Simon Boag sounds downright sheepish.
“We’re spoiled,” Boag, the new CEO of the $100 million Stage 2 Innovations Fund, told Xconomy. “We realize that. We’re extremely lucky to be in this position.”
The fund, announced earlier this week, is targeting growth/expansion startups on the brink of commercializing their technology. An anonymous billionaire is putting up the entire $100 million. Former Chrysler CEO Tom LaSorda is a co-founder.
I can’t stress enough what a big deal this is. Over the years, I’ve written about Midwest venture funds that say they are going to raise (insert unrealistic amount right here) dollars only to see the funds fall short of the mark or fizzle all together.
The most infamous example that comes to mind is San Francisco-based investor Steve Burrill’s boast that he would create a $1 billion fund to back a biotech park in rural Minnesota in 12 months. Three years and several empty promises later, the state is still waiting.
$100 million in the bank not only gives you instant credibility but more importantly, the ability to actually….you know, do things.
Instead of constantly wooing investors, the upfront money “affords you the time and luxury to really dig into the projects,” says Boag, a former Chrysler and General Motors executive.
Here’s how the fund works. Stage 2 is looking for companies, especially in auto and medical devices, which already possess patents and ready to commercialize in 18 months.
“These companies need to scale up quickly,” Boag says. “When you come out, you come out on fire, en mass.”
Stage 2 will either take a majority stake in the company or retain exclusive licensing rights to the technology. The fund is looking startups that can eventually generate $100 million to $200 million in net income.
“There remains significant opportunity for a mid- and later-stage venture companies here in Michigan,” says Jeff Bocan, managing director of Beringea, a venture/private equity firm based in Farmington Hills, MI. “That’s what we’re focused on. I think their strategy makes sense. It all comes down to execution.”
The anonymous donor and LaSorda, who runs his own manufacturing consulting firm called the LaSorda Group, will make the final decisions on investments. Boag says each deal amount will vary but he doesn’t think Stage 2 will require outside capital.
“We have enough money that we don’t need other partners,” he says. “But we wouldn’t close the door if there is the right opportunity,” especially if there’s a large deal.
With high gas prices, Stage 2 is especially interested in automotive technology that promotes fuel efficiency, Boag says.
“Consumer behaviors are changing,” he says. “People are driving less miles. Put all of these factors together, that’s a great sweet spot.”
Stage 2 also likes medical devices that help lower skyrocketing healthcare costs. “Small- and medium-sized companies play a big role” in Michigan’s economy, Boag says. “They need to play a bigger role. We know that from the last three years” when the Big Three automakers struggled.