The Michigan Economic Development Corp., or MEDC, and the state of Michigan have made a long-term commitment to supporting and stimulating the risk-capital investment industry, which accelerates the emergence and growth of high-potential Michigan companies.
“We’ve recognized that in order for the investment industry to grow and become sustainable, the state will have to continue to be an anchor investor in these venture funds,” says Michael Flanagan, director of equity programs at MEDC.
Since 2006, the state has created a succession of fund-of-funds programs that have invested $800 million through Michigan-based venture capital, private equity and mezzanine funds that make seed, early- and later-stage investments in start-ups and middle-market companies. Of that total, $475 million already has been invested in 107 Michigan companies, which have created or retained 8,700 jobs. In addition, the $800 million investment pool has leveraged $6.5 billion in additional private capital that has been co-invested in those companies. The newest fund-of-funds – the Pure Michigan Venture Development Fund – was launched in 2012 and made $9 million in commitments over the past year to four venture funds: Michigan eLab, Resonant Ventures, Detroit Innovate and Detroit Venture Partners. The major sectors for risk-capital investment in Michigan are the life sciences and, increasingly, information technology.
The challenge, Flanagan says, is that many of the earlier fund-of-funds – such as the 21st Century Investment Fund and the Venture Michigan Fund I & II – are out of capital to commit to new venture-investment funds. “If we don’t continue to create new fund-of-funds programs, venture funds will have a hard time raising capital, and the industry runs the risk of falling off the cliff,” he explains. “Over the past 10 years, the state’s commitment of capital has helped to drive exponential growth in Michigan’s risk-capital investment sector and the value of assets under management. We think it’s worth supporting the industry in the future, in hopes it will develop deeper roots and become self-sustaining.” Currently, there are more than 25 venture capital firms operating in Michigan, and they manage nearly $4 billion of assets.
“The capital is one piece of the equation, but the Michigan Growth Capital Symposium is really the force that has brought the whole industry together in Michigan,” Flanagan comments. “It also has attracted investors from outside the state and encouraged them to look seriously at Michigan companies for investment. The Symposium is now a premier event in the state and one of the best of its kind nationally. It showcases great Michigan companies, generates investments and collaboration and elevates the status of the risk-capital investment industry in the state.”
To learn more or get involved in this community visit the MGCS website.