As Michigan VC Scene Matures, Funding Gaps, Diversity Remain Challenges
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his term as the chair of the MVCA board. He says his firm is coming off a banner year and has already seen two big exits in 2018 from portfolio companies nVision Medical Corporation and NxThera, although neither is based in Michigan.
“When I look at the total [MVCA 2018] report, I’m impressed by the progress made and struck by the number of opportunities that remain,” Shehab says. “Michigan’s venture ecosystem is still in development, but now is the time to double down and keep a foot on the accelerator.”
Shehab says Michigan needs a virtuous cycle—in other words, the resources to entice entrepreneurs to start companies here that eventually find enough success to inspire new entrepreneurs, thus increasing the state’s venture activity exponentially.
“VCs in Michigan are able to draw outside money from across the country, at almost a 4:1 ratio,” he says. In 2017, every dollar invested in a Michigan startup by a Michigan VC attracted $3.83 in investment from outside the state. In 2016, that figure was $4.61, according to MVCA data. “What underlines that stat is key—our local VCs make Michigan a safe and smart place to invest,” Shehab adds.
The decline in VC dollars invested in Michigan startups over the past two years doesn’t concern Adrian Fortino, a Michigan-based partner with the Mercury Fund, which also has an office in Houston, TX.
“All regions are going to have ebbs and flows—this is not an indictment of our region,” Fortino says. “I just do not get worried about that stuff. I think we’re a great market. Sometimes I think we’re overly critical of ourselves. I don’t think we’re in a bad or weak position, just in a slow-down part of the cycle.”
Fortino conceded there were two statistics from the report that gave him mild concern: despite the growing number of local angel investors, he thinks Michigan needs more of them, along with more seed capital. But in the grand scheme of things, he says he’s not going anywhere.
“I was talking to a buddy of mine in the Bay Area recently, and he said, ‘You can’t even live out here on $300,000!’ That tells you how expensive it is,” he says. “Our focus is on the middle of the country for a reason.”