Michigan’s venture capital investment landscape looks good, and VC investors around the state are optimistic about deal-making in 2020, according to Ara Topouzian, executive director of the Michigan Venture Capital Association.
“The sentiment among investors is very positive going into the New Year,” he remarks. “Last year was a pretty productive and fairly successful year for venture capital investment and the whole ecosystem. I expect 2020 will be similar.”
A self-described “cheerleader” for the state, Topouzian sees many attributes that make Michigan a fertile place for entrepreneurs to launch new ventures and investors to take stakes in promising startups. At last count, there were 27 venture capital firms and 140 venture-backed companies in the state. More than 530 out-of-state venture firms have invested in Michigan-based startups.
“Our entrepreneurial ecosystem is vast, so we have lots of great opportunities for investment,” he remarks. “We also have phenomenal talent here.”
Michigan’s outstanding research universities, relatively low cost of doing business, and long history of innovation, particularly in the pharmaceutical and automotive industries, are also pluses.
Currently, Michigan-based venture firms and national firms with a Michigan presence are deploying the largest amount of capital in the information-technology and life-science sectors.
In 2018, the total venture capital funds under management in Michigan was $3.7 billion. The total for 2019 will be reported in the MVCA’s 2019 Annual Research Report, due out later this spring.
“Software development and life science are big right now,” Topouzian remarks. “We’re also seeing more investment with medical devices as well as investing in the mobility sector, and we hope that will continue.”
He notes that Michigan’s angel investment community, which connects promising entrepreneurs and startups with investors, has strengthened and gained traction in recent years, particularly on the west coast of Michigan and in Ann Arbor.
In September 2017, Grand Rapids-based Grand Angels and several investors in the Kalamazoo area connected to form an affiliate group called Ka-Zoo Angels. In March 2019, this statewide expansion continued with the launch of Woodward Angels in Detroit. Ann Arbor SPARK acts as a catalyst for innovation, company growth and economic development in the greater Ann Arbor region.
“Angel investors are doing some fantastic work and represent an important group in our ecosystem,” Topouzian remarks. “We hope to partner with them to a greater extent in the future.” In 2018, $52 million in angel capital was invested in 84 Michigan startups.
The University of Michigan and other research universities and medical centers serve as a major conduit for innovative technologies and research discoveries, according to Topouzian.
“The U-M Office of Technology Transfer has played an important role in helping researchers and inventors move their discoveries through the commercialization process,” he comments. “As an organization, we’d like to forge closer connections with U-M and all the other universities and colleges throughout the state. They are an important piece of the venture investment landscape.”
MVCA members often volunteer as guest speakers and judges for pitch competitions at Michigan Ross, which offers a suite of finance courses focused on venture capital and private equity investment. Other universities have expressed interest in developing a similar curriculum, according to Topouzian. He says he’d like to see the MVCA expand its role and do more outreach at the university level.
MVCA is a sponsor of the Midwest Growth Capital Symposium, which brings together key players in the investment, entrepreneurial, business and academic areas every May. This year’s event is May 12-13. Topouzian says he is definitely planning to attend.
“We need to get our story out to the public,” he insists. “Angels and VCs are the risk-takers who make seed and early stage investments in new ventures. Their contribution is vitally important to these entrepreneurs. Ultimately, we hope these startups will stay and flourish here in Michigan.”