David Brophy and the Michigan Growth Capital Symposium: A 30-Year-Old Growth Story
When I first started at Xconomy three months ago, people consistently urged me to meet two people: Dug Song and David Brophy.
Song, a successful local Internet entrepreneur, was obvious. But why Brophy, a long time business professor at the University of Michigan?
Well, it’s a little something called the Michigan Growth Capital Symposium (MGCS). Since Brophy created MGCS in 1981, the symposium has morphed into the state’s premier investor event for startups seeking money.
For the symposium’s 30th anniversary next month in Ypsilanti, Brophy and his team did a little number crunching. Over the past decade, 300 companies have presented at MGCS, with 71 percent of them eventually raising a total of more than $1.7 billion in capital. Twenty percent of those startups later enjoyed successful exits.
“There’s no question that the quality [of presenting startups] has improved,” Brophy, a professor of private equity at the Ross School of Business, told me in his office the other week. “The light bulb has gone on.”
It’s probably no accident that Brophy launched MGCS in the early 1980s, when Japanese automakers first challenged Detroit. “It was the first decline in the auto industry,” Brophy recalls. “Then we had a good year and then everyone would forget about it…There was a sense of entitlement. People would tell their kids that working at Ford was much better than going to college.”
Of course, we all know how this story ends. Michigan, Brophy says, was unprepared for the emergence of a knowledge-based economy that valued brains over brawn.
“We got to find a new way,” Brophy says. “Unfortunately, every other state and country has come to the same conclusion.”
When thinking about MGCS, Brophy concluded the biggest obstacle to diversifying Michigan’s economy was finding investors to pay for it.
“How come we have so many startups that don’t go anywhere?” Brophy says. “When there is money visible, people will go out and monetize their creations.”
At first, the pickings were slim. Brophy had to scour the state to find startups to present to investors. “We really had to beat the bush,” Brophy says.
But things soon picked up after large research universities began embracing technology transfer.
In the past ten years, 23 percent of all companies presenting at the symposium originated from universities, according to MGCS, including the University of Wisconsin at Madison, Purdue University, Rutgers University, Carnegie Mellon University, and the University of Chicago.
Seventy percent of that number were spun out of Michigan’s University Research Corridor, consisting of U-M, Wayne State University, and Michigan State University. Those local startups went on to raise $430 million.
Six companies, all from U-M, found successful exits, including HandyLabs, Arbor Networks, Incept Biosystems, Sensicore, HealthMedia, and Accuri Cytometers.
Today, the MGCS has had to turn away companies. “I received an e-mail from a company bitching about not being included” in the symposium, Brophy says with a satisfied grin.
Michigan has also come a long way from its auto-only days. Of the 41 companies presenting at this year’s symposium, there are only two auto-related startups. About one-third of the lineup are healthcare or life science-related, with the remainder focused on information technology and clean tech.
Among those presenting next month: Esperion Therapeutics, InPore Technologies, Life Magnetics, Nextronex Energy Systems, and OnShift.
Brophy has nothing against the auto industry. In fact, he thinks Michigan should use its auto-related brain power to develop clean energy technologies.
“To the extent we contributed to the energy crisis, we should fix it,” he says.
But he does have a problem with an economy that confines fourth-generation young Michiganders to a career of “attaching nuts to left wheels for Ford trucks.”