The fundraising environment is challenging these days – for entrepreneurs and venture funds alike – but Peter Shagory, partner of Chicago-based Baird Venture Partners (BVP), doesn’t think that is necessarily a bad thing. “This lean environment is giving rise to new business models, more resourceful management teams and more capital efficient investment strategies that I believe are enabling the venture industry to generate attractive risk-adjusted returns,” he said. “We will see numerous successful companies and winning investments pursuing creative and capital-efficient growth strategies.”
While the economic shift is proving to be a benefit to the venture capital industry, Shagory said VC is, in return, a boon to the economy. “Studies have shown that job growth associated with venture-backed companies, particularly in life sciences, has a significant multiplicative effect on total job creation,” he said. “These companies generate the need for other outsourced skill positions. VC-backed companies are focused in sectors that demand knowledge-based workers who are, generally speaking, more highly skilled, highly paid, and more flexible as a workforce.” As a result, Shagory said, venture investment brings a positive employment dynamic that is also resilient to positive and negative economic cycles.
Shagory also notes that today’s startups are demonstrating more sophisticated levels of management and technology validation, with less paid-in capital than in recent years. Additionally, institutional resources for commercialization, governmental support for entrepreneurs and investors, and the influx of more experienced business people residing in theMidwestall factor into a hot entrepreneurial environment. And then, there’s the resurgence in IT: “I’m amazed at the proliferation of IT startups over the past five years,” said Shagory. “As Internet 2.0 companies have engineered business models that require less and less capital, such companies have been able to scale and even thrive in what remains a very challenging economic landscape.”
BVP is a sponsor of the Michigan Growth Capital Symposium. Shagory said events such as the MGCS are important to the entrepreneurial communities ofMichigan and theMidwest. “It serves an educational purpose through the sharing of lessons learned among these constituents,” he said. “The MGCS serves as a compelling recruitment tool for innovators, executives, and investors through the celebration of entrepreneurial success stories, all of which reflect well onMichigan and theMidwest.”