton Township, said his shop tried to sell its own line of bikes last year for $300, but the effort failed. The problem was the shop assembled the bikes out of parts it purchased from Taiwan.

“We had a hard time at $300 getting a product worth selling. I had a lot of problems with parts, with quality,” Kleinglass said. “It was an experiment.”

Kleinglass said Pashak is trying to hit an aggressive price point.

“I’d love to sell his bikes here if he can,” Kleinglass said.

He compared Pashak’s effort to another plan to cash in on Detroit’s image to sell a consumer product: Motor City Denim Co., the clothing brand launched by fashion designer Joe Faris and Sterling Heights automotive supplier TD Industrial Coverings Inc.

Faris and TD split last year, with Faris expressing disappointment that the company couldn’t hit a lower price point on the jeans, which sell for nearly $200 a pair. TD continues to sell the line without Faris.

“I love Detroit and do everything I can to buy local, but I can’t pay $200,” Kleinglass said. If Pashak “hits that price point and has quality,” Kleinglass said, “he’ll hit a home run.”

Kelli Kavanaugh is co-owner of Wheelhouse Detroit LLC, which sells and rents bikes and runs bike tours from its shop near the Detroit River downtown. Kavanaugh said no purely American-made bike options exist anymore outside of high-end bikes that cost thousands of dollars.

Customers would definitely jump on a “$500 bike that’s made in the U.S. versus a $450 bike made in Taiwan,” Kavanaugh said.

“What I find interesting about Zak is it’s an American-made product at a fairly moderate price point,” she said. “It makes sense to do it here. We have the manufacturing acumen. The bikes we sell are not made in the USA, and that doesn’t sit well with me. There aren’t any moderately priced bikes I can turn to.”

But whether that would play as well outside Detroit is hard to say, Kavanaugh said.

Kleinglass said an affordable made-in-Detroit bike would please his customers.

“If I can get something that’s made in the USA, they’d be happy. If I can get something made in Detroit, they’d probably jump up and down,” he said, but also noted that cities outside Detroit might be tougher.

“Would somebody from Detroit want a Minneapolis bike or vice versa?” Kleinglass said. “Probably not.”

The Motor City as Sprocket City?

It’s not a foreign concept to Detroit. “The city was a big biking town before the turn of the last century,” said Jack VanDyke, a member and shop head of The Hub of Detroit, a nonprofit that uses bicycling repair as a tool for youth development.

Richard Bak’s book Detroitland, published this year, brings back to light Detroit’s forgotten history as a haven of bicycling enthusiasts in the years before the auto industry took off:

“During the Gay ’90s, Detroit was a city on wheels — but not the variety of wheels that one day earned it the distinction of being the motorcar capital of the world. ‘Cass Avenue was so crowded with wheels after dark that the street twinkled with the tiny headlights and the air was filled with the clanging of bicycle bells.’ Florence Marsh, one of (Henry) Ford’s contemporaries, later wrote of the two-wheel mania of the late nineteenth century. Pedestrians on Cass, Lafayette, and other popular cycling thoroughfares ‘waited in vain for a chance to cross the road.’ ”

April 27, 2012 | Crain’s Detroit Business,