The Michigan venture capital industry is gaining momentum and attention as it continues to thrive despite a national dip. Michigan Growth Capital Symposium (MGCS) Founder David J. Brophy, Director and Professor of Finance at the University of Michigan Ross School of Business, joins us this month to discuss the state of Michigan’s VC industry – what’s going right and what people are buzzing about.
The president of the National Venture Capital Association recently used the term “the Michigan Miracle” while describing the VC industry in this state. Do you agree with him?
Yes and no. It’s a miracle that people have pushed the boulder uphill for a good many years – it’s a ’30-year overnight success.’ Right now everybody else in the country seems to be down and we’re up, and I think that reflects that we had a nice clustering of deals that have come together at one time. The trick is always sustaining it, and success is vital to that momentum.
Why has the VC industry grown in Michigan while contracting in other areas of the country?
We planted a slow-growing tree here a long time ago; it’s gradually developed and we got a good crop this year. Other areas may have crested a little earlier than we did. Remember, the same people that are praising us now didn’t have much time for us a few years ago when other places were hot. That doesn’t diminish what we’re doing and what we’ve done. And I do think we’re on a sustainable highway as far as this business is concerned. I think it’s the fruits of a lot of good hard work over the years.
What is the overall industry reputation of Michigan?
It’s definitely improving and growing. When we stand out, like we’re doing now, it can have a ratchet effect on the attitudes of people who otherwise would not see a trip to Michigan as potentially profitable. The MGCS is a bell-ringing event. On one hand it’s going to attract people to see what’s going on, and on the other hand it’s going to strike people as an affirmation of the quality of people – like Mark Weiser and Tony Grover – who they got to know out in California, and who moved back here and are doing very well.
What is the secret to Michigan’s success?
Just hard work, and ultimately the absolute need to do it. In a way, it finally took the dislocation of our industrial base, and we now have a total revision of the economic pillars of the state. We’ve got a new and philosophically different governor, and we’ve got right-to-work legislation. We’ve got a very effective venture capital and private equity provision through Credit Suisse and the 21st Century and Michigan Venture funds of funds. That’s a public/private partnership program that’s absolutely working.
We also have a cadre of good, smart entrepreneurs. We’ve got one of the great universities in the world here at the University of Michigan, and many others. So there’s been a tremendous intellectual property pump, and we’re only now beginning to really figure out how to turn it into economic production. We’ve got a heck of a lot going on, and it’s catching the attention of people around the country and around the world.
What are the most promising sectors for VC in Michigan?
The one big area where we’re doing quite well is in medical devices and healthcare in general. Where we’ve got potential that has not yet been fully realized is in information technology. Those two are inter-dependent in a way, because there’s a lot of IT opportunity in healthcare, so we’ve got an opportunity to blend the talent pools here. You can say the same on the energy side, and I think our long suit in that area is in efficiency improvement.
Beyond that, we’ve got sophomores and freshman who are busy creating smartphone apps and all kinds of online companies. We’ve got probably fifty meet-up groups that are just humming all the time. Overall, we’re building an entrepreneurial community here that is going to grow to challenge anybody anywhere.
The best place to get a pulse on Michigan’s VC industry is at the Michigan Growth Capital Symposium. For more information on this year’s event, visit www.MichiganGCS.com.