Every basketball fan has seen it: Your hard working team plays great and goes into halftime with a big lead. But in the second half that same team looks entirely different, as the players stop doing all the aggressive, scrappy things that gave them the lead, and instead begin playing with the sole goal of not losing. More often than not, by focusing on being safe, they see their lead evaporate.
This basketball analogy is eerily resonant with the story of entrepreneurship in Michigan, a state that grew to unprecedented heights in the 20th century on the backs of the world’s greatest entrepreneurs. Then Michigan lost its momentum, beginning a long, slow shift from a hungry, innovative state to one that worked primarily to maintain what it had — playing not to lose. We moved from playing offense to solely playing defense, and it is tough to score while playing defense.
The biggest blow to Michigan was a cultural one. By playing defense, we became a state of risk-avoiders. We spent the first eight years of this century clinging to a two-generations-old model of doing business in Michigan, even as major cracks in that model became apparent. Well, real change often doesn’t come until you hit bottom, and in 2008-09 the walls came tumbling down — and our blinders came off.
The good news is that since this happened we’ve seen real change. Entrepreneurial support organizations such as Detroit’s TechTown and Ann Arbor’s SPARK were suddenly inundated with budding entrepreneurs. Innovative new programs have been created by private, public and philanthropic sources, ranging from Dan Gilbert’s work in Detroit to the MEDC’s economic gardening and business connection efforts.
An important change has been in the growth of venture capital. Name an important company that has emerged in that time period — from Google to Intel — and chances are that venture capitalists invested millions of dollars before that company could otherwise support itself. Venture capital–backed companies grow 50 percent faster and hire employees at eight times the rate of other companies.
Venture capital tends to cluster around world-class research universities and concentrations of engineers, so Michigan had the attributes of a venture capital haven — though it hadn’t taken advantage of them. But in late 2008, the Renaissance Venture Capital Fund, the organization I am honored to lead, was created by Business Leaders for Michigan to accelerate the growth of venture capital, new companies and jobs in Michigan, with an innovative twist: While other regions had attempted to attract venture capital as an economic development tool, never had the process been led by major businesses in the region who were willing to “go on offense” to drive success.
We tore up the old arcane, protective rules of many similar funds and focused instead on aggressively bringing together the assets that made Michigan so special. And, through Business Leaders for Michigan, we had a secret weapon: major corporations -- from DTE Energy to Blue Cross Blue Shield of Michigan to Meijer, Ford and many others -- would not just invest in our fund, but would look to become customers of new Michigan start-ups, dramatically increasing the likelihood of success of those companies.
We are now four years into the life of the Renaissance Fund, and the results have exceeded our most optimistic projections. We have become the largest private fund of our kind in the country. Through 2012, Renaissance investments of $16.7 million have helped bring nearly $300 million of new venture capital investment into 20 Michigan companies, a ratio of more than $17 coming to Michigan for every $1 invested by Renaissance.
These investments have already created hundreds of excellent jobs with average pay of approximately $80,000. At the same time, the fund has provided strong financial returns, proving Michigan is an attractive state in which to invest. We expect that Renaissance’s work will ultimately yield more than $1 billion in venture capital investment in the state and more than 25,000 Michigan jobs.
Our efforts, combined with the state’s Venture Michigan Fund and a series of innovative programs created by the MEDC and philanthropic organizations, have helped Michigan venture capital grow 69 percent over the last five years, while the venture capital has grown only 3 percent nationally. And the rest of the nation is taking notice. At Renaissance we regularly receive calls from other parts of the country hoping to replicate our “Michigan model” of driving entrepreneurship.
Of course, Michigan hasn’t completely turned the corner; it will take years to establish sustained, diversified growth. But it is important to take stock of where we are in the process, and a look at the last five years shows Michigan has come a long way. Young people are flocking to downtown Detroit, Grand Rapids and Ann Arbor. Entrepreneurship is no longer a rarity but something for which hundreds of thousands of us are striving. I’m excited to be part of this renaissance, and one of many, many leaders working toward a day – which I believe is coming soon – when the current excitement leads to a truly prosperous Michigan. It’s amazing what can happen when you move from defense to offense.