West Michigan’s angel and venture investment community came together to examine the Michigan Venture Capital Association’s (MVCA) Annual Report on venture capital activity in Michigan. The event offered participants a deep dive into the report’s findings, with particular focus on the venture community’s impact on West Michigan.
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. “In West Michigan, it’s the active angel investors, two large universities (Grand Valley State University and Western Michigan University) and an entrepreneurial community with strong dedication to the region that set it apart from other VC pockets in the state,” she reflected. There are six venture firms with headquarters or offices in West Michigan, with the highest concentration of activity in Grand Rapids and Kalamazoo.
Emily Heintz, Associate Director of MVCA, heads the organization’s research efforts, which this year included polling 46 venture firm and angel group members. “MVCA venture firm members told us they expect the startups they’ve already identified as viable successes are going to need $1.3 billion in additional investment in the next few years. These firms have earmarked $108 million of additional support for these growing companies, but our venture investors are going to need to raise substantial funds in coming years to keep these young Michigan startups healthy and growing.”
Rick DeVos, founder and CEO of Start Garden, called Michigan “a special place and capable of incredible, interesting things, but to grow, we need to do a better job of telling Michigan’s startup stories: successes, failures and opportunities. It’s an exciting time to be here.”
A panel discussion featured DeVos plus several other members of West Michigan’s entrepreneurial and early-stage investment community. Panelist Ryan Vaughn, founder of the venture-backed company Varsity News Network, says, “The support structures in West Michigan are strong and my company is a better organization because we’re here.” Panelist Jody Vanderwel of Grand Angels, remembers when her organization began in 2004, and it was the first time that angels in the area had collaborated to provide a “front door” for entrepreneurs to have access to capital. “Grand Angels was the first early-stage investing group in West Michigan and a catalyst for the beginning of an entrepreneurial community,” she recalls. “Today it is part of a thriving ecosystem not only in west Michigan but also around the state.”
Other panelists included Emily Heintz from MVCA and Mark Gurney of Tetra Discovery Partners.
About the Report’s Findings—West Michigan Specific
- There are currently 6 venture firms with headquarters or offices located in West Michigan, which represents 16% of all firms with offices in Michigan
- 16% of the venture professionals located in West Michigan are woman.
- 5% of the venture professionals located in West Michigan are minorities.
- Only 3% of venture capital managed in West Michigan is available for new investment
- There are currently 24 venture-backed startups in West Michigan who have collectively received more than $185M 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.
- While Michigan venture funds invest in a wide variety of sectors, the Information Technology and Life Science sectors have historically been the main focus of capital deployment in West Michigan. Currently, 42% of the startup companies that have received venture capital funding in the region were information technology companies and 34% were life science 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