A few years ago, there seemed to be a continental divide between the “old economy” and the “new economy,” and the state in which I live, Michigan, appeared to much of the world as the poster child for the former. Never mind that Michigan had been in the top 5 nationally for such important innovation bellwethers as university research, patents issued, and engineering workforce; to much of the U.S., we were still the “rust belt.”
Some of that reputation was earned, as the state was best known for a few very large auto companies whose success over the 20th century attracted a preponderance of our talent, sapping much of our entrepreneurial spirit and leaving Michigan’s economy subject to the wild swings of a single industry. Consequently, while we were advanced technologically, we were a region that lagged in the creation of innovative new companies and rarely strayed from the middle of the pack in terms of attraction of venture capital dollars.
Most of the nation began its recession in 2008, but we in Michigan had a five year head start, with our citizens experiencing the most economically brutal stretch in two generations. And as our largest employers—particularly those in the automotive industry—faced hard times and began shedding workers, our underperforming entrepreneurial community couldn’t pick up the slack, leaving the state in a nearly decade-long slide.
There was a need to reinvent Michigan and to take advantage of the state’s great scientific, engineering, and infrastructure resources to create a new generation of innovative companies. And in 2007, a group came together to spearhead a creative effort to do just that. Ironically, that group consisted of the CEOs of many of the state’s largest and most established companies. Business Leaders for Michigan, an impressive non-profit organization consisting of the leaders of 80 of Michigan’s most important corporations and universities, established a blueprint for transforming the innovation community in Michigan, with the goal of encouraging and supporting a better environment for startups in the state. The centerpiece was a unique venture capital fund-of-funds, called the Renaissance Venture Capital Fund.
I was honored to be asked to form and serve as the first CEO of the Renaissance Fund. Our goal was deceptively simple: To establish a fund that would invest in the best venture capital funds from around the country under the condition that they begin to actively look at innovations in Michigan. While the idea of a venture capital fund-of-funds to spur growth was not new (many state governments have established similar programs, including the very successful Venture Michigan Fund program in our state), Renaissance was different in that it was led not by government but by business. Most importantly, we had major corporations in industries ranging from energy to automotive to home products to insurance (collectively representing over $1 trillion in annual sales) committing not only their money as Renaissance investors, but also their talent and purchasing power.
In other words, some of the nation’s most sophisticated organizations agreed to engage with our venture capital funds and Michigan start-up companies to help make them more successful. This was a game changer for our region in attracting venture capital: It is one thing for a venture capital fund to find an interesting alternative energy company in which to possibly invest; it is another for that fund to know that an industry leader like DTE Energy Company is willing to work with the VC and to provide market and technical feedback.
This created the ultimate “win-win” scenario that helped Michigan startup companies and venture capitalists increase the likelihood of their success and provided our corporate members with new visibility into cutting edge technologies. It also highlighted the overarching idea behind Renaissance: to use our fund as a platform to establish a network to bring together major businesses, research universities, venture capitalists, and startup businesses—helping all.
We established the Renaissance Fund at the worst possible time: Fall of 2008. The world seemed to be falling apart and Michigan was hemorrhaging jobs and companies. But the members of Business Leaders for Michigan stood tall and nonetheless provided over $40 million to get us started. Three and a half years later, we’ve grown to over $100 million and have an even broader group of stakeholders. We’ve provided our investors with solid financial returns but, just as importantly, have used our platform to create tangible benefit to Michigan’s innovation community. Our investments in venture funds to date have yielded venture capital investments of 15 times that amount in Michigan startup companies. If trends continue, our fund will enable over $1.5 billion in venture capital investment in Michigan, as well as increased connectivity between Michigan’s largest companies and some of its smallest, benefitting both.
When we established the Renaissance Fund, we felt that it could serve as a model for other regions of the country that have strong technology development and an engaged business community. So we were prepared when we were contacted by executives at Proctor & Gamble who, with others in the Cincinnati area, were looking to establish an ambitious, innovative organization called Cintrifuse to increase entrepreneurship in their region.
Working with McKinsey & Co., they identified Renaissance as a model for attraction of venture capital and development of new companies, and we freely shared our model with them. They are now establishing their own fund modeled after ours, and are using it as a means to connect their most important organizations with some of their youngest. This is great news for Ohio, and portends similar innovative approaches by other regions of Middle America. And you can bet that, despite the annual Wolverine-Buckeye battle, we’ll be working closely with our Ohio friends to strengthen both of our efforts.
The message in all of this is that the discussions of the “old economy” and “new economy” are really off base. A strong region requires constant innovation in both well-established industries and new ones, and regions need to support ideas that can both transform existing industries and establish new ones. Every state has skills and characteristics that are strengths; ours in Michigan include our science and engineering talent as well as our engaged business community. However, those regional advantages can be lost when each is working in isolation.
With Renaissance and our partners, we’ve created a synergy among those strengths through a network that should help our new companies blossom and our established businesses grow stronger, ultimately resulting in the kind of economic growth and diversity that makes a region both vital and an exciting place to live and work—and moving Michigan even further from its old “rust belt” moniker.