The Zell Lurie Institute celebrated exciting new milestones that made 2015 a historic and formative year. Highlights of the report include a major gift announcement from our founding benefactor and the launch of cutting-edge programs designed to expand entrepreneurial engagement and opportunities for our students and alumni. The university was also awarded a No. 4 national ranking, which recognized our long-term standing as a pioneer and leader in entrepreneurship education.
The report showcases several outstanding student entrepreneurs as well as the dedicated alumni, mentors and faculty who help to inspire and guide them in the pursuit of their entrepreneurial dreams. The team at the Zell Lurie Institute is proud of what these talented young people have accomplished, and hope you will join in supporting their personal and professional success and fulfillment in the future.
The Samuel Zell & Robert H. Lurie Institute for Entrepreneurial Studiesat the University of Michigan’s Stephen M. Ross School of Business announced the kick off of its annual business plan competition, the Michigan Business Challenge. Round one of the competition will take place today where participating teams will present their pitch to a panel of judges, and several of the top teams will be selected to advance to round two to compete in January. Now in its 33rd year, the Challenge continues to thrive as interest in entrepreneurship at the collegiate level is growing rapidly across a wide variety of disciplines and student degree programs.
Michigan Business Challenge, the University of Michigan’s annual campus-wide business plan competition, exposes students to a rigorous, multi-phase business development and planning process. Open to all current undergraduate and graduate students, more than 100 student teams from medicine, engineering, and a number of other different disciplines are expected to participate. These teams will have the opportunity to win a variety of cash prizes totaling more than $85,000, gain feedback from judges, and expand their business network with entrepreneurs and prospective investors.
“As interest in entrepreneurship continues to grow among students, we at the Zell Lurie Institute are proud to offer a competitive and intensive program to help both business and non-business majors gain experience building a business concept, developing it, and moving it toward launch,” said Sarika Gupta, managing director of the Zell Lurie Institute. “We engage students from all areas of study to test and validate their business concepts, and provide them with valuable feedback from seasoned entrepreneurs and venture capitalists.”
Last year, the Michigan Business Challenge debuted a social impact track in response to heightened interest in startups that have a social mission at their core. This track is presented in partnership with the Frederick A. and Barbara M. Erb Institute and the Center for Social Impact and was created to stimulate the creation of new businesses, products, or services that have a mission-driven goal or prioritize social and/or environmental considerations. In 2015, Blueprints for Pangaea was selected as the recipient of the Social Impact Award and $15,000 for the company’s work collecting unused medical supplies from local hospitals and shipping them to emerging nations that lack such supplies.
In 2015, the Pryor-Hale Award for Best Business and $20,000 cash prize was awarded to Companion, which launched a peer-to-peer safety app and participated in the Desai Accelerator. The early-stage accelerator is jointly managed by the Zell Lurie Institute and the College of Engineering’s Center for Entrepreneurship. Winners in past years have represented a wide range of industries, including educational tech, fashion, bio and medical tech, and app-based businesses.
For more information on the Michigan Business Challenge competition, deadlines, process, and eligibility, please visit: http://bit.ly/UM-MBC16.
Read the full press release here: http://bit.ly/PR-MBC16.
Are you thinking about a career in healthcare consulting, investment banking, private equity or in-house business development? Or do you wish to join a healthcare product development and commercialization team in an established or an early-stage company?
If you are considering these options, you might find this interdisciplinary course from ZLI (ES 720) a worthwhile career booster or simply interesting. The class was developed at Johns Hopkins and is taught Winter A on Mondays, 6:30-9:30p.m.
Registration is open to MBA students and to graduate students in medicine, bioengineering, pharmacy, life sciences, law, public health, and health management.
The course is taught by ZLI Associate Director and Clinical Assistant Professor Eric Gordon. Professor Gordon’s areas of interest are entrepreneurship and technology commercialization, the biomedical industry (pharmaceuticals, devices and biotechnology), venture capital, private equity, mergers and acquisitions, corporate governance, and digital and mobile marketing. He also is a professor at the School of Law. He has served as an adviser or co-founder to numerous companies.
