Recently, MVCA was successful in working with the Senate Committee on Economic Development in passing an amendment to HB4195 and HB4196 that allows for income earned by the State as a result of venture capital investment to go back to fund future state investment in venture capital vs. the general fund. The Michigan venture capital community will be able to use those proceeds to fund entrepreneurs and continue the diversification of Michigan’s economy.
In 2003, and again in 2006, the State of Michigan endorsed and financed venture capital in Michigan with bipartisan support and the formation of the first fund of funds – The Early Stage Venture Investment Corporation. The financing of the VMF programs was done by the State to fit within the State’s budgetary constraints of 2003-2006. Today, 12 years later, the legislature has introduced bills designed to modify the State’s financing of the VMF programs to better fit within today’s budget constraints.
It is important to note that the VMF programs themselves have been very successful in helping to catalyze, build, and importantly, diversify the Michigan economy. For example, in 2003 there was $80M dollars invested into 18 Michigan companies by venture capital firms. Last year alone, venture capital firm funded 51 startup companies in Michigan with more than $120 million dollars. Of those, 16 were new companies, which create new, high-paying jobs in Michigan. MEDC estimates that the number of these high-tech jobs grows by an average of 1100 jobs per year. Jobs created in venture-backed companies pay 50% more than the median salary in Michigan.
Michigan outpaces the nation in venture capital growth. The national average fund size for venture capital firms throughout the state has decreased by 1%, while Michigan’s average fund size has grown by 8%.
Much like the start up companies on the cusp of realizing success, the Michigan venture capital community is on the cusp of becoming a leader in the Midwest due in part to the focus the State of Michigan has placed on the importance of diversifying the economy using venture capital investments to build the next big idea in Michigan.
MVCA appreciates the process the Senate Committee on Economic Development employed in its review of the House Bills before advancing them to the floor for a vote. We were grateful for the time they spent with MVCA getting a better understanding of the venture capital industry and its contribution to Michigan’s economic resurgence.
It is our hope we get invited to sit at each table where venture capital is discussed as a component of the State’s economic development plan. We look forward to working with the administration and legislators to build a better means for the State to maintain its commitment to entrepreneurism and diversifying Michigan’s economy using venture capital as the catalyst for funding startups.