Michigan may be the automotive capital of the world and home to the Great Lakes, but in relation to its size, Michigan sorely lacks a close-knit venture capital community. According to VentureXpert, throughout 2001 only 22 venture funds were raised in the Wolverine State. Its neighbor, Illinois, even managed to raise 151 funds, additionally Massachusetts, which is smaller than Michigan raised 437 funds in 2001.
The venture capital community in Michigan is tired of it, and has decided to take action by forming the Michigan Venture Capital Association. The group aims to put Michigan on the VC map.
Dick Eidswick, president of the Michigan VCA, and founder of Arbor Partners – a six year-old firm that focuses on early stage information technology and software companies – decided to launch the group because even the Michigan government was passing area VCs over.
“Our state invests most VC into larger funds that are not here but most of the time on one of the coasts,” he says. “The Michigan pension fund has billions and billions of dollars, and they invest it in larger, out-of-state firms. We need support.”
Eidswick, whose firm is in the midst of investing its $32 million second fund, says being a VC in Michigan gets especially difficult when he is meeting with LPs on the East Coast who become suspicious and choose not to invest after they find out that Michigan pension funds are not investing. “We really need support from the state to become healthier,” says Eidswick.
The association argues that without the Michigan LPs giving cash to the Michigan VCs, entrepreneurs and companies in the area are forced to flee to one of the coasts to get funded. “The universities and graduates pump out a lot of good ideas and companies, but there just isn’t enough money available for them to stay,” Eidwick says. “These new companies always have to relocate. They start here and wind up in California.”
Other than not having enough venture capital to go around, Eidswick says Michigan has plenty to offer, like a good talent pool and a lower cost of living.
The board of directors for the Michigan VCA includes Samuel Valenti III of Valenti Capital in Bloomfield Hills; Eidswick of Arbor Partners in Ann Arbor; Dr. David Brophy of the University of Michigan; James Plonka of The Dow Chemical Corp. in Midland; Birgit Klohs of The Right Place Program in Grand Rapids; Jeff Sloan of Sloan Ventures in Birmingham; Raj Khothari of Accelero Capital Partners in Walled Lake; and Skip Simms of Ralph Wilson Equity Fund ing in Grosse Point Park.
Contact Danielle Fugazy at Danielle.Fugazy@tfn.com