High-Net-Worth Michiganders: Time to “Get Off the Dime,” Brophy Says
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—Nine percent of CEOs from the state’s venture-backed companies were a woman, an LGBTQ person, or a person of color, besting the national average of “approximately 4 percent at Fortune 500 companies.” The report goes on to say that “Michigan’s venture-backed CEO population still looks much whiter and more male than the rest of the U.S. labor force, [where] 21 percent of workers are a minority.”
Michigan’s Market is Solid, So Where Are All the Institutional Investors?
Brosnan says the numbers that matter most are trending up. “For being newer to VC, Michigan has done an amazing job of attracting capital,” she says. “Companies here are strong. Ninety-four percent are very confident that we’re on an upward trajectory. The Michigan market is solid.”
Brosnan says she’s not sure why the total amount of capital under management in the state is down 24 percent from last year, but she plans to keep her eye on it. (If you look only at firms headquartered in Michigan, the total amount of capital under management is up by 9 percent, she points out.)
“The number of venture-backed companies here (141) speaks the loudest,” she maintains. “It shows we have capital and investors willing to take chances. That 141 number is really one of our greatest indicators that there is capital here, and great ideas are getting funded and growing here.”
The biggest challenge now, she says, is building on the successes of the past. Her members have clearly indicated that there is a shortage of talent, particularly in the managerial realm, but “we’re hoping to work with the state to attract and retain talent,” she adds.
Some investors feel that it’s past time for Michigan’s wealthy families with investment offices, corporations with investment arms, and other institutional investors to come off the sidelines and start putting some of their money into in homegrown companies.
According to Forbes, the state is currently home to 12 billionaires with a combined net worth of $40.9 billion. The University of Michigan, ranked 10th in the nation when it comes to churning out billionaire graduates, boasts an alumni roster flush with high-net-worth people, including Larry Page, the co-founder of Google and one of the wealthiest people in the country. Oakland County, adjacent to the city of Detroit, is considered the fourth wealthiest county in America. In short, there are a ton of rich people that call Michigan home.
David Brophy is a University of Michigan professor who is considered the godfather of Michigan’s VC community, and he’s also the founder of the state’s largest annual venture event. This year’s growth capital symposium, which took place in May, had 60 presenting companies—the most in the event’s nearly four-decade history, he says.
“The audience this year had more investors and a wider span of investment interests,” he says. “Everybody is getting the idea, after 36 years, that we’re here to stay. But we’ve still got a ways to go to make a bigger impact on the coasts.”
Brophy looks at the MVCA report and sees a “double-edged sword” in attracting $4.61 in outstate venture capital for every Michigan dollar invested.
“It’s nice they find our companies investment-worthy, but we really need more local institutional capital, such as from universities or corporations,” he says. “I can’t tolerate that ratio because if there’s a bump in the night and the funds can’t stand up, we’ll lose those companies. It’s time for the private sector to step up and get involved.”
Calling it a “hell of a problem for the last 36 years,” Brophy can’t hide his frustration with the state’s conservative investment culture—these are legitimate companies seeking funding that we’re talking about, he points out, not appeals for charity. He’d like to see Michigan’s universities lead this private-sector rally, seeing as it’s often their intellectual property being developed into tech startups.
“This attitude of ‘let the state do it’—I don’t understand it,” he says. “Everyone has to get involved if we want to build the state of Michigan. Get off the dime and get involved!”
He believes U-M’s alumni are “very eager to see that happen and participate, and there have got to be ways for universities to figure out how to get their alumni involved.” Brophy says he’s not aware of any formal statewide efforts in the past, only “lip-service.”
Brophy calls college graduation season an annual “flight to the border.” The only way to keep scores of young professionals from leaving the state is to offer them opportunities here, he notes. A commercialization class he teaches at U-M is now drawing graduate business students interested in monetizing their thesis projects. If they could become “welded” to local companies while they were still in school, he says, that’s the kind of stickiness that would keep students here after they graduate.
“But that won’t happen if we treat startups as simply California dreaming,” Brophy says. “We have talent galore, sources of IP galore—there’s no reason why we should be as slow off the dime as we are.” … Next Page »