Invest Michigan, the Detroit-based early-stage capital fund, had an eventful 2017 and is off to a busy start already in 2018. We caught up with CEO Charlie Moret for an update and to find out what’s ahead for the fund in the coming year.
Invest Michigan, established in 2014 by the Michigan Economic Development Corporation, recently completed its 75th investment. The fund has invested in 44 companies across the state so far, and has made 31 follow-on investments.
“Michigan’s entrepreneurial sector is very active,” Moret says. “Last year was a record, with 26 investments.”
Invest Michigan now has 38 active companies in its portfolio, and Moret says the fund’s current strategy largely involves providing its portfolio companies more financial support as they make commercial progress. (Portfolio companies, all headquartered in Michigan, include a wide variety of tech startups across a mix of sectors, including life sciences, ag tech, and medical devices.)
“We try to invest in the best teams and technologies, but until you’re in the trenches, it’s hard to know which will hit. So we have to maintain capital reserves to continue to fund them since angel investors don’t usually do a lot of follow-on investing, and that’s proven to be a very effective way to support these companies.”
So far this year, Invest Michigan has closed two deals with undisclosed terms: A new investment in Mi Padrino, an online portal for planning events such as quinceaneras, and a follow-on investment in Autobooks, a fintech startup. Both companies are based in Detroit.
“The pace continues to be pretty active,” Moret says. “We had three exits last year that provided returns to the fund, so we knock on wood and hope that continues.”
Despite a bustling year for Michigan’s venture community, Moret says a few challenges remain. “There are a lot of players in the state, but the biggest shortfall is in large capital rounds—there’s still not enough,” he says. “And it’s still hit or miss in terms of how much capital is available for downstream rounds. But as we have more successes, we’ll start to narrow that gap.”
Moret also says Detroit’s startup growth has flattened a bit in recent years as a few of the city’s VCs, such as the now-defunct Bizdom, have gone quiet. However, if you look at Southeast Michigan as a region, 2017 was a banner year, he says—so much so that he describes Invest Michigan as being “buried in opportunity.” In fact, he says he doesn’t have much time to go out and find new investment targets because so many deals are referred to his fund.
“Keeping up with new opportunities is probably our biggest challenge,” Moret says. “Our deal flow continues to be very robust.”