An unobtrusive piece of economic data is, a further testament to Michigan’s comeback status – and, just maybe, healthier long-term growth.
The latest report from the Michigan Venture Capital Association (MVCA) provides startling numbers that show the state is beginning to attract investors. And not just any investors, but those risking capital on start-ups – the type of ventures that gave Silicon Valley its name and reputation.
In 2012, Michigan jumped to 15th from 25th in terms of venture capital activity among states. Yes, California remains first, followed by Massachusetts and New York.
Washington, Texas, Colorado, Illinois and Pennsylvania also remain biggies.
But Michigan has passed Minnesota, Arizona and Florida in terms of venture capital activity.
Why is this significant? The jump suggests that investors and innovators are coming together to create Michigan enterprises – few of whose names you’d recognize – that tomorrow could grow into major companies and employers.
Planing Financial Seeds
Infant companies in fields like genetic engineering and software often don’t survive. They need cash desperately because they don’t yet have products. Venture capitalists specialize in these companies because they know the payoff, if it happens, can be immense.
EcoMotors, based in Allen Park, designed a new type of opposed-piston engine that promises startling power and efficiency in a small package. The company granted its first major license last month to a Chinese company.
Names of Michigan-based startups like Axonia or Llamasoft don’t sound like much. They won’t necessarily amount to anything. Of course, Ford Motor looked improbable back in the day when Henry Ford was looking for what would become known as “venture capital” to start his horseless buggy business. And cars in those days seemed as unlikely as laptop computers did in 1980 or 3D printers do today.
Yet venture capital has provided the seeds from which mighty companies like Microsoft, Facebook and Apple Computer have sprouted.
In 2008 Michigan had 15 venture capital firms that accepted money from investors to plow into startups. The number of venture capital investment professionals operating in the state was 43; and the amount of capital under management was about $1 billion.
Credit to Snyder
Four years later the number of firms has grown to 20, according to the MVCA, and the amount of capital under management has grown to $1.5 billion.
A great deal has changed economically for Michigan in the past four years. The auto industry is back on its feet. The state has elected an effective pro-growth governor who recognizes that without a stable state budget and competitive tax regime, residents will continue to flee.
Not only is there a deep talent pool in the state, the cost of doing business in Ferndale or Auburn Hills is quite attractive compared to towns like Cambridge and Palo Alto.
Most of all the idea has sunk in that Michigan’s economy has got to diversify from its historic reliance on cars and agriculture. The state has gobs of higher education, engineering talent and imagination. What has been lacking is the financial help that is oxygen for risk-takers when their companies are little more than ideas.
Until now.