For more information email: firstname.lastname@example.org (Erik Gordon)
The relationship between limited partners (LPs) and general partners (GPs) has continued to evolve in recent years, as niche strategies – such as co-investment and secondary transactions – have become more widely adopted. A panel of LPs and GPs examined the pros and cons of these trends at the 2015 Michigan Global Private Equity conference on October 9. The event was sponsored by the Center for Venture Capital and Private Equity Finance and the Zell Lurie Institute at Michigan Ross.
Co-investment Goes Mainstream
“What we’re seeing over the last three to five years is that a lot of LPs are trying to get more co-investment,” reported Eric Hanno, a principal at AlpInvest Partners, a global private equity firm with an integrated investment model and $48 billion in assets under management. “Many LPs use co-investment as a fee-reduction strategy.” AlpInvest creates synergistic opportunities for its business partners by providing fund commitments or supporting the timely execution of co-investment or secondary transactions. The firm plays the co-investment role broadly ─ from participating in a syndication to teaming up as a co-sponsor early in the process and actively supporting underwriting a bid.
“Co-investment is beneficial for both LPs and GPs because it deepens mutual understanding and strengthens partnerships,” said Eric Wilcomes, director and portfolio manager at DuPont Capital Management, which offers proven investment management services and global perspective to institutional investors. “LPs have an opportunity to see how a GP works in more detail, and a GP is able to solidify the relationship with investors.”
“Despite the favorable economics, co-investment is not for everyone,” said Brian Gimotty, director of investments at the UAW Retiree Medical Benefits Trust, which provides health care benefits for retired UAW members of General Motors, Ford and Chrysler along with their eligible dependents. “Co-investment takes a lot of time, and not all LPs can do it,” he continued, “These days, more LPs are bringing on additional talent, because they need a different skill set for co-investing.”
Secondaries Are Overheated
Another trend, according to the panelists, is the rapid growth and mainstreaming of the secondary market, which focuses on the buying and selling of pre-existing investor commitments to private equity and other alternative investment funds. Stricter U.S. banking regulations and tighter oversight in the U.S. and Europe are compelling banks, funds, insurers and other institutions to pare down or sell off assets. Impatient limited partners also are opting to sell their interests in PE funds early to receive liquidity for their funded investments as well as a release from any remaining unfunded obligations. Many private equity and global investment advisory firms have set up specialized teams or programs dedicated to the origination, structuring, execution and monitoring of secondary transactions in the private equity and hedge fund markets.
“Secondaries are now part of portfolio management, and there is no longer a stigma attached to selling off positions,” Gimotty said. “Secondaries also make an illiquid market more liquid. However, most LPs don’t have the skill set to execute these acquisitions.”
“We place the most weight on the quality of people,” Hanno remarked. “If we are buying a secondary portfolio, we want to make sure we have the best people as partners. It’s not just about the deal. You can buy great assets at a discount, but what you do with these assets is how your create value.”
“A lot of players have come into the secondary space, and it is now very competitive,” Wilcomes reported. “These secondary buyers have a lot of money. Therefore, discounts have shrunken because so much money is chasing secondaries.” In the past, GPs looked unfavorably on secondary transactions, which resulted in the sale of LP commitments to unfamiliar investors. “Now it happens so frequently and fluidly that GPs accept it and use it as an opportunity to get to know new investors,” Wilcomes added.
Whirlpool Corporation and Robert Bosch are two vastly different companies. Each has its own goals, culture and products. Yet, these two global corporations share one thing in common: a laser-sharp focus on fostering innovation and developing entrepreneurial ventures both inside and outside the four walls of the company. At the Women Who Fund conference on October 8, Noel Dolan from Whirlpool and Maximiliane Straub from Bosch shined the spotlight on different channels of innovation and offered tips for moving more women-led start-ups through the pipeline.
“We see innovation coming into Whirlpool through four different avenues,” said Dolan, who is responsible for the company’s North American Open Innovation Strategy and Strategic Partner Alliances. “These avenues include our internal employees; our corporate and academic relationships; emerging growth companies; and the crowd (ordinary consumers).” Although Whirlpool has limited relationships in the start-up community, and has “yet to physically write a check to fund a start-up,” Dolan and her team are pushing the 103-year-old company to fund and grow entrepreneurial companies rather than acquire them or shunt them into the supplier pool.
“I need to bring these opportunities to leadership for them to ultimately write a check,” Dolan explains. “But in my role, there is a big disconnect. We love start-ups because they are fast, agile, creative and courageous ─ but they are also reactive, chaotic, starved and deprived. They look at us the same way. They like us because we are disciplined, strategic and business focused and can help them scale. But they also can’t stand us because we take forever, have bureaucracies and are risk averse.”
As a potential corporate investor, Dolan said, Whirlpool is looking for visibility on a start-up board, an opportunity to learn, a path to recognize revenue and information about other investors’ interests and timing. She offered these words of advice to start-ups that have been identified for potential investment and want further consideration:
Straub, who is CFO and EVP of Finance, Controlling and Administration at Bosch, told the audience that the company’s product slogan, “invented for life,” requires continuous innovation. “We get that innovation in several ways,” she said. “Bosch is a venture capitalist and has its own division that invests venture capital in high technology or services in the technology area. We also have our own start-ups.”
Straub drew on her professional experience with Bosch’s “innovation framework” to offer some generalized tips to entrepreneurs seeking to promote their ideas and procure seed and early-stage funding:
Over a span of nearly two decades, KPS Capital Partners has successfully made four transformative changes to its investment strategy and scope since raising its first private equity fund in 1997. At each juncture, the New York-based investment firm has met new challenges head on and established a strong track record as a leader in the private equity industry. David Shapiro, co-founder and managing partner, shared highlights of his firm’s evolution at the 2015 Michigan Global Private Equity conference on October 9. The event was sponsored by the Zell Lurie Institute and the Center for Venture Capital and Private Equity Finance at Michigan Ross.
“Since 1997, we have evolved from advisors to investors; from union advocates to employers of large workforces; from pure distressed investors to investors in challenged and healthy businesses; and from pure U.S. investors to global investors,” Shapiro said. KPS Capital Partners manages the KPS Special Situations Funds, a family of private equity funds with approximately $5.6 billion of assets under management. The firm has won the Buyouts Deal of the Year Award ─ given by Buyouts Magazine in recognition of exceptional buyouts ─ for three of the past four years.
KPS’s most recent evolution from a domestic to a global investor presented both opportunities and obstacles to its founders. “At first, globalization seemed a one-way street of badness, and we had no interest in outsourcing,” Shapiro said. “We viewed the rest of the world as a risk factor in our investment thesis as opposed to an opportunity.”
Two investment deals, one in a Pittsburgh-based steel manufacturer and a second in a U.S. machine tool business, changed KPS’s perspective after both companies saw industry competitors move their manufacturing overseas to China. “It certainly opened our eyes to what can happen and how quickly it can happen, if you are not paying attention to what’s changing on the demand side and how manufacturing is shifting around the world,” Shapiro said. “The lesson for us was that even if you are not making low-end products that can be outsourced by cheap labor, you are still vulnerable to changes and movements in manufacturing.”
KPS entered the international arena shortly after purchasing Wire Rope Corporation of America. Shapiro and his team revamped the company’s management team, purchasing a competitor in Mexico to expand the product line and geographic reach and optimize its manufacturing footprint. KPS then turned its attention to China, where there was no dominant Chinese manufacturer of high-quality wire rope. This vacuum created a market-entry opportunity for other investors and companies looking to set up low-cost manufacturing facilities in China and gain market share.
“We hired consultants to advise us on how best to get involved in the Chinese market, because we had very little experience in China,” Shapiro said. “We determined that finding a joint-venture partner would be better than trying to do it ourselves.” KPS negotiated a JV agreement with a Chinese material supplier, contributed capital and then sold the business. “One of the most exciting things for potential buyers was this international Chinese connection,” he remarked. “From our perspective, we sold the sizzle without actually building the JV.”
Since then, KPS has made successful investments in various companies around the globe. Today half of its deals are done outside the U.S. At the conclusion of his talk, Shapiro shared lessons-learned with other private equity investors seeking to enter the European and Asian markets: