Over 100 members of Detroit’s entrepreneurial and venture communities gathered Wednesday at Techtown to examine the Michigan Venture Capital Association’s (MVCA) Annual Report on venture capital activity in Michigan. The event, held in conjunction with Techweek Detroit, offered participants a deep dive into the report’s findings, with particular focus on the venture community’s impact on Detroit.
Maureen Miller Brosnan, executive director of MVCA, told the audience that this year’s in-depth analysis of venture capital activity in the state indicates a steady and consistent trend of success in Michigan. “The number of investors, the amount invested in Michigan-based companies, and the number of successful, active angel- and venture-backed companies located and hiring in Michigan are all trending upward, showing significant increases in the last five years,” she said. The 2015 Report also reflects members’ request that the organization examine venture activity in specific geographic regions of the state. “With all the energy surrounding Detroit’s comeback, it was natural that we turned to the Motor City to see what was new or trending there,” Brosnan said.
The Detroit area is quickly becoming a new center of venture capital activity in Michigan. Emily Heintz, Associate Director of MVCA, reported that there are currently 24 venture-backed companies in Detroit who have collectively received more than $186 million in venture investment. “More remarkable than the number of new venture investments in Detroit is the rate at which those new investments are being made: the amount of new venture investments made in Detroit startups doubled in the last five years,” she said.
Gabe Karp, partner at Detroit Venture Partners, was part of a panel that discussed the city’s fast-growing entrepreneurial scene. “Detroit has seen explosive growth in the last few years, with entrepreneurs setting up shop in downtown Detroit’s thriving technology hub.
Other panelists included Ted Serbinski of Techstars; Martin Dober of Invest Detroit; and Bob Marsh of LevelEleven.
About the Report’s Findings—Detroit Specific
- Over 15 venture capital firms in Michigan have invested in startups in Wayne County
- There are currently 5 venture firms with headquarters or offices located in Detroit, which represents 14% of all firms with offices in Michigan
- 22% of the venture professionals located in Detroit are woman.
- 28% of the venture professionals located in Detroit are minorities.
- There are currently 24 venture-backed startups in the Detroit area who have collectively received more than $186M in venture capital funding
- 0% of these startups have a CEO who is a woman.
- 13% of these startups have a CEO who is a minority.
- The number of Detroit-based companies receiving venture capital investment for the first time has increased 100% in the last five years.
- The diversity of startups receiving venture capital investment in Detroit is even more striking, as the eight new investments in Detroit are spread among companies in five different industries.
- While Michigan venture funds invest in a wide variety of sectors, the Information Technology sector has historically been the main focus of capital deployment in the Detroit area. Currently, 54% of the startup companies that have received venture capital funding in the region were information technology companies.
About the Report’s Findings—General
Venture capital and angel investment in Michigan continues to contribute to the state’s economic recovery, according to the report. The in-depth analysis of venture capital activity in the state indicates a steady and consistent trend of success in Michigan’s entrepreneurial economy. The number of investors, the amount invested in Michigan-based companies, and the number of successful, active angel- and venture-backed companies located and hiring in Michigan are all trending upward, showing significant increases in the last five years.
Notably, the report also forecasts a disparity between the demand and the amount of venture capital available for new and follow-on investments in Michigan startups. Founders typically locate and keep their businesses geographically near the sources of the capital they need for growth.
“We’ve spent more than a decade building a venture capital community in Michigan that can support the state’s extraordinary startup companies and contribute to the diverse economy that is crucial to the state post-recession. We’re now at a point where, despite significant increases in venture capital under management at Michigan-based venture firms, it’s still not enough to meet future funding demands by Michigan startups,” said Brosnan. “In order to continue to have a positive impact on our economy, we must ensure Michigan-based venture capital firms are able to grow their available capital while at the same time able to attract out-of-state venture firms to invest more in Michigan.”
Key highlights of the 2015 MVCA Research Report include:
- There are currently 129 venture-backed companies in Michigan, a 70 percent increase in the last five years.
- Michigan venture capital firms invested in 97 percent of all Michigan startups that received any venture capital in 2014.
- Last year, Michigan-based venture capital firms had $1.7 billion in capital under management, an increase of 45 percent in the last 5 years.
- Fifty one companies in Michigan received more than $204 million from Michigan venture capital firms in 2014. This is an 89 percent increase in the last five years.
- The number of venture capital investment professionals living, working, and investing in Michigan has increased by 98 percent in the last five years.
- The number of venture firms with an office or headquarters in Michigan has increased by 48 percent in the last five years.
- There are currently 214 startup companies in Michigan that have received funding from a Michigan angel group, a 206 percent increase in the last five years.
- In 2014 there were nine Angel Groups in Michigan with 272 Active Angel Investor Members, a 45 percent increase in membership in the last five years.
About The Michigan Venture Capital Association
The Michigan Venture Capital Association (MVCA) is a non-profit trade organization designed to bring together venture capital industry experts in the state of Michigan. The organization’s goal is to grow and sustain a vibrant venture capital community in Michigan. MVCA membership includes private and corporate venture capital funds, angel investors, universities and economic development participants, and service providers. More than 400 individuals are members of MVCA, representing over 100 organizations across the nation. www.MichiganVCA.org