It’s not exactly a secret that this isn’t the greatest time for venture capital. Returns over the past decade have gone negative after the heady dotcom bubble years, and with the recession lingering many funds have either closed or found themselves significantly smaller as it became harder and harder to attract capital.
These national trends are mirrored in Michigan. The Renaissance Venture Capital Fund, which announced its final close earlier this month, came in at half its $100 million target—and small firms like Apjohn Ventures of Kalamazoo, MI, were not able to raise a new fund at all.
Still, a quick look at venture fund-raising activity around the state shows there is still life in them thar limited partner pockets—and if anything, buoyed by a recent wave of exits such as Arbor Networks and Mobius Microsystems, the odds of successfully closing a venture fund in Michigan might even be rising.
We’ve been tallying things up and keeping a list of venture funds that have either closed recently or are currently seeking to close—both funds based in Michigan and those with a strong Wolverine state presence. By our count, 12 of these funds representing $614 million in committed capital have closed in the past two years—including the University of Michigan’s Social Venture Fund announced today (see below)—although because many invest around the Midwest or even the country, not all that money is earmarked for Michigan startups. And another six funds, targeting more than $250 million, are raising money now. That’s not counting two new angel funds trying to get going.
Here’s a roundup of what we have. If we missed something, and no doubt we did, please let us know at [email protected]
Closed in 2009 and 2010
—Allos Ventures (Cincinnati and Indianapolis): Invests in early-stage companies and plans to work closely with angels who have helped build companies to the point they are ready for initial venture rounds. Began raising this debut fund in October 2009, and in early September of this year reported that it had reached $25 million target. Focus is on tech and healthcare companies in the Midwest.
—DFJ Mercury (Houston): Seed and early-stage firm invests in information technology, advanced materials, and life sciences/bioscience. Announced close of $70 million DFJ Mercury Fund II in late June 2010. The vast majority of its portfolio companies are in Texas. Michigan investments are limited to Kabongo and Swift Biosciences, but it is one of the firms Michigan-based fund of funds Renaissance Venture Capital Partners (see below) has invested in.
—Early Stage Partners (Cleveland-based, but opened Ann Arbor office in 2009): Invests in early-stage companies, primarily in Ohio and Michigan, across life sciences, information technology, and cleantech. Began raising funds for ESP Fund II in 2007 and this March closed the fund at $55 million.
—First Step Fund (Detroit): This April, TechTown announced a $5 million seed fund established with support of the Detroit-based New Economy Initiative. The fund represents a partnership between TechTown, the Invest Detroit Foundation, and Ann Arbor Spark.
—General Motors Ventures (Detroit): Automaker GM announced this June that it had formed this new $100 million venture fund to help back development of innovative automotive technologies
—MK Capital (Northbook, IL): Invests across all stages of funding focusing on digital media, software, and other information technology fields. Closed $50 million MK Capital II in June 2009. The only Michigan investment listed in its portfolio is Outside Hub of Southfield, but it is another of the firms in Renaissance Venture Capital Partners’ portfolio. First fund, which closed in 2005, totaled $150 million.
—North Coast Technology Investors (Ann Arbor and Midland): Invests in Midwest startups across all stages and technologies, including life sciences and medical devices, software, and hardware. The $100 million fund closed in mid-2009.
—Renaissance Venture Capital Fund (Ann Arbor): Announced close of $50 million fund of funds on September 6. Invests in venture firms around the country that invest in Michigan startups—looks for firms that invest across all high-tech and life sciences sectors.
—RPM Ventures (Ann Arbor): Seed and early stage fund invests in information technology and physical sciences companies. Formed in 2000, closed $60 million second fund in December 2009.
—Social Venture Fund (Ann Arbor): This fund, operated by the Samuel Zell & Robert H. Lurie Institute for Entrepreneurial Studies at the University of Michigan’s Ross School of Business, technically formed in 2009 but has been operating in stealth mode until its official debut today. Fund will be managed by students and will make early-stage investments of up to $200,000 in startups in six key areas: education, environment, finance, food & nutrition, health, and urban revitalization.
—TGap Ventures (Kalamazoo): Makes early-stage investments, primarily in the Midwest, in medical devices, software, specialty manufacturing, Internet, telecommunications, healthcare, and other high-growth arenas—everything but pharma, says general partner Jack Ahrens. Closed current $26.3 million fund in June 2009.
Raising Funds Now
—Huron River Ventures (Ann Arbor): One of two early-stage funds forming largely with $6 million in backing from the Michigan Economic Development Corporation after a statewide competition. In order to win state funding, managers had to raise at least $1 million on their own and have a partnership with an academic institution, among other criteria. Huron River plans to specialize in alternative energy and other advanced technology sectors.
—Michigan Accelerator Fund I (Grand Rapids): Along with Huron River Ventures (above), one of two funds formed with Michigan Economic Development Corporation support. This fund has partnered with Grand Valley State University, Michigan State University, the Van Andel Research Institute, and others. It plans to invest 70 percent of its capital in life sciences companies, with the balance going to advanced manufacturing, homeland security, and alternative energy. Target is $10 million, which it hopes to raise in 2011. In the meantime, fund managers say they are eyeing a first close late this year and that they could make their first investment around the same time.
—Plymouth Management Company/Plymouth Venture Partners (Ann Arbor): Invests regionally in Michigan, Ohio, and other Great Lakes states in growth-stage companies across tech, life sciences, and other fields. Held a $16 million first close in June on Plymouth Venture Partners II, which is targeted at $40 million, according to chairman Ian Bund. New fund is a follow up to $24 million Plymouth Venture Partners I, which began investing in 2003.
—Resonant Venture Partners (Ann Arbor): Seed-stage fund, planning to invest in Midwest firms across a variety of technology sectors, but primarily in software and hardware. Resonant Fund I was launched this July and the next month announced it had lined up its first limited partner (unnamed) and first portfolio company (Scio Security of Ann Arbor). Founders Michael Godwin and Jason Townsend hope to raise $10-$20 million. They didn’t want to say how far along they are right now, only that they are in full fundraising mode and hope to have more to announce shortly.
—Seneca Partners (Detroit, Chicago, and Ann Arbor): Currently operates Seneca Health Partners fund, and this spring revealed plans to raise between $50 million and $75 million for another healthcare venture fund.
—Triathlon Medical Ventures (Cincinnati): Focus is early-stage companies in life sciences, including medical device, biotechnology, and diagnostics startups. Opened Michigan office led by Mina Sooch, chairman of Michigan Venture Capital Association. Firm is seeking to raise $150 million, and Sooch says it hopes to hold a first close of between $50 million and $70 million later this year.
New Angel Funds
—Michigan Women’s Foundation angel fund: Carolyn Cassin, CEO of this foundation, told Xconomy the group is raising a small angel fund to help boost female entrepreneurship. The group hopes to announce the fund this fall.
—Randal Charlton, executive director of Detroit-based TechTown, said this spring he was looking to form an angel network in Southeast Michigan in hopes of raising a $25 million fund.
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