Show Me The Money! Ex-Chrysler CEO Co-founds New $100 Million Fund For Growth/Expansion Startups
Wow. Now that’s what I’m talking about.
Automation Alley, a business accelerator based in Troy, MI that helps nurture local startups, today announced the creation of a $100 million fund to back local companies looking to take their fledgling businesses to a higher level.
Chrysler CEO Tom LaSorda co-founded the fund, called Stage 2 Innovations .
“$100 million is a big deal,” Automation Alley executive director Ken Rogers told Xconomy. “This is great news for the state of Michigan. We’re just thrilled.”
What makes the fund even more intriguing is the source of the money: an anonymous billionaire who’s putting up the entire $100 million. Rogers wouldn’t say much but said the donor had previously worked with LaSorda. (I’m gonna got out on a limb and say this donor worked in the automobile industry. Who else could be a billionaire in Michigan?)
It’s encouraging to see Michiganders step up. Contrary to popular perception, the state is home to a large number of wealthy individuals, who mostly made their fortunes in the car business. There’s also Quicken Loans founder Dan Gilbert, who recently formed Detroit Venture Partners to back local tech companies.
But unlike DVP, which is still trying to raise money from other investors besides Gilbert, Stage 2 Innovations has all of its money upfront.
“The $100 million is on the table today,” Rogers says.
The money couldn’t come at a better time. Michigan is not a venture capital powerhouse, though the state has improved in recent years. Last year, local companies attracted $215 million, placing Michigan in the middle of the pack compared to the rest of the country, according to the annual report of the Michigan Venture Capital Association.
About two-thirds of that money went to early stage startups, while only 19 percent went to companies in the growth/expansion stage, the report says. That’s where Stage 2 Innovations comes in.
The idea of the fund, Rogers says, came from conversations he had with LaSorda, whose consulting firm belongs to Automation Alley. Since 2003, the organization has invested $6 million in seed money to 29 companies.
But just when those companies have developed a prototype and are about to land their first contract, the money dries up, Rogers says.
“Bam! They hit the wall,” he says. “They couldn’t find the funding.”
So LaSorda approached the donor, who agreed to back the fund.
Stage 2 Innovations is only interested in companies with products that are ready to generate sales. “They only want companies ready to go,” Rogers says.
The fund will offer the startups either money, management advice, or manufacturing capabilities, or a combination of all three, Rogers says.
“How much better can that get?” he says.