Electric Cycles and Software For The Soul: A Tale of Two Startups—and Whether They Plan to Stay in Michigan

5/13/10

Peter Scott, president of Current Motor, an electric scooter and motorcycle company based in Ann Arbor, MI, had just finished his 10-minute pitch on the opening day of this week’s Michigan Growth Capital Symposium, when he was immediately taken aside by Lauren Flanagan of Douglas, MI, who is with Phenomenelle Angels Fund in Madison, WI. What seemed like a serious conversation followed. Could this be the beginning of a beautiful friendship, when angel meets entrepreneur? Did sparks fly?

I did not get a chance to ask Scott until Day Two of the conference, and he hinted that, yes, he might have finally found an angel funder to take the lead and help get his company from one prototype electric scooter to mass manufacturing and distribution. He would not say if Flanagan, or somebody else, ended up being that angel. He did tell me that she’s decided to take the lead and start organizing other angels behind his company. So, mission accomplished for at least one satisfied customer at the symposium—one in which it was emphasized, as I reported yesterday, that venture funding for seed stage companies is pretty paltry in Michigan.

Nevertheless, Current Motor is in Michigan at this very early stage of its development. When/if the company hits the big time, will it stick around? Well, I asked that question of Current and another Michigan company, representing disparate industries, presenting at this year’s symposium. I also asked CircleBuilder Software, a Franklin, MI, company that produces social networking software for faith-based organizations.

Current just closed on a $50,000 microloan from the First Step Fund, newly created by the New Economy Initiative, a Detroit-based philanthropic partnership. With that money, the company should be good to go to production level, says Scott. Right now, it has one prototype out to a first customer, is working on a second and third, and has deposits for another 10. “But we still need a large chunk of change to accelerate our progress,” Scott says.

“From a fund-raising perspective, no, Michigan is not the place to be,” he says. The reason, in his view, is that despite the current push among the Detroit automakers toward electric vehicles, the region still is not “electric-minded.” In California, Scott says, they’ve been working on EVs for the past 10 years. There’s already a green mindset out there, and that is where the likely customers are for his electric motorcycles. Current’s first market will probably be San Francisco, Scott says.

So, why is he in Michigan at all?

“What is easier out here, is, oh my gosh, we have a ton of people we can draw on to build our bike, to design the bike, engineer the bike,” Scott says. “We’ve got battery people, we’ve got controls people out here, we’ve got suspension people out here, ride stability people out here. So, engineering and manufacturing the bike is easier here.”

Will that always be the case? What if a VC says come on over to California? “At this stage,” Scott says, “we’re not going anywhere.” After a pause, he adds that, no matter what, he would always want to keep engineering and manufacturing operations in Michigan. Then he checks himself. He’s getting a bit ahead of things.

“Right now, we’re focused on three things: Raising money, building bikes, and developing the brand.”

Brand-development is exactly the stage where we find CircleBuilder Software, whose CEO and co-founder, Howard Brown, currently operates the company out of his home in Franklin. Automation Alley, the Troy, MI-based business organization, invested $250,000 in CircleBuilder in April 2009 and followed up with another $25,000 last week. What he does is best described in his own words. Here’s how he began his 10-minute pitch at the symposium Wednesday.

“Largest social network in the world today?” Brown asks the packed hotel conference room. He pauses until somebody in the crowd, inevitably, takes the bait. “Facebook!” somebody shouts. Brown makes a game-show buzzer sound. “Ehhhh. Wrong. Christianity, 2.6 billion people, followed by Islam and Hinduism.”

CircleBuilder creates cloud-based software for private online religious communities. You want to share and collaborate with everybody? Go to Facebook. You want a private, safe environment to talk with like-minded members of your own faith-based circle then CircleBuilder can help you create it—as either its own entity or on top of an existing Web site, or even within Facebook.

VCs and angels like to target underserved markets, Brown tells the crowd of entrepreneurs and funders, well, this is the largest underserved market—with four million churches and ministries in the Christian faith alone that need to better connect, communicate, and collaborate with their members.

Brown brags that his burn rate is very slow, only $19,000 a month, which of course is nothing compared to his old stomping grounds in Silicon Valley. He moved to Michigan five years ago. Why is he here instead of where the money is? Simply because this is where his wife’s family lives and because he works out of his home, or Starbucks, or wherever his laptop happens to be; it really doesn’t matter where he is. So, why not Michigan?

“We were alone out in Silicon Valley,” Brown says. “It’s wonderful out there, but it’s really expensive. But I can work anywhere. My team is virtual. I’ve got a home office, they all work out of home offices as well.”

But he travels to wherever the investors are. Even in Michigan.

“I have fished in the backyard here, and we were one of the first groups that had raised money from the Great Lakes Angels in a long time,” Brown says, referring to a 2007 investment of an undisclosed amount by the Detroit-based private investment group.

He wants to raise more money to hire some people. “I’d be glad to hire them here in Michigan,” Brown says. “I don’t have too many openings, but I can hire about four people here I think. A lot of good people in Michigan. Great work ethic.”

So, he’s here at least for the short term. When the time is right to find physical office space, Brown says, he’ll likely look in Michigan.

These were only two companies out of dozens presenting at the Michigan Growth Capital Symposium, and most of them are at the same early stage of their startup life. They’re in Michigan, some have been helped by Michigan-based seed funds, many cite the talent pool and strong worth ethic and many say they would love to maintain at least some presence here as they grow.

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