Maureen Miller Brosnan is executive director of the Michigan Venture Capital Association, based in Ann Arbor.
It is undeniable that Michigan’s investment community boasts some impressive numbers. According to the 2017 MVCA Research Report, 54 startups received $222 million from Michigan venture capital firms and there was $4 billion of capital under management in 2016. As Michigan’s entrepreneurial community continues to grow and thrive, the investment community is actively fundraising and expanding their networks to keep up with this boom in activity.
But, with this progress, it is clear we still have work to do to ensure that there remains a robust continuum of capital to support Michigan companies at all stages of growth.
An estimated $504 million of venture capital investment will be required to adequately fund the growth of Michigan’s existing startup companies in the next two years. While Michigan has seen nearly three times the number of venture capital firms investing in local startups, for the last two years, the state has experienced a decline in venture firms located in the state.
The 33 venture firms in Michigan estimate that funds needed for new investments, coupled with the need for follow-on funding for their 141 Michigan-based startups, exceeds what is currently available, reflecting the need for additional funds to help Michigan’s many venture-backed businesses succeed.
With tremendous business development happening in the entrepreneurial community, having a strong venture capital community in Michigan will play a critical role in attracting and securing much needed out-of-state investment capital.
Local venture investment professionals are often the first to identify high-growth, high-potential businesses, partner closely with growing businesses, and provide important connections to key stakeholders. Michigan’s entrepreneurial and investment community is becoming more recognized nationwide and is uniquely positioned to attract significant amounts of capital from outside of the state, largely due to a combination of research, talent, ideas and diverse leadership.
Currently, every dollar invested in a Michigan startup by a Michigan venture capital firm attracts $4.61 of investment from outside of Michigan. This data shows that entrepreneurs who are backed by both in-state and out-of-state venture investment have an advantage because they can leverage the expertise and investment of local investors to grow their business while also raising funds from out-of-state venture professionals to take their business to the next level, resulting in greater economic opportunities in the state.
State legislators must pay attention to the needs of Michigan’s entrepreneurs and investors to keep its competitive advantage and build a stable, diverse economy. There is enormous potential and talent in the state, but we need to support the venture capitalists who invest in and support our entrepreneurs. If Michigan wants to keep building on the momentum of our vibrant entrepreneurial and investment community, we need to ensure our high-growth, high-potential companies have access to the early stage capital they need to continue building businesses in Michigan, keeping them in Michigan, and ensuring Michigan’s economic health in the long run.